Richmond Mayor Tom Butt announced Tuesday an intent to pursue taxes on soda and Airbnb rentals in 2016, along with a litter fee on cigarette sales, as ways to help the city fix its budget problems.
During his State of the City address Tuesday night, Butt also warned of reductions to city services as the city looks to save $8.7 million this year either through reductions in expenditures or new sources of revenue.
Late last year, an independent consultant warned Richmond City Council that the city faces a $22.7 million budget deficit by 2021 and recommended taking immediate action to raise revenue and cut expenses. The audit followed months of outside scrutiny about Richmond’s financial situation, including downgrades by the Moody’s and S&P credit rating agencies. The city faced fire after using Measure U tax revenue meant for sustained road repair to balance this year’s budget.
In December, however, Richmond received good news when S&P took the city off of credit watch on the belief the city is taking the necessary steps to address the financial issues.
Butt said the city has made progress in balancing its annual budgets, but added “the longer term trend is not sustainable.” The mayor has asked city staff to spend time every month looking for ways to save or make money.
“Until Richmond becomes a more income-diverse community, we will continue to struggle with revenues,” Butt said.
To address the revenue side, Butt said he will bring a number of proposals for taxes and fees to City Council this year.
He said he intends to revisit a proposal to tax soda in Richmond, which was rejected by voters in 2012. Butt brought up how Berkeley’s soda tax is bringing in about $2 million in annual revenue.
The mayor also pitched the idea of imposing a litter fee on cigarette sales in the city, saying a similar fee in San Francisco is netting $2 million annually in revenue.
He believes taxing the 300 or so Airbnb rentals in Richmond will bring in several hundred thousand dollars annually.
Butt says he also wants to propose raising the tax on marijuana businesses from 5 to 10 percent and imposing a tax on marijuana cultivation in the city.
In terms of addressing expenses, Butt proposes reducing city staff, cutting overtime by 25-percent and achieving concessions in employee pension and health care costs.
Despite the tough financial situation, Butt’s State of the City indicated the city was moving in a positive direction. A survey of local residents shows quality of life has been improving, and the unemployment rate in the city was recently at its lowest (5.3 percent) since WWII, which is similar to the U.S. rate. Butt also discussed strides made toward building affordable housing in the city.
Aside from the city’s financial situation, Butt said reducing crime, which saw a 5-perecent increase overall last year, will be his top priority for 2016. The mayor’s bold goal: Bring the homicide tally in 2016 down to single digits for the first time in decades.