LOS ALAMITOS, Calif. — Next year, shopping in Los Alamitos will get a little bit more expensive.
But for a good reason, Los Alamitos Mayor Richard Murphy said.
With the city of Los Alamitos teetering on a fiscal sustainability crisis, voters narrowly passed Measure Y, a ballot initiative that increases the city's sales tax by 1.5%, from 7.75% to 9.25%.
The city's new tax rate ties Santa Ana as the highest in Orange County.
Unlike other measures decided the moment or days after preliminary election results, city officials would not proclaim victory on Measure Y until the Orange County Registrar's office certified the election results last week. Measure Y won by 114 votes.
"With everything going on, the coronavirus, and businesses struggling, we knew it was going to be close," said Murphy, who is in the final weeks of being mayor. He decided not to seek re-election after eight years on the city council.
The city's sales increase comes amid a global pandemic that has affected residents, businesses, and the city. Los Alamitos was already facing a budget shortfall before introducing Measure Y, but officials hope the new sales tax increase could help them balance the budget in the years to come.
City staff placed Measure Y, dubbed City of Los Alamitos Quality of Life, 911 Police Response, Business/Job Protection Measure, as a way to prevent more cuts to essential city services and public safety.
Leading up to the election, opponents of Measure Y said the sales tax increase would deter people from shopping in the city and instead take their dollars to other nearby cities with a lower sales tax rate. Opponents also said city leaders need to do a better job and find different ways to balance the city's budget without increasing taxes.
"Increasing taxes without major spending reform is like signing up for more credit cards when you have a spending problem," Los Alamitos resident Phil Silverthorn said on the ballot measure.
Murphy said city staff has looked at "every revenue source" before introducing Measure Y. But the city is facing a growing budget deficit due to state-driven health and pension costs and a fixed annual payment to CalPERS. In the 2020-2021 fiscal year, the city faces a $1.4 to $1.6 million budget deficit. According to city staff, by 2027-2028, that deficit is estimated to grow to $3.4 million.
Murphy said the city did not want to cut any more essential services and police.
"We've been facing financial problems like every small city in Orange County for years," Murphy said. "In the past ten years, we've cut staff from 75 to 50. During our last budget, we cut another 11 people. We went from 75 to 39 full-time city staff in 10 years. We got to the point where we saw the writing on the wall."
Murphy said the city had no choice. If the city continued with the status quo, the city's $8 million cash reserves could get depleted by the 2024-2025 fiscal year.
The city considered either raising property taxes or sales taxes. Ultimately, they chose to increase the sales tax rate. The city estimates a one-cent local sales tax could generate more than $3 million annually.
"We should have done this years ago," Murphy said. "I think Stanton did theirs [sales tax increase] about four years ago. We kept trying to find ways to budget the balance. We finally bit the bullet."
If Measure Y hadn't passed, Murphy said the city could go broke.
"It would have been a mini-Armageddon here," he said.
Murphy said he doesn't expect residents to drive outside of the city to buy their goods because of its new sales tax rate.
"Maybe for large items, big-ticket items, they'll feel the extra cost, but really these are pennies that we are talking about," Murphy said. "This was a leap of faith. We're not spending the money on unnecessary things. We're going to spend it on police and essential city services."