Details emerge on possible tax bump: Yuba City could pursue a 2024 revenue measure for public safety, roads

Feb. 22—During Tuesday night's Yuba City City Council meeting, City Manager Diana Langley gave an overview of what a possible 2024 revenue funding measure may look like and why such an action would be needed by the city.

With just three council members in attendance — Shon Harris and Dave Shaw were both absent — the city asked the council on Tuesday to approve a contract with Smart Marketing for a "Professional Services Agreement" for "Revenue Measure Consulting Services."

According to the proposal, the agreement would be for an amount not to exceed $135,000 for "base consulting fees plus $40,000 for other hard project costs for a total not to exceed $175,000." The agreement is "subject to immaterial modifications" by Langley "upon approval of the city attorney as to legal form, with the finding that it is in the best interest of the city."

As part of the proposal, the recommendation by the city was that the council also "approve a supplemental appropriation of $75,000 from one-time federal American Rescue Plan Act funds."

The American Rescue Plan Act, often referred to as ARPA, was passed in 2021. It was a $1.9 trillion economic stimulus in response to effects of the COVID-19 pandemic. About $350 billion was distributed to help state, local, and tribal governments bridge any budget-related shortfalls and mitigate negative impacts from COVID-19. Yuba City currently has about $6 million of ARPA funds available.

The city said the purpose of the contract with Smart Marketing was to "develop a potential revenue measure for the November 2024 election," which the city said would "support the council's overarching goal of quality of life, and address public safety, fiscal responsibility, infrastructure, and business friendly."

In her presentation to the council, Langley stressed that the process for pursuing a possible revenue measure was in the "very early stages" of evaluation. What is mostly being considered is a sales tax increase similar to the failed effort made by Sutter County with Measure A in the November 2022 general election.

Previously, the city council on Dec. 20, 2022, chose Vice Mayor Harris and Councilman Marc Boomgaarden to participate on a Revenue Ad Hoc Committee. During the following month in January, two ad hoc meetings were held with city staff to "review a variety of items including the city's five-year fiscal outlook, public safety priorities, the city's road conditions, and creating a Citizen Ad Hoc Committee to provide input to the Revenue Ad Hoc."

The city said after those discussions, it was determined that the city's revenues were "not projected to be sufficient to maintain fiscal sustainability." Langley on Tuesday identified that the greatest needs were in public safety and maintaining the city's deteriorating roads.

"If you go back to 2019, early in that year we did a transportation workshop in which we evaluated the roadways. At that point in time, the cost to maintain the roads in their current condition was about $7.3 million annually. To increase the condition to what would be considered the low end of good, it was about $8 million annually," Langley said. "If you fast forward to 2023, that price has gone up significantly. To maintain the current condition, which has declined since 2019, it's about a $13 million price tag on an annual basis. And that's not just for a couple of years, that's ongoing for many years. If you want to increase it to the state average ... that's about a $20 million price tag. When you add that to the public safety priorities, there's a lot associated with that. As the revenue ad hoc, we talked about opportunities to increase revenues. One of which is a potential revenue measure within city limits for the November 2024 election."

For the city's police and fire departments, Langley said on Wednesday that, in general terms, both departments have equipment, facility, and personnel needs.

"For fire, we have SAFER grant funding that covers salaries and benefits for three years for three Firefighter II positions. Once that grant funding is over, we will need to provide the funding for those positions. We have fire stations that need to be remodeled, and in some cases, expanded to bring the stations up to standard. In regards to equipment, the fleet of fire engines and other equipment is aging," Langley said in an email to the Appeal. "For police, we discussed the costs for the police department to provide law enforcement services for what is called Beat 6, which is the Walton area south of Franklin Road. Under our Master Tax Exchange Agreement with the county, the Sutter County Sheriff's Department provides law enforcement services for this area until we meet a certain population threshold within the area. Police also has facility needs such as an evidence storage building as well as equipment needs. Also, with the number of homeless individuals in our community, there is a significant need for resources to assist the individuals and reduce impacts to property owners and businesses."

Langley said because the Revenue Ad Hoc Committee has only had two meetings, officials involved have not "gone into great detail on any of these items yet."

While Langley couldn't say exactly what percentage of a sales tax increase the city would possibly pursue, she did say that a 1% increase would generate about $14.5 million in additional revenue. While a proper upkeep of roads would certainly eat up much of that additional revenue, Langley also pointed out that of the more than $52 million available in the general fund budget, the police department makes up $20 million and the fire department makes up $13 million of that spending.

"So, between police and fire, they're close to two-thirds of the general fund budget. Any significant reduction in expenditures would impact public safety," Langley said. "If you try to keep public safety whole, then what you're really looking at is your next two largest budgets are community services, which is parks and recreation, and then also public works. A portion of public works is funded through streets and roads that comes through the general fund. ... There's not a lot of places to look for the type of funding that's required to address the roads."

Part of the reason the city would be seeking a revenue measure is that it currently has a sales tax of 7.25%, one of the lowest in the region and state. Langley said Yuba City is one of seven cities in California with a population over 50,000 that does not have a revenue measure. She said the other cities were Thousand Oaks, Simi Valley, Redding, Camarillo, Rocklin and Hanford. She said even if those cities don't have a sales tax revenue measure, that doesn't mean they don't have other "revenue-generating" policies in place.

"I've lived in this community my whole life. And it seems like we're hard-wired to go shop at other places — Sacramento, Roseville," Yuba City Mayor Wade Kirchner said. "If you do that now and get that receipt, you look at the bottom of that receipt ... it says 8.5%, 9%, maybe even more. These are opportunities that unfortunately are leaving our area. It's money that's going elsewhere that could be going to reinforce our roads, to make us a safer community. This is an opportunity that is being missed."

Kirchner then pointed to the fact that places such as Chico recently passed a 1% sales tax increase that may provide the city as much as $25 million a year.

Langley said other possible revenue funding opportunities could be achieved through a "parcel tax," cannabis sales or a utility users tax.

"The thing with all of those other options is they still require the vote of either the property owner or the public. So, you're still in the same process," Langley said.

To address a projected gap in funding, the Revenue Ad Hoc Committee "expressed a desire to approach a potential revenue measure in a methodical manner that is well thought out and provides opportunities for the public to provide input," according to the city.

Because the Revenue Ad Hoc Committee said city staff "does not have expertise in this area," the committee recommended that a consultant be hired to assist the city with the process of considering a revenue measure for the November 2024 ballot.

The decision to use Smart Marketing, which is owned by longtime political consultant Crystal Martin, brought concerns of a potential conflict of interest with the majority of the council. According to campaign records, four out of five Yuba City council members used Smart Marketing in their most recent election campaigns — Boomgaarden, Dave Shaw, Mike Pasquale and Kirchner.

Shannon Chaffin, city attorney for Yuba City, said there was no conflict of interest.

"There's two items that would be primarily involved. One is what's called the Political Reform Act, or the PRA. And the other one is what we call Government Code 1090 conflicts," Chaffin said. "The state Legislature has basically said, 'hey, if you're a decision maker, you shouldn't be making money off a deal. You shouldn't be having a financial interest in a deal that is not in the public interest.' But, there is a difference between, are the decision makers having a financial interest in something? And, what I call the Subway rule. And that is, just because you've eaten at Subway in the past and done business there, doesn't mean that you own a Subway or work at a Subway. There's your difference."

Essentially, Chaffin said there was no legal conflict of interest with the four council members because they only used the service provided by Smart Marketing in their election campaigns.

Unwilling to go on the record, people familiar with Martin have claimed, without direct evidence, that Martin is the "puppet master" pulling the strings behind the scenes of various politicians in the region. Many have gone so far as to claim that she has had a direct impact on not only election outcomes, but also various policy decisions made by some area leaders. The Appeal has not been able to confirm those claims, but did find that Martin and Smart Marketing have been directly involved with political campaigns in the Yuba-Sutter area for a number of years — including various supervisors in both counties.

Boomgaarden, who used Smart Marketing in his most recent election campaign, pushed back on the notion that he takes orders from anyone, especially Martin.

"I'm not receiving any financial benefit by selecting Smart Marketing for this particular project. I need to make that abundantly clear," Boomgaarden said. "The other thing that continues to be alleged out in the unknown, anonymous people in the community is that there is some connection to Smart Marketing in the decisions I make at this dais. I do not have an ongoing relationship with Smart Marketing and I don't have her (Martin) or her husband (Chad Miller) or any other participant in that company on retainer. So, the false narrative out there needs to stop, at least on my part."

Pasquale and Kirchner both echoed that they have no financial interest in Smart Marketing, nor do they rely on the company or Martin for policy decisions.

"I have received no input from these people (Smart Marketing) other than trying to get elected and using what their knowledge was to get elected," Pasquale said. "The false narrative, as the councilman just said, needs to stop. I'm very transparent. I didn't get on this council to line my pockets whatsoever from anybody. I owe no one a thing. ... You don't know me if you think somebody's guiding me to make decisions. Doesn't work that way with this gentleman here."

Kash Gill, a former Yuba City council member who previously filed a Fair Political Practices Commission complaint against Martin's former client Tej Maan for robocalls and mailers that reportedly did not have proper attribution during Maan's campaign against Gill, said he had several concerns about the council's potential actions.

"I know our attorney explained conflicts of interest, but it could also be a quid pro quo. It depends on how you want to define it," Gill said.

Concerns about possible conflicts of interest were raised because the city wanted to enter into an agreement with Smart Marketing without doing a standard bidding process, often referred to as a request for proposal, or RFP.

Several former officials, including Gill, brought up this concern during public comment.

"My biggest thing is I look at the optics of this whole thing. Perception being reality ... it just doesn't look good. It's not a good way to start out. If you're looking for a 1% sales tax, it's not a good way to kick this thing off," Former Sutter County Supervisor Jim Whiteaker said. "I would personally like to see all of you support going out to an RFP. ... As a supervisor I've always asked department heads, and I'm sure you've asked department heads, to go out for an RFP on a lot of other projects. What it does is keep an even playing field for all businesses. This sets a bad precedent. If you're granting Smart Marketing this contract, what it says to other businesses is that they're gonna want the same thing. And how do you justify that after you give this to Smart Marketing? People are gonna say, 'wait, I want to be exempt from an RFP as well.' ... I believe by utilizing the RFP that would suffice everyone's belief that it was done fairly."

Earlier in the meeting, Langley addressed the RFP concern.

"Staff did not follow a bidding process in this. But, we have fully complied with all of the city's procedures and all legal requirements," Langley said. "So, why didn't staff follow a bidding process for these services? Per the municipal code Section 2-6.14, which is exemptions from competitive bidding, it states that competitive bidding requirements for purchase and sales over the limits set forth in Section 2-6.08 may be waived when the council determines that it is in the best interest of the city to do so. The conditions authorizing waiving of the competitive bidding requirement may include professional services, of which this is a professional services contract."

Langley said some of the reasons the city wanted to use Smart Marketing were because of its success in Yuba County with the passage of Measure K and the fact that it was a local company familiar with the local community.

"This question about sole sourcing, it was one that we definitely spent some time considering because we knew that if it were proposed it would bring up an issue in regards to why would we do this," Boomgaarden said. "... The real concern is, how do we engage the public? I believe our effort here and one of the reasons we were not a participant in the last measure was that we felt like we owed it to the citizens of Yuba City to be as transparent and open as possible. ... Cities aren't marketing agencies. ... We seek professional help when we need that. Smart Marketing, with the history, provides that level of professional help."

The previous measure Boomgaarden alluded to was Measure A, Sutter County's proposed revenue funding measure that would have increased the sales tax in the county by 1%. That measure failed by a few hundred votes in the November 2022 general election.

Yuba City officials took part in discussions with Sutter County officials prior to the November vote with the idea that the city would split the revenue received by the measure. While there was never a set deal in place, the idea was that Sutter County and Yuba City would split revenues from Measure A evenly after Like Oak received a small percentage.

Should the city move forward with its own measure, Langley and the council members said they would be open to sharing some of that revenue with the county. Pasquale, however, said the city would probably need to keep about 70% of that split rather than 50% due to the fact that the majority of residents in the county live in Yuba City.

After nearly an hour of discussion on the use of Smart Marketing for a possible 2024 revenue measure, Boomgaarden made a motion to approve the city's request to use the firm. He failed to receive a second from the other two council members. Because the approval needed three votes, Boomgaarden then made a motion to seek approval at the next council meeting on March 7. That motion passed with a 3-0 vote.