Escondido Again Considers Tax Increase to Solve Budget Woes

The Escondido council is again considering putting a tax measure on the November ballot in hopes that it will solve the city’s budget shortfall. It’s nearly identical to a measure the council rejected two years ago despite positive financial projections and strong polling results that showed community support. 

Escondido currently projects a budget deficit of $8 million in the upcoming fiscal year and around $150 million over the next 20 years. The city has had to make significant cuts to city services over the past few years to make up for costs.  

The proposed one-cent sales tax increase is projected to generate $28 million annually, and the measure previously had 71 percent of residents’ support according to a community survey conducted in 2020 by the city. That motion needed a unanimous vote to be placed on the ballot, but failed when Councilman Mike Morasco voted against it.  

Escondido now has a second chance to put the measure on the upcoming November ballot. The council appointed Morasco and Mayor Paul McNamara to a subcommittee last year to explore the measure further. 

In 2020, when it was first up for discussion, the council had a Democratic majority with Morasco as the only conservative councilmember. This time around, the council has a Republican majority with Morasco, Councilwoman Tina Inscoe and Councilman Joe Garcia outnumbering Democrats McNamara and Councilwoman Consuelo Martinez. 

The three conservative councilmembers tend to vote the same way on most issues, which has caused some tension in the past. It’s unclear if Morasco will change his mind about the measure—or, even if he does, whether Inscoe and Garcia will join him in supporting a tax measure that supporters argue could fix the city’s fiscal outlook.  

The current sales tax rate in Escondido is 7.75 percent. Many cities in the county have at least an 8.25 percent tax rate including Del Mar, Oceanside, Vista, El Cajon, Chula Vista, Imperial Beach and La Mesa.  

City staff presented four possibilities to the council at last week’s meeting: no new revenue, a 1/2-cent increase, a 3/4-cent increase or a one-cent increase. The latter three scenarios were labeled in ascending order, “surviving,” “stabilizing” and “thriving.” 

City staff, in its report recommending the council place the measure on the ballot, said the city could be forced to make dozens of cuts to city services, including eliminating youth intervention programs, decreasing library programs, reducing park maintenance and closing city pools. The city could also eliminate 10 police officers, 12 firefighters, three medical technicians, close a fire station, and reduce public works staff and city staff, according to the city staff report. 

A full one-cent increase, on the other hand, would allow the city to bring on more police officers, firefighters and medical technicians, and restore programs and services that have taken a hit because of Escondido’s financial woes. 

Morasco said that a significant portion of the budget deficit is caused by the city’s pension obligations. He’s instead argued the city should issue pension obligation bonds to retire some portion of its pension debt. 

Pension obligation bonds are a controversial method to try and reduce pension debt. A government agency issues bonds and invests the borrowed money, usually in its regular pension fund, then tries to earn more on the invested money than it pays in interest on the bonds, and that difference is used to shrink the pension deficit. 

However, there’s a high risk that the earnings on the borrowed money will be less than the interest rate, thus losing taxpayers’ money. 

“Pension obligation bonds … these could theoretically take 50 percent of these dollars in deficit out of the equation, which significantly alters what you can do with 1/2 cent, 3/4 cent, one cent,” Morasco said. 

Morasco also said there needs to be more transparency with the public on the increase in actual dollars that residents would see with their purchases. 

“One cent can sound very innocent,” Garcia said. “It doesn’t sound like a lot, but when you start looking at the common things, it does add up.” 

McNamara said a tax increase may not be ideal, but the alternative is risky. 

“Life costs money,” McNamara said. If the voters don’t support the measure he said, “That runs the risk that graffiti starts to go up, the city starts on a downward spiral, investment starts to go down and people start to move out. And I don’t think we want that.” 

Inscoe suggested a sunset clause, meaning the tax increase would end after a period. 

The council ultimately decided to commission a new community survey to see which, if any, options Escondido residents would support. 

It would take four votes of the council, or a super-majority, to place the measure on the ballot, and then a simple majority at the ballot box to approve the measure. 

The council has until Aug. 12 to put the measure on the ballot. 

In Other News

• The Vista City Council voted last week to reinstate an inclusionary housing policy that would establish a minimum requirement of affordable units for residential developments greater than 20 units. The council will consider an official policy in the coming months after city staff develops a formal proposal. (Coast News) 
• The San Diego County school board approved a new map for the San Dieguito School District, overriding San Dieguito’s previous map, which resulted in a lawsuit that alleged political gerrymandering. The San Diego County Board of Education took over San Dieguito’s redistricting process because the district was late in holding a public hearing regarding its map and, the county warned, that the map potentially violated state law. (Union-Tribune) 
• Encinitas has reached a settlement with the developer of the Encinitas Boulevard Apartments, a housing project that the city rejected last year. Encinitas has a history of denying housing projects, but the state attorney general warned the city in March to approve the project once it’s resubmitted. The complex will now have 250 units, with 50 of them set aside for low-income people. (Union-Tribune)