El Cajon sales-tax increase in effect
City's rate higher than rest of county
By Liz Neely
April 1, 2005
EL CAJON – Consumers here will begin paying more today – on everything from diapers to diamond rings – when a voter-approved sales-tax increase takes effect.
Beginning today, El Cajon shoppers will pay more sales tax than consumers in San Diego County's 17 other cities when the rate increases from 7.75 percent to 8.25 percent, or a half-cent on every dollar.
For the average shopper, the difference may go unnoticed. A $100 trip to the grocery store will cost 50 cents more in sales tax, while a $1,000 shopping spree will increase the sales-tax bill by $5.
All goods sold in El Cajon are subject to the new tax, except for vehicles and other forms of transportation. Consumers buying cars, motorcycles, boats or airplanes pay the sales-tax rate of the city where they live. A San Diego resident buying a sport utility vehicle in El Cajon would pay 7.75 percent sales tax, San Diego's rate. But an El Cajon resident buying the same SUV in San Diego would be stuck with the higher tax.
Tax rate now 8.25%
El Cajon voters approved a sales-tax measure in November that will generate $62 million for public safety projects. The sales-tax rate in El Cajon will increase today from 7.75 percent to 8.25 percent. It applies to all goods sold in El Cajon, with a few exceptions. El Cajon residents who buy big-ticket vehicle items such as cars, boats or other vehicles will pay the tax even if they make the purchase in another city or county. Nonresidents will not.
Sales tax is collected by the state Board of Equalization. The base rate is 7.25 percent. Five state funds share 6.25 percent on each taxed purchase and 1 percent goes to the city and county, with 0.25 percent going to county transportation funds and 0.75 percent going to city and county operations.
In San Diego County, residents voted to increase the rate to 7.75 percent. The TransNet tax was first approved by voters in 1987, and it was extended last November until 2048. The extension is expected to provide $14 billion for highway and transit projects and local street and road improvements.
Sales-tax revenue from the increase will be separated by the state, and El Cajon will receive its first payment reflecting the new tax July 1.
The higher rate was approved by El Cajon voters in November. It is the first city in the county to take advantage of a law that took effect Jan. 1, 2004. It allows local jurisdictions to put sales-tax measures before voters without first seeking permission from the state Legislature.
City officials say the increase is expected to generate $62 million over the next seven to 10 years. The money will be used to build a new police station that combines public safety administration in one facility, as well as an emergency operations center. Fire stations will be upgraded, and a new animal-control shelter will be built. The new tax will expire in 10 years, but city officials have said it could end sooner if the $62 million mark is reached early.
The increase won approval with 68.92 percent of the vote, just over the two-thirds required. During the election, some questioned whether the measure would hurt business in El Cajon.
Terry Saverson, the San Diego East County Chamber of Commerce chief executive,
said there are some who believe the tax will hurt business. But that doesn't necessarily mean it will prompt El Cajon shoppers to spend their money elsewhere, she said, because "there is value in convenience."
"From a personal perspective, if there is something I want in a shop on Main Street . . . I'm not going to go get in my car and go find it" somewhere else, Saverson said.
Some car dealers declined to comment on the increase, but others said they think shoppers will adjust.
"I personally don't think it's going to be a big problem, especially with gas prices," said John Blake, controller at El Cajon Ford. "The amount you save in sales tax you're going to pay in gas to go outside the city."
Still, the dealership is worried customers in neighboring cities may not realize they are exempt from the tax increase.
"We're going to increase advertising to help educate our customers about that," Blake said. "Sales tax is based on where you live, not where you buy, when it comes to car sales."
Car dealers have long had to deal with this issue, as many municipalities have different rates. It is not uncommon for buyers to come to San Diego from Los Angeles, Orange and Imperial counties – either for a better deal or to find a specific model.
Loren Campbell, general manager for El Cajon's Bob Baker Chevrolet Subaru, said the increase is for a good cause, and he doesn't anticipate any significant change in sales.
"Most people that buy cars, what they are really interested in is how much they have to put down and how much their monthly payment is," Campbell said. "They don't really care about all the numbers in between that get them to that point."
Compared with other San Diego County cities, El Cajon residents would pay $150 more in sales tax when buying a $30,000 car.
Nancy Palm, assistant to the city manager, said she has fielded more than a dozen calls from residents concerned about how the increase will affect them, but none has been overly negative. The city chose to go with a sales-tax increase over a property tax because a poll of likely voters showed they would be more inclined to support the former. Palm said the sales tax is more equitable in the sense that everyone is contributing, not just homeowners.
Additionally, a city staff analysis showed that El Cajon would save $50 million compared with a property tax increase because it would be in place for up to 10 years instead of 30. Mike Shelton, assistant city manager and finance director, said sales-tax revenue will start coming in before land is acquired for the new police station, so the period of debt financing will be relatively short.
Voters in the city of Visalia, located in California's Central Valley, approved a sales-tax increase in March 2004 that raised the rate from 7.25 percent to 7.5 percent. The tax has no expiration date, and it is expected to raise $110 million over 20 years, with 60 percent going to the police department and 40 percent going to the fire department.
Visalia's increase went into effect July 1, and the city already has hired five more officers, said Leslie Coviglia, Visalia's deputy city manager.
"I don't think at this point we have seen anything (to indicate) that it has negatively affected sales-tax revenue," Coviglia said.
Liz Neely: (619) 593-4961; email@example.com