Like several other Inland Empire municipalities, the High Desert town desperately needs to raise money to make up for the losses caused by COVID-19. But if it passes, will it raise enough to help?
In the 32 years since it incorporated, the town of Apple Valley has never raised a tax.
Not even during the Great Recession of 2007-08, which shook the High Desert economy to its core, did the town council add to the local sales tax or raise utility rates, to name two ways that city or town councils commonly raise money during difficult times.
Twelve years later, times are again bad, with the potential to get much worse in the next year or two. Apple Valley’s resistance to raising taxes might be about to change.
Last month, the five-member council voted unanimously to place a one percent sales tax on the Nov. 3 ballot. That action was a direct response to the damage done to the town’s economy by COVID-19, according to Mayor Scott Nassif.
“We have to bring in more revenue in order to maintain the quality of life our residents have come to expect,” Nassif said. “This is not something we want to do – I would say everyone on the council is opposed to raising taxes – but this is an extraordinary situation we’re in.
“A one percent sales tax increase would solve our problem.”
Probably no city in the United States has been untouched by the pandemic, which drove the number of unemployed to 17.8 million in June, following consecutive months of unemployment above 20 million, according to the Congressional Budget Office.
By comparison, there were fewer than six million people unemployed in February, right before the effects of the pandemic began to be felt in the United States. The budget office is also predicting that COVID-19 will cause the GDP to fall about 38 percent year-over-year during the second quarter.
The Center for Budget Policies and Priorities in Washington, D.C., a non-partisan agency that analyzes federal and state fiscal policies, says state and local governments are facing more than a $500 billion shortfall, and that more federal aid – including an expansion of Medicaid – is needed.
“The pressures on state and local finances from the COVID-19 pandemic and resulting economic fallout are mounting and will quickly become severe — significantly worse in the coming year than states and localities experienced during the worst year of the Great Recession,” a recent 28-page report by the center stated.
Nationwide, some cities are borrowing or dipping into their reserves to deal with the crisis, but others are placing sales tax measures – usually one percent – before their voters on the Nov. 3 general election ballot.
In the Inland Empire, in addition to Apple Valley, at least eight municipalities have agreed to take that step: Adelanto, Montclair, San Bernardino, Victorville, Redlands, Chino Hills in San Bernardino County, and Lake Elsinore and Corona in Riverside County.
Hesperia is considering a November sales tax measurer but has not reached a decision, and Upland discussed taking such an action but declined.
If approved, Apple Valley’s measure would generate about $7 million a year for the town’s general fund, which it uses to pay for law enforcement, road construction and upgrades, and improvements to parks and ballfields. General fund revenue is also used to pay for community events, including concerts and recreation programs.
Because Apple Valley lacks freeway frontage along Interstate 15, the town doesn’t generate as much business from interstate travelers and commuters as other High Desert cities. That depletes the revenue it gets from sales tax.
Apple Valley’s estimated sales tax revenues for the 2020-21 fiscal year is $6.4 million. By comparison, Hesperia expects to generate $9 million in sales tax revenue during that time, and Victorville $20.5 million.
Apple Valley also expects to lose about $3.5 million because of COVID-19 during the 2020-21 fiscal year, but the full financial impact of the crisis won’t be known until the pandemic is over.
By far Apple Valley’s biggest financial concern is maintaining its public safety contract with the Riverside County Sheriff’s Department, Nassif said.
In May, the town renewed that contract for the 2020-21 fiscal year, which began July 1, at a cost of $15.5 million. That was a $1.5 million increase – 10.3 percent – from the previous fiscal year’s contract, according to a town statement.
About 50 sheriff’s department personnel are assigned to Apple Valley, and the town council wants to at least maintain that number. That won’t be easy, because law enforcement costs are expected to go up five to eight percent next year and to keep rising during the three to five years after that.
But the town must find a way, Nassif said.
“Law enforcement is the top priority,” Nassif said. “It’s the one thing you never want to cut.”
Apple Valley is essentially conservative and anti-tax, and the extraordinary circumstances brought on by COVID-19 might not be enough to change that, said Janice Moore, president of the Apple Valley Chamber of Commerce.
Moore said she expects to have a better feel for the issue later this month after the chamber hosts a luncheon at which the proposed sales tax hike will be discussed.
“I think people up here never want to raise taxes, no matter what the circumstances,” Moore said. “This could be different, but I’m not sure. I’m not hearing a lot of talk about it one way or the other.”
Raising taxes in a recession is not a good idea, and raising the sales tax at a time when people have cut back on their spending probably won’t work, said Robert Kleinhenz, a Long Beach-based economic consultant.
“No matter what they do I think they’re going to come up short,” Kleinhenz said. “I understand that they have to make up lost revenue, but if the measure passes I don’t see how it can raise enough to do that.”