Election 2024: Measure HB sales tax increase divides current, former leaders

by Kevin Cody

Current and past political leaders are taking opposing positions on Measure HB, on the November 5 ballot. The measure would add a 3/4% local sales tax to the current 9.5% sales tax.

In February, the City Council voted, four to one, to ask voter approval of a 3/4% Transaction and Use Tax (TUT or sales tax). Councilmember Dean Francois cast the dissenting vote. If approved, the increase would nearly double the $3.8 million the city currently receives annually in sales tax revenue. 

According to the 2023-24 city budget, sales taxes account for 10 percent of the city’s budget. Almost 50 percent of the city’s sales taxes come from downtown businesses, according to the city budget. The tax measure includes a 20 year sunset clause.

All of the 3/4% increase would go to Hermosa’s general fund, the proponents note. Currently, Hermosa only receives 1% of the sales tax revenue it generates. The balance goes to the State (6%) and County (2.5% to the county).

Additionally, proponents note, approximately half of the increased sales tax would be paid by Hermosa’s 5.2 million annual visitors.

The proposed sales tax increase is a “take it or leave it” proposition because the State caps sales taxes at 10.25 percent. If Hermosa voters don’t approve the proposed tax increase, another County agency could take it, a city staff report explains. 

The ballot argument in favor of the sales tax increase has been signed by Councilmembers Justin Massey, and Rob Saemann, School Board member Maggie Bove-Lamonica, Police Chief Paul LeBaron and former councilmember George Schmeltzer (1976-84). Schmeltzer is the only proponent signor who no longer holds an official city title.

Five former councilmembers have signed the ballot argument opposing the measure. They are Carolyn Petty (2013-17), Sam Edgerton (1992-07), JR Reviczky (1993-09), Jim Rosenberger (1986-89), and Michael Keegan (2001-09). 

A second opposition ballot argument was written by Council candidate Elka Worner, and co-signed by former councilmember Michael Keegan, who is seeking reelection to the council in November.

Proponents of the sales tax increase argue the sales tax increase is needed to balance the city budget without reducing city services.

The city balanced its $54 million budget this year, but projects rising deficits, reaching $3.6 million by the end of the decade. 

The opposition argument by the former councilmembers blames Hermosa’s financial shortfall on unnecessary spending. Rising property values and hotel taxes have increased city revenues over the past six years from $45 million to a projected $54 million this year.

Candidates Worner’s and Keegan’s argument contends the sales tax increase will hurt local businesses. 

Additionally, they argue, “There is no guarantee that the $3 million won’t go to higher salaries and bonuses.”  

A similar, 3/4% sales tax placed by the council on the November 2022 ballot failed by a vote of 45 percent in favor and 55 percent opposed. ER