June 11, 2024

Palm Desert Considering New Sales Tax to Fund Essential Services and Infrastructure

By Bob Marra

At its June 13 meeting, the City of Palm Desert City Council will consider a new one-percent sales tax ballot measure that residents would vote on in the upcoming November 5, 2024, General Municipal Election if it is approved. This proposed tax, known as the Transactions and Use Tax (TUT), aims to address significant financial challenges and fund essential city services and infrastructure projects. It would raise the city’s general sales tax to 8.75% from 7.75%.

The city council considered the same sales tax approach in May 2023 for the March 2024 election but did not send it to the ballot at that point. Instead, the city council directed staff to seek community input by working with a consultant to conduct public opinion and community priority surveys.

Other cities in Greater Palm Springs have already raised their tax rates to the level that Palm Desert voters may consider at the next election. Cathedral City, Coachella, Indio and La Quinta currently have an 8.75% sales tax rate. Palm Springs has the valley’s highest at 9.25%.

Financial Necessity and Priorities

In recent years, maintaining essential services in Palm Desert has become increasingly challenging due to operating costs rising at a faster pace than revenues. Veronica Chavez, Director of Finance, emphasized that without a new revenue source, the city faces significant budget deficits and potential reductions in services. “The addition of a one-cent sales tax is expected to generate approximately $25 million annually,” Chavez stated. “These funds will help maintain 9-1-1 emergency medical and police/fire response services, repair and improve streets and public facilities, and support youth and senior programs.”​​​

The city’s infrastructure – including traffic signals, community centers, fire stations, and streets – requires substantial investments to maintain current standards. Palm Desert contracts with the County of Riverside for public safety services, and financial projections indicate that additional investments are necessary to maintain current service levels and response times​​.

Post-pandemic economic factors, such as increased minimum wage requirements and supply chain issues, have further strained the city’s budget​​.

Detailed Spending Plan

The proposed TUT plan prioritizes several key areas for the allocation of new tax revenue:

  1. Public Safety: Significant funds will be directed toward constructing and staffing new fire stations, rehabilitating existing ones, and increasing police patrol staffing to address rising crime rates. These enhancements are projected to require over $45 million over the next five years​​​​.
  2. Infrastructure: Upgrades to the city’s flood control infrastructure and public works maintenance are essential. Projects like the North Sphere Flood Control, which will address long-term impacts and prevent future flooding, are expected to cost around $18.5 million​​.
  3. Community Amenities: Investments in the Palm Desert Municipal Library and the North Sphere Regional Park aim to enhance community resources and recreational spaces. The library construction is estimated at $30 million, and the regional park at $20 million​​​​.
  4. Financial Reserves: Maintaining a healthy reserve fund is crucial for financial stability and preparedness for future emergencies. The city plans to use part of the new revenue to replenish emergency and operational reserves​​​​.

Addressing Financial Challenges

The city has previously implemented several service and operations reductions to remedy financial shortfalls. These measures included freezing positions, concession bargaining with employee groups, seeking grant funding, deferring capital replacements, and bundling work to achieve economies of scale. However, these strategies alone are not sufficient to maintain the community’s current level of service​​.

Five-year financial projections presented to the City Council show that estimated expenditures for annual operational costs will outpace revenues almost immediately by FY 2024-25. Without additional revenues or service reductions, the General Fund deficit will continue to grow each year​​.

Public Statements and Support

During a May 2023 city council meeting, current Mayor Karina Quintanilla emphasized the proposed tax’s importance for the city’s long-term financial health and quality of life. “This measure is about securing Palm Desert’s future. It ensures that we can continue to provide top-notch services and amenities to our residents and visitors without compromising on safety or infrastructure,” Quintanilla stated​.

At the same meeting, Councilmember Kathleen Kelly stated, “Out of all those that we’ve looked at in study sessions, this is the least onerous because it invites our visitors to carry the hardest part of the load rather than our residents.” She also pointed out that items such as groceries and medical services “Out of all those that we’ve looked at in study sessions, this is the least onerous, because it invites our visitors to carry the hardest part of the load rather than our residents,” Kelly said. She also said that items such as groceries and medical services are exempt from California’s sales and use tax, “so in most respects, it’s not going to pinch those who are struggling most.”

City council members have highlighted the inclusive process leading to this proposal. Extensive budget outreach sessions with residents helped identify the community’s priorities, ensuring that the proposed tax aligns with public expectations and needs​​.

Implementation and Accountability

If approved by voters, the new sales tax would take effect on April 1, 2025. The city has assured that all funds generated will remain in Palm Desert, benefiting the local community directly. The measure includes provisions for public spending disclosures and audits to ensure transparency and accountability​​​​.

The City Council has taken steps to consolidate the municipal election with the statewide general election to streamline the process and encourage higher voter turnout. The consolidation request, along with the measure itself, will be submitted to the Riverside County Board of Supervisors and the Registrar of Voters for approval​​​​.

Those interested in learning more and/or commenting on the new tax can remotely view the June 13 city council meeting live at the city’s website: www.palmdesert.gov under the “Council Agenda” link at the top of the homepage or on the City’s YouTube Channel.

The meeting starts at Palm Desert City Hall at 4:00 p.m. Numerous agenda items are listed for consideration prior to the public hearing on the new tax.

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