With Palm Desert officials expecting costs to keep rising to fund police and fire services, and with multiple new projects in the works, the city’s voters will decide later this year whether to increase the local sales tax by one cent per dollar — a move that would generate tens of millions of dollars of new revenue.

The Palm Desert City Council unanimously agreed Thursday to place a sales tax measure on the November ballot that would increase the city’s rate to 8.75% from 7.75%. If adopted by voters, the measure is expected to produce roughly $25 million annually.

In Palm Desert, voters could potentially see two sales tax measures on the November ballot, depending on the fate of a separate proposal to increase Riverside County’s sales tax by 1% to fund a wide range of transportation projects.

The Riverside County Transportation Commission may decide during its July meeting to place that on the ballot. While the citywide measure would only require a simple majority to pass, the other would require approval from two-thirds of voters countywide to take effect. If both won approval, the rate in Palm Desert would go from 7.75% to 9.75% — a roughly 25% increase in sales tax paid.

Palm Desert’s sales tax measure will head to the ballot as costs for services are projected to outpace the city’s revenue, a gap expected to start in the upcoming fiscal year and grow over the next four years. By the 2027-28 fiscal year, city officials are projecting a roughly $17.1 million deficit, barring additional revenues or cost cutting.

That trajectory would quickly drain the city’s general fund reserve balance, which had roughly $120 million at the start of the 2023-24 fiscal year.

Veronica Chavez, the city’s finance director, said in a memo to the council that the city has taken several steps to cut costs in recent years, including freezing positions, seeking grant funding for capital projects, deferring and extending capital projects and “bundling work” to achieve economies of scale.

“However, these strategies alone are not sufficient to maintain our community’s current level of service,” Chavez wrote, also noting post-pandemic cost increases due to supply chain issues and new minimum wage requirements.

The proposed measure, which requires just a simple majority to pass in November, is heading to the ballot as several new projects, such as a fire station off Gerald Ford Drive and a pair of new parks in Palm Desert’s growing northern region, are in the works.

The revenue from the sales tax measure would be used primarily to pay for the new fire station, additional firefighters and sheriff’s deputies, renovations to the city’s existing fire stations, storm channel and retention basin upgrades, citywide equipment replacements and new public works staffing, according to a five-year plan submitted to the council.

The secondary priorities under the plan include the future construction of a new library following the city’s transition from Riverside County’s library system, building a regional park in the city’s north end and replenishing the city’s reserve accounts.

The one-percentage-point increase represents a roughly 12.9% increase from the previous rate, though Chavez noted Thursday that certain items — including most groceries, medical supplies, diapers, prescriptions and feminine products — are exempt from California’s sales tax.

Palm Desert currently receives a full percentage point of the state’s 7.75% sales tax, the same rate as Desert Hot Springs, Indian Wells and Rancho Mirage, while others have already raised their rates. Cathedral City, Coachella, Indio and La Quinta currently have an 8.75% sales tax rate, while Palm Springs has the valley’s highest at 9.25%, after voters approved Measure D in 2017.

Chavez also noted city staff have held several meetings with homeowners associations, the local rotary club and other groups, as well as four town halls, to discuss the proposal in recent months. In surveys that were a part of that outreach, they found an overwhelming majority, more than 85%, viewed maintaining adequate emergency response times and public safety services as very important.

More: Sales tax hike would fund road, bridge, rail plans in Coachella Valley. Voters may decide

What the council said

The council was largely in agreement that the sales tax measure was necessary, particularly given the considerable growth expected to occur in Palm Desert in the coming years, with more than 4,500 units either under construction or approved by the city.

Mayor Karina Quintanilla initially expressed some concern for people living on fixed incomes, saying for some the impact of a one-cent increase “is a pinch to their overall financial situation, and for others, it will be a punch.” But she ultimately supported the measure due to the need to maintain adequate response times for emergency services.

“(With) public safety, we say the words, but what that means is it comes down to life and death,” Quintanilla said.

Other councilmembers offered similar perspectives, noting the urgency to build the new fire station in the city’s growing northern region.

“I start thinking about all the new homes we’re building in north Palm Desert and all the people (coming in), and we only have so much manpower to get to people when they have an emergency,” Councilmember Gina Nestande said. “Oftentimes, seconds matter.”

Councilmember Evan Trubee also highlighted that while there’s considerable growth underway, only a small fraction of the property tax revenue — or what Chavez described as “a drop in the bucket” — from the new housing will come to the city’s coffers.

“It was in the six figures, not the seven figures,” Trubee said of the projected property tax revenue. “Yet those 5,000 additional homes, in order to keep our levels of service, will require millions of dollars of investment in public safety.”

Mayor Pro Tem Jan Harnik also noted the importance of having funding available in case of emergencies, pointing recent events like the COVID-19 pandemic and Tropical Storm Hilary, and echoed the importance of quick response times.

“No one likes a tax increase, but no one likes to call 911 and not get a response,” Harnik said. “They don’t like that to a much greater level than they don’t like a one-cent sales tax.”

Councilmember Kathleen Kelly noted city estimates that people who don’t live in Palm Desert, who she said create some of the need for public safety, would pay for roughly 70% of the sales tax, and she also touched on the mayor’s concerns about affordability.

“My experience is when we budget tightly, a much higher percentage of our expenditures are in the tax-free category … for groceries or prescriptions or rent, so I’m confident that those who are most financially stressed won’t be paying (as much),” Kelly said.

What residents said

As part of its recent community outreach process, the city conducted a survey that found roughly 57% of respondents were supportive of a sales tax measure.

During Thursday’s meeting, only three people offered public comments, each raising a few questions about the proposal.

Stephen Nelson, a resident of the city’s north end, said he was generally supportive of the measure, but he also said the city needs “to tighten our belts” to ensure it doesn’t find itself in the same situation down the line.

Resident Gregg Akkerman said it feels “a little desperate that we only have one option moving forward,” after city staff determined that an increase in the transient occupancy tax rate or other funding mechanisms wouldn’t generate adequate revenue to meet Palm Desert’s needs.

“We were told that 70% of that money will really be from people that don’t live here,” Akkerman said. “That sounds impressive and optimistic at first, but I have another way of looking at it that says 100% of everyone who lives in Palm Desert will be spending more money because of this. … But if this tax is really the only way to solve our problems, I guess I can see that that’s a possibility.”

Brad Anderson, a resident of Rancho Mirage, was the most critical of the measure, saying the city needs to rethink its finances before taking such a step.

“I guess I’m heavily concerned because I can tell you I don’t even shop in Palm Springs because of the high sales tax that they have,” Anderson said. “I’m sure tourists come in, and I’m sure they rethink their visit for the next time just because of that.”

Residents have until Aug. 19 to submit arguments for or against the ballot measure at city hall, with a pair of councilmembers agreeing Thursday to work on a statement in support. Those arguments will be included in voting materials sent to residents during election season.

The measure will be considered during the city’s general election Nov. 5.

Tom Coulter covers the cities of Palm Desert, La Quinta, Rancho Mirage and Indian Wells. Reach him at thomas.coulter@desertsun.com.

This article originally appeared on Palm Springs Desert Sun: Palm Desert voters will decide on 1-cent sales tax hike