North County Report: San Marcos, Encinitas Consider Sales Tax Measures

Two North County cities, Encinitas and San Marcos are considering putting sales tax measures on their November ballots. 

Encinitas needs the money to complete an array of infrastructure improvements for the city, while San Marcos needs the money to keep its head above water. 

But there’s a lot to consider when it comes to sales tax increases including cost of living, other tax measures on the ballot and even the current political climate.  

Encinitas Needs Infrastructure Money 

Encinitas is considering a one-cent sales tax increase that could generate around $16 million annually. City leaders say they would likely use the money to improve the city’s infrastructure, storm drains and roadways.  

The city’s sales tax rate is currently at 7.75 percent, which is on the lower end compared to some other cities in San Diego County.  

The City Council hired a consultant to survey 1,242 of the city’s registered voters to better understand how residents would feel about a sales tax increase. 

Sixty-one percent of the likely voters that were surveyed said they would support a one-cent sales tax increase. The measure would require approval from a simple majority of voters – more than 50 percent. 

Most of the voters surveyed said they would like to see that money go toward repairing and updating some of the city’s aging infrastructure including storm drains, bridges, sidewalks and public facilities. Most also agreed that keeping parks, beaches and recreation facilities clean and safe was a priority, and so is keeping trash and pollution out of waterways and beaches. 

Jill Bankston, director of engineering, said at a Feb. 28 council meeting that the city’s infrastructure taskforce has identified 113 infrastructure projects Encinitas needs to complete over the next 10 years, totaling an estimated $1.3 billion. 

The biggest chunk of that is $597 million for roadway repairs, followed by $235 million in mobility projects, which includes sidewalk and bike lane repairs. The estimate also includes $257 million of backlog projects. These are projects that maintain, repair, and rehabilitate existing assets to keep up with accepted industry standards. 

Reminder: I recently wrote about Encinitas’ plan to finally improve the existing stormwater infrastructure in Leucadia Roadside Park, a neighborhood in Encinitas. The area has been troubled with drainage issues for decades. 

During the January rainstorms that caused historic flooding all over the county, businesses and homes in Leucadia Roadside Park saw significant damage caused by inadequate stormwater infrastructure. 

City staff identified nine stormwater projects, including the one in Leucadia, coming out to an estimated $72 million in total. 

San Marcos Has Many Needs 

The city of San Marcos is in a similar boat with a current 7.75 percent sales tax rate that city leaders are considering raising by a half-cent or one cent. 

In San Marcos’ case, though, a sales tax measure could be an answer to the city’s shaky financial standing. San Marcos started the 2024 fiscal year with a $3.8 million budget deficit and has since reduced that deficit to about $2.4 million by consolidating some of the city’s expenses. 

City Manager Michelle Bender said the city has “slimmed down” as much as it can, and that includes public safety and public works. 

City leaders agreed the city is going to have to find a new and consistent source of revenue or they will have to consider significant cuts to city services. 

Like Encinitas, San Marcos officials commissioned a survey of likely voters. Out of 800 residents surveyed, 64 percent said they would either probably or definitely vote yes on a half-cent sales tax increase. 

A half-cent tax is projected to bring in about $11 million annually, while a one-cent rate could bring in upwards of $20 million annually, city staff said at a March 12 council meeting. 

The City Council has until August to decide whether to put the sales tax measure on the ballot. It would also need a simple majority to pass. 

The Trouble with Sales Tax Measures 

In theory, a half-cent or one-cent sales tax increase doesn’t sound like a lot, especially when you hear that it could generate millions of dollars to make improvements to the city that you live in and care about. 

But even a half-cent tax increase adds up, especially considering the rising cost of living, increasing water rates, increasing gas and electricity rates and more. 

Encinitas, for example, recently completed a state-mandated housing study that found that more than 50 percent of the people who rent in Encinitas are considered “rent burdened,” meaning they pay more than 30 percent of their income on rent. 

The study also found that people are moving out of Encinitas at an increasing rate, and that can primarily be attributed to the city’s high cost of living. 

San Marcos is not quite as expensive as Encinitas, but it still has a cost of living that’s about 38 percent higher than the national average. Encinitas is about 52 percent higher. 

About these surveys: Both Encinitas and San Marcos commissioned surveys that returned favorable results, showing that a majority of residents in both cities would support a sales tax measure on the ballot. 

But these surveys aren’t a guarantee. There’s no full-proof way to predict how voters will vote when that time comes.  

It’s happened before: Escondido attempted to address their structural budget deficit by raising sales taxes, with ballot measures projected to raise around $20 million annually. The first one failed at a City Council meeting in 2020, and the second failed at the ballot box in 2022.   

In 2022, before city leaders agreed to put a 3/4-cent sales tax increase for 15 years on the November 2022 ballot, they commissioned a survey. More than 60 percent of the 1,000 Escondido voters surveyed indicated support for the proposed sales tax hike.  

But when it came time to vote, the majority of Escondido voters voted against the measure. 

And another thing: Tim McLarney from True North Research, which conducted the survey of San Marcos residents, said there are social and political factors to look out for going into the 2024 November election that could impact voters’ mindsets.  

He said this election season is sure to be an “emotional” one because of the hyper partisanship that exists in the current political climate. Plus, there are other statewide initiatives and overlapping local measures that could be competing with a potential sales tax measure in San Marcos or Encinitas. 

For example, a countywide sales tax increase to fund transit projects is already headed for the November ballot. The measure started as a citizens’ initiative that collected enough signatures to qualify for the ballot. It proposes a half-cent sales tax increase countywide for transit, highway, road and infrastructure projects. 

Some experts have argued that multiple tax measures on the same ballot may cannibalize support from one another, creating a sort of competition among the different tax measures. 

Others disagree with that theory. Michael Zucchet, the general manager of the Municipal Employees Association, the largest union of city employees, previously told Voice of San Diego the notion that multiple tax measures hurt each other is “overrated.”