The Future of the Food and Beverage Tax

Analysis and Opinion by Dean Silver

Third in a Series

The Ashland City Council continued deliberation of a revision of the Food and Beverage Tax (FBT) at the July 19 business meeting.  First reading of Ordinance 3212, proposed by City Manager Joe Lessard was on the docket. It would remove obsolete language from the City Code, change some of the existing language, change the assignment of the tax revenue, and change the sunset date.  Ordinances require two readings for adoption, whereas resolutions require only one.

The Details

Let’s examine the changes. It’s easy to visualize them in the link to the actual ordinance.  You can also see Resolution 2022-22 which would refer the Ordinance to the voters, and the proposed ballot verbiage with the same link.

Section 1 C 1.

  • CHANGES the wording “25” to “not less than 25” percent
  • CHANGES Shall be “paid into a parks account” to “used”
  • ADDS “operation, maintenance” and “open spaces, and trails and for recreation or senior programs” to uses
  • REMOVES “per adopted plans of the Ashland Parks and Recreation Commission”

ADDS Section 1 C 2.

  • “Up to seventy-three percent (73%) may be used for general government purposes
    including, but not limited to, public safety, wildfire prevention, and emergency event
    housing”

CHANGES previous Section 1 C 2 to Section 1 C 3

REMOVES

  • previous Section 1 C 3 referring to obsolete payments to WWTP debt
  • previous Section 1 C 4 referring to uses for Street Fund
  • previous Section 1 C 5 referring to potential changes after 2023

ADDS reference to publishing public hearing notices electronically in Section 1 D

CHANGES Section 2 termination date from 2030 to 2040

Council Discussion 7/19/22

The City Council discussion was wide ranging.  You can watch the video here.

Councilor Paula Hyatt suggested that if the FBT were to be made “permanent” it could be used for a greater variety of purposes.  Councilor Tonya Graham pointed out that the FBT is not “new money”.  Councilor Stefani Seffinger stated that she could not support the ordinance because she feels that it is not adequately supportive of Parks.  Councilor Shaun Moran questioned the change of the sunset date from 2030 to 2040. Councilor Gina DuQuenne also expressed support for the 2030 sunset date.  The Mayor also expressed support for 2030.  DuQuenne moved to approve the ordinance amended to change the sunset date to 2030.  Moran seconded.

Hyatt argued that 2030 doesn’t give the council enough time to deal with the budget problems.  Graham also stated that she could not support the change to 2030.  Councilor Stephen Jensen suggested that the tax should be continued “in perpetuity”.  Mayor Akins asked what will happen if this ordinance fails.  City Manager Joe Lessard replied that there would be no change in the current ordinance and tax, that the 25% would continue to go to the APR CIP. The Mayor suggested that changing the end date to 2040 would make the measure unpalatable to many voters.

The vote on the amendment to the ordinance changing the sunset date to 2030 failed 2 to 4, with DuQuenne and Moran in favor.

Jensen moved to approve the ordinance amended to read that the tax would be in effect “in perpetuity”.  Hyatt seconded, and argued for its adoption.  Lessard then explained that because there is a cancellation clause in the ordinance, the verbiage “in perpetuity is too strong a word”.  City Attorney Doug McGeary pointed out that “in perpetuity” is an affirmative statement, whereas the cancellation clause is optional, and that the proper procedure would be to remove the termination date.  Lessard pointed out the contradiction between the cancellation clause and the verbiage “in perpetuity” could create confusion.  The attorney clarified that the proper wording of Jensen’s amendment would be to remove reference to a sunset date.  Graham argued again for 2040.  Hyatt argued again for removal of the end date.  DuQuenne argued strenuously against continuing the tax in perpetuity.

The vote on Jensen’s amendment failed 0 to 6.

Hyatt moved to approve the ordinance as written, including the date of 2040.  The motion was seconded by Jensen. The motion was approved 4 to 2, Moran and Seffinger dissenting. Since it is an ordinance, it requires passage at a first and second reading.  This was the first reading. That second reading will occur at the 8/2 Council meeting.

What’s Next?

There are three options for this ordinance at the next meeting.  It can pass as adopted on first reading, with a sunset date of 2040.  It can be amended to include a sunset date of 2030.  Or it can fail.

All of the Councilors, with the exception of Seffinger, agreed that this ordinance is beneficial, and agrees that it should be referred to the voters.  The outstanding question is whether the FBT should be extended for an additional ten years to expire in 2040, with the potential for repeal before that date.

My personal feeling is also that the ordinance is beneficial, and should be adopted.  I do not favor extending it to 2040; that makes it “quasi-permanent” and removes the urgency from the attempt of this and subsequent Councils to finally eliminate the FBT.  The tax is widely disliked throughout the city, but was passed overwhelmingly in 2016 primarily because it was presented as a mechanism to fund street maintenance as well as APR, when there appeared to be no alternative funding source.

The ordinance as written will provide greater flexibility for funding of APR, because it will allow uses for operations and maintenance, as well as the previous uses.  It will give the Council and City Manager more flexibility in the ways they use those funds.  It will give them the ability to apply it where it is needed, when it is needed.

If the ordinance is presented to the voters with a sunset date of 2040, I believe it will fail.  If the ordinance is presented to the voters with a sunset date of 2030, I believe it will pass.  If the ordinance is rejected by the voters, the current FBT will remain in effect.  That will continue to allocate 25% to the APR CIP (presumably not for operations and maintenance), and the rest to the Street Fund.  However, the ambiguity of wording will remain, and it could be subject to reallocation as was seen in the adopted 2021-2023 budget.  That would be the worst outcome, in my view.

What do you think?  Now is the last chance for citizens to weigh in before the ordinance is referred to them in November.  Now is the time to write your councilors and tell them how you want the ordinance to be worded: 2030 or 2040.  Or something else.  Until the ordinance passes a second reading, it cannot advance to the voters.

You can write to all of the Councilors and the Mayor with one email address: council@ashland.or.us . The meeting is scheduled for Tuesday, August 2 at 6 pm.

You can read the first two articles in this series at these links:
The Evolution of the Food and Beverage Tax
The Recent History of the Food and Beverage Tax