Measure U

Measure U is a local sales tax measure that costs one-half-cent per dollar. This equates to an additional five cents per $10 of taxable sales, or 50 cents per $100. Some exemptions apply to Sales Tax, such as most groceries, prescription medicine and many medical supplies, rent, utilities, diapers, and feminine hygiene products. No taxes apply to these exempt items. For a complete list of all the sales and use tax exemptions, please visit the California Tax Service Center at https://www.taxes.ca.gov/.

The City of Sebastopol hosted public Townhall Meetings and conducted a survey and poll on Community Priorities. The results are summarized here:

https://www.cityofsebastopol.gov/sebastopol-community-priorities-survey/

The Townhall meetings included presentations given by City staff on the status of City services, its budget outlook, and the potential for a Sales Tax proposal.

The City also distributed a city-wide informational mailer to educate the public about the specific challenges facing the City and to invite the public to our Community Town Hall events.

Measure U would apply to any taxable purchases made in the City of Sebastopol, and is paid by residents, the City’s elected officials, and tourists and visitors to the City. Measure U would ensure that out-of-town visitors pay their fair share while re-investing in our community.

Measure U legally requires independent financial audits as part of the City’s annual comprehensive audit, as well as oversight by the City’s elected leaders. By law, all Measure U funds must be spent locally in the City of Sebastopol, the State cannot take this funding away, and funds cannot be transferred to the County or another public agency.

Measure U has a “sunset date” that dictates the half cent tax would end after 12 years.

No, local businesses are not required to do any additional work for this sales tax. It will be collected in the same manner as existing sales tax.

We estimate that under best case circumstances in which all retail spaces were filled we would see $350,000 more per year in sales tax revenue, or 23% of the amount projected from Measure U.  This assumes that all available spaces are filled with retailers generating sales taxes at the same rate as our current retailers. This is unlikely given:

1. Typically vacant spaces are less desirable (one reason they are vacant) than filled spaces.
2. Some new tenants will ‘cannibalize’ sales tax from existing tenants.
3. Most new tenants probably are going to be services (this is where the economy is trending) and generate little to no sales tax.
4. About 3% of spaces will always be vacant due to turnover and improvements in the spaces.

According to Keegan and Coppin, a reputable local commercial real estate broker, our retail vacancy rate is 10.7%. The County-wide average is 9.3%. Our vacancies for neighborhood centers are considerably higher than average, while vacancies for other locations are below average. 

https://www.keegancoppin.com/pdf/market/sonoma/2024/2/2nd_Qtr_2024_Sonoma_County_Retail_Summary.pdf

Retail vacancies are driven primarily by supply and demand for retail space. While cities have little influence on these factors, there are things that we can do to attract retailers. The most important is to make it easy for new businesses to locate here. This includes a strong Planning function that responds quickly to requests for information and assistance, does not require businesses to go from Department to Department to get answers, and provides certainty with answers. Mostly it takes a culture dedicated to finding ways to meet businesses’ needs rather than creating obstacles. We are moving in that direction.

Cities can also help by supporting local events that generate visitors, streamlining approvals for permits, and setting reasonable standards for zoning, parking, and other factors affecting businesses.

Cities can target particular businesses, or types of businesses, and attempt to recruit them. This can be time-consuming and expensive. This is most useful after establishing a strong Planning function as noted above.

The attached summary of retail and business activity provides the best information we have on our sources of sales taxes from local businesses as of the 2nd quarter of 2024. It shows that the primary generators of sales taxes include grocery stores, restaurants, and gas stations. We do not have the kinds of businesses that generate large amounts of sales taxes, such as car dealerships and big box stores.

90% of our local sales tax is generated by our top 100 businesses. The top 100 businesses generate $8,000/year on average, while the lion’s share of our filled spaces generate less than $4,000 each (the non-top 100 group which only generates 10% of our total local sales). 

Note that we cannot legally provide the sales tax revenue for individual businesses.

Approximately 25% - 30% of retail sales in California are on-line. About 10% of Sebastopol’s sales taxes are from e-commerce, including Amazon. We receive all of the sales taxes from Amazon and other on-line retailers that we are entitled to. While the amount of sales tax Amazon generates for Sebastopol is confidential (all sales tax information for individual businesses is confidential), it falls within the same range of our top 25 local sales tax generators, but because it is not local it is not included in that group or in the Quarterly Report on Sales Tax and Business Activity.