Thursday, July 26, 2012

El Monte Seeks a Sugar Fix for Its Budget

El Monte Seeks a Sugar Fix For Its Budget - a sugar tax.

El Monte is a city of 113,000 in the San Gabriel Valley with a 13.7% unemployment rate. It bills itself as “The end of the Santa Fe Trail.” It faces a problem common to many California cities. El Monte’s debt was downgraded in May. It is running out of money. Its current deficit is $1.1 million on a $50 million budget. The city is not yet on the edge of bankruptcy, but will run out of money in a few months.

Again, previous administrations, like many other California cities, entered into overly generous compensation packages. It has shrunk the city work force from 410 employees to 290. Mayor Andre Quintero is negotiating with the employee unions for adjustments, but no agreement has been reached.

The economic recession hit El Monte hard with a number of auto dealerships closing, depriving the city of substantial sales tax revenues. An existing half cent sales tax expires in 2014. The State has seized the redevelopment funds and otherwise reduced support. Several large employers have left the city.

El Monte is nearing the end of the trail.

Mayor Quintero proposed a sugar tax this week to plug the budgetary gap – one cent per ounce of “sugary – sweetened“ drinks. The estimate is that it will raise between $3.5 million and $7 million annually.

He said the purpose is to raise revenues, and then added that it will also contribute to improving the health of the residents. The allure of the sugar tax is the revenue potential. The estimate is that if imposed statewide in California, billions would flow into Sacramento.

If the goal is in fact to combat obesity, diabetes, and tooth decay, then the solution is simply to ban the drinks.

If sugar is the culprit, then it should be applied to donuts, pastries, cakes, pies, ice cream, double and triple cheeseburgers, beer and the list goes on.

The unilateral tax in the San Gabriel Valley will be an economic disaster for El Monte. The city is surrounded by the communities of Alhambra, Monterey Park, South El Monte, Temple City, and West Covina, and is a short driving distance to Hacienda Heights, La Puente, and Whittier in the vast metropolitan area with ill-defined surface boundary lines. The tax will drive residents to merchants in these cities. 

The commercial losers will be local bodegas, ma and pa small merchants, convenience stores, gas stations, grocers, restaurants, and theaters.

The residents will be the true losers as this heavily regressive tax is imposed on a poor citizenry. A cent per gallon would be 67 cents on a 2 liter (67.5 gallon) Coke or Pepsi, or $.72 a 12oz six pack. Since it imposed on sugary-sweetened drinks, it could apply to teas, Starbucks and other beverages.

A proposal to impose the tax statewide failed in the California legislature last year.

El Monte’s voters get to decide. The City Council put the measure on the November ballot.

Could it turn from sweet to sour?

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