Can U and I co-exist?

City and county strike a deal over the conflict between Measure I and Sebastopol's Measure U, which, together, would have pushed Sebastopol's sales tax over the state cap

When the city of Sebastopol put Measure U on the November ballot, its advocates knew there might be trouble if another countywide sales tax measure, Measure I (“Our Kids, Our Future”), passed at the same time. Both measures proposed sales tax increases—Measure U by a half-cent and Measure I by a quarter-cent. Taken together, they would push Sebastopol’s current 9.75% sales tax above the 10.25% sales tax maximum, currently allowed in Sonoma County by state law.

When both passed, the California Department of Fee and Tax Administration (CDTFA), the state agency that administers sales taxes, gave an opinion that neither tax could be implemented and suggested instead that the city and county reduce their sales tax increases to 1/8 of a cent.

According to a city of Sebastopol staff report, “CDTFA’s proposal would result in Measure I raising approximately $15.7 million of the $30.5 million originally anticipated by Measure I, and Measure U raising approximately $1.125 million of the approximately $1.5 million anticipated by Measure U.”

While the CDTFA said it could not implement either tax without a legal opinion from the California Attorney General’s Office or a solution from the California Legislature, it suggested to the County and city that the taxes could be implemented if an agreement was reached between the jurisdictions.

So clever folks from the county and the city put their heads together and did just that. They came up with a stopgap measure that will allow both voter-approved measures—Sebastopol’s Measure U and the countywide Measure I—to increase sales taxes by a quarter of a cent in Sebastopol and countywide on April 1, 2025. The county will then pay Sebastopol the additional amount the city would have raised had it been allowed to raise its sales tax by a full half-cent. It will use Measure I funds to pay for this supplement.

According to a county press release, “An agreement reached between the County and the City of Sebastopol will temporarily keep the city’s sales tax from exceeding the maximum rate of 10.25 percent, allowing the Measure I sales tax to take effect countywide. Under the agreement, the City of Sebastopol will seek to phase in Measure U, temporarily collecting only a quarter-cent of the half-cent sales tax approved by city voters. In exchange, the County of Sonoma will make Sebastopol whole by paying the city an amount equal to the portion of the Measure U tax temporarily waived by the city. The County payments, estimated at approximately $62,500 a month, will continue until either the Attorney General’s opinion or a legislative fix is received.”

The Sonoma County Board of Supervisors approved this agreement on Dec. 10.

“Voters in Sonoma County and the City of Sebastopol want to tax themselves to pay for causes they believe are worthy, and we should respect those decisions,” said Supervisor David Rabbitt, chair of the Board of Supervisors. “This temporary fix will allow the County and the City of Sebastopol to execute the will of voters while we work on a legislative solution to allow full implementation of Measure I and Measure U.”

The Sebastopol City Council will vote on whether to approve this agreement at the council meeting on Dec. 17.

Mayor Zollman said he will support the agreement. “I appreciatively support the agreement with the County and look forward to my fellow colleagues on Council considering it,” he said.

If approved, the countywide sales tax and the City of Sebastopol sales tax will each increase by a quarter-cent on April 1, 2025.

Staff from the County, the city of Sebastopol and First 5 Sonoma County (the local agency administering Measure I tax proceeds) are seeking a permanent solution from the legislature that would allow Sebastopol to fully implement both Measure I and Measure U.

Additionally, the California Department of Fee and Tax Administration is requesting a legal opinion from the California Attorney General’s Office, a process that is expected to take at least six months.

If Sebastopol is ultimately successful at raising its sales tax to 10.50%, it will not be alone at the top of the sales tax scale—it won’t even be at the top. According to the CDTFA website, six cities have a 10.75% sales tax, including Alameda, Albany, Hayward, Newark, San Leandro, Union City, and two other cities—Santa Fe Springs and Emeryville—have a 10.50% sales tax.

How is this allowed?

The Sebastopol Times reached out to the CDTFA and got the following explanation from Yating Campbell, at the CDTFA’s Office of Public Affairs: “Legislation is required if a jurisdiction plans to exceed the cap,” Campbell said. “Jurisdictions you mentioned that exceed the cap had legislation passed that enabled them to do so.”

This is a developing story, and we’ll likely learn more about the deal between the city and the county and possible legislation at the Sebastopol City Council meeting on Dec. 17.