Sales tax hike in Westminster will be decided by voters in March election

Westminster is asking its residents to again decide whether to increase taxes.

Before voters in March is an option to add a half cent local sales tax, which city leaders say would bring in an extra $8 million in revenue as Westminster projects to be completely out of reserve funds in just a few years.

The tax does not include an end date. Instead, city staff will survey residents after the eighth year to determine whether they wish for it to continue.

“We are not increasing their tax,” Councilmember Kimberly Ho said. “We’re only giving them (residents) the right to decide for themselves that they want to increase by a half-percent sales tax or not.”

The ballot question may seem like déjà vu for some residents; voters agreed to extend a 1% sales tax in November 2022 at the behest of city leaders who warned Westminster would go bankrupt without it.

Sales tax in California is 7.25% and there is an added half-cent tax in Orange County that funds transportation projects and programs. The previously approved local 1% tax brought Westminster up to 8.75%.

That 1% sales tax brought in $16.8 million in revenue since it was first enacted by voters in 2016 through the end of 2022, when it briefly sunset. But that tax “was never enough to fund increased service levels or even continue services at current levels due to inflation,” said Erin Backs, Westminster’s finance director.

That tax expired at the end of December 2022. Voters, in November, approved extending the 1% tax for 20 years, and collections began again in April. The city projects a loss of $4 million during that lapse, according to a presentation from Backs.

Westminster’s budget is strained by “additional issues outside of the city’s control,” the staff report said, from more 911 calls that require emergency medical attention to increased crime and homelessness.

Without significant changes to the rate of revenue collected, Backs said Westminster’s reserve fund balance would be completely depleted by fiscal year 2027-28.

“Westminster continues to make progress with revenue-generating projects and initiatives … we’ve postponed running out of money for a few years since original projections back in 2016,” said Backs. “But these continue to take time and effort. None of these options provide an ongoing revenue source that will close the gap, nor is there a very large, one-time amount that can be captured.”

It was down to the wire for councilmembers to greenlight putting the tax proposal before voters in just three months.

The council met for nearly three hours on Friday, Dec. 8 — the deadline to approve ballot measures for the March primary election, per the Orange County Registrar of Voters — and needed all four present members (NamQuan Nguyen was absent) in agreement.

That nearly didn’t happen.

When it came time for a vote, Mayor Chi Charlie Nguyen originally said no. He had advocated for the tax measure to come with an end date.

But he was the only one in opposition, meaning the measure would fail, so he changed his position.

“For the sake of the city, I will change my vote to yes,” he said to applause.

Despite her yes vote, Councilmember Amy Phan West was critical of how quickly the council needed to decide on the measure, saying she only had a few days to look at data and research.

“I do feel like it’s too rushed,” she said. “I just feel like it’s too early for another tax increase, but I do truly trust the people to have the voice, and I want the people to speak for themselves.”

If approved by voters, the new tax would likely begin to be collected on Oct. 1, said city attorney Christian Bettenhausen, who noted implementation depends on various factors such as election certification. And even then, it would be a few months before the city would begin to receive revenue from the tax collections, Backs said.