½-cent sales tax ends

A temporary local half-cent sales tax with a shelf life of six years will be rescinded 3 1/2 years early.

The tax was approved by 55.7% of Laguna’s voters in December 2005, with the understanding, but no legal obligation, that the City Council would use the funds for the city’s share of the costs to repair infrastructure destroyed or damaged in the Bluebird Canyon landslide and bank the remainder for a Disaster Relief Fund. The tax was estimated to raise about $11 million over the six-year term, of which the city will have collected almost $8 million by the end of this fiscal year.

“The affected residents and the community owe a great gratitude to our businesses that helped with the sales tax during this very difficult time,” said Mayor Pro Tem Elizabeth Pearson.

“I am pleased this burden has been lifted from the shoulders of residents and businesses in this lean time.”

The unscheduled 10-minute council meeting was held to meet the state Board of Equalization deadline to notice the curtailment of a local tax before the term ends.

Although the city’s share of the Bluebird Canyon landslide on June 1, 2005 depends on the federal audit of the expenditures still underway, City Manager Ken Frank estimated that “recissions” would be in the range of $1 million to $2 million, based on informal discussions with the auditor.

If the auditor determines the city’s share is $1 million, that would leave $4.8 million for the disaster fund, about equal to 10% of the general fund, which complies with the Measure A Oversight Committee recommendation. However, if the auditor taps the city for $2 million, the disaster fund would drop to $3.8 million.

Frank recommended the termination even though the final audit might bring the reserve fund down below 10%. He reasoned that with the 1% increase in sales tax recently approved by the state, any unnecessary barrier to sales should be eliminated in these tough economic times.

“It seems a little incongruous in this economy for the city to be taxing people and taking money out of the income stream for a reserve fund that we might not need for several years,” Frank said. “If we get lucky with the audit, we will have the full 10%.”

BARBARA DIAMOND can be reached at (949) 380-4321 or [email protected].