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Facing deficits, L.A. Council moves forward with proposed tax hikes

October 31, 2012 |  1:49 pm

The Los Angeles City Council moved forward with four proposed tax increases on Wednesday, instructing city lawyers to draw up the language for ballot measures that would raise property, real estate, parking and sales taxes.

Council President Herb Wesson said he hopes only one of those proposed increases ends up on the ballot in March. He is pushing for the half-cent sales tax hike, which would generate an estimated $220 million in new revenue for the financially strapped city.

Wesson said he asked the council to move forward with each of the ballot measures as a safe guard. He said results of Tuesday’s election, when voters in three dozen California cities will consider their own sales tax increases, will allow Los Angeles to gauge voter opinion on local sales tax hikes. 

"I think it will be a big indicator as to how people feel throughout the state,” Wesson said, noting that if response to those proposals elsewhere is tepid, he might support putting one of the other tax measures on the ballot.

Wesson took community leaders and some of his colleagues by surprise Tuesday when he announced that he wanted to increase the sales tax from 8.75% to 9.25%. The proposal drew sharp questions from some business leaders, who complained that it could drive shoppers to neighboring cities that have lower tax rates.

The proposed change would bring L.A. in line with Santa Monica and Inglewood, among other cities. But it would mean that some communities bordering Los Angeles, including Burbank, Pasadena and Glendale, would have lower rates.

Several council members expressed support Wednesday for raising the sales tax, including Bernard C. Parks, who said the proposal was the fairest on the menu of increases the council is considering.

Parking lot operators and real estate agents have fought the tax hikes that would affect their industries, saying they shouldn't have to bear the burden of raising revenue for the city. One proposal on the table would generate $40 million a year by increasing the parking tax from 10% to 15%. Another would increase the tax home owners must pay when they sell their house. That tax would generate anywhere from $76 million to $103.2 million for the city, depending on how it's implemented.

Parks complained about a third proposal to charge a $39 parcel tax in order to raise an estimated $30 million for the Recreation and Parks Department. He said residents in poorer, denser parts of the city would suffer because they would be paying more than those in less dense areas. And he pointed out that poorer districts like his own, which includes much of South Los Angeles, have little park space.

“The people with the least amount of park space and the most density will come out on the short end,” he said.

He and Councilman Paul Koretz said it makes more sense to put one large tax increase on the ballot instead of several smaller ones, with Koretz saying the sales tax increase is “the only thing that we should be looking at.”

Koretz said lawmakers must explain what they have already done to cut costs when they appeal to voters to pass the tax measure.

“We’re doing everything that we possibly and legally can and yet we still have a hole not of our own making,” he said.

Since the economic recession hit in 2008, Mayor Antonio Villaraigosa and the council have slashed about 4,000 people from the city payroll, using layoffs, early retirement packages and transfers to agencies not affected by the budget crisis, such as the Department of Water and Power. Many employees who stayed behind have faced mandatory furlough days, have seen their pay raises postponed and have agreed to pay more toward their retirement benefits.

Villaraigosa has said in recent weeks that he would not support a tax increase unless the council adopted additional cost-cutting measures, including privatizing the city zoo and Convention Center.

Wesson said Wednesday that the council will continue to move forward on the initiatives supported by the mayor, and he promised to lobby Villaraigosa to warm him to the idea of a sales tax increase.

“We’ll sit in a room and maybe argue a little bit and see if we can’t work this out,” Wesson said.

City Administrative Officer Miguel Santana said the fact that other cities in the state are considering similar sales tax hikes shows that L.A.'s budget crisis is not unique. The city faces a roughly $220-million fiscal deficit next year, with that gap expected to grow the following years.

“The crisis didn’t just hit us,” Santana said. He warned that the city will not be able to maintain public safety at the levels it’s at today without the tax increases.

“If Angelenos continue to expect the same level of service . . . this is a choice they’re going to need to make,” Santana said.


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-- Kate Linthicum at Los Angeles City Hall