Santa Cruz County, already home to the nation's most expensive rental market, is considering a temporary half-cent sales tax increase to address a looming fiscal crisis. The Santa Cruz County Board of Supervisors voted to place a measure before voters on the Nov. 3 ballot, which, if approved, could generate an estimated $27 million annually for five years.
These funds are intended to support healthcare, emergency services, homelessness programs, and mental health treatment. The proposal comes on the heels of a report identifying Santa Cruz as the priciest rental market in the U.S., where a full-time worker needs to earn approximately $81.04 per hour to afford a two-bedroom apartment. The average fair-market rent in the area exceeds $4,200 per month, surpassing even San Francisco in unaffordability, according to the National Low Income Housing Coalition.
Under the proposed measure, sales tax rates would see a uniform increase across different areas. In Santa Cruz, Scotts Valley, and Watsonville, the rate would rise from 9.75% to 10.25%. Unincorporated areas of the county would experience a jump from 9.5% to 10%, while Capitola's rate would climb from 9.25% to 9.75%. Essential items such as groceries, prescription medications, diapers, and feminine hygiene products would remain exempt from the tax.
County officials attribute the proposed tax to anticipated federal policy changes that are expected to reduce funding for healthcare and social services, while shifting financial responsibilities to local governments. Estimates suggest these changes could result in over $150 million in lost revenue and increased costs for the county and its partner organizations over the next five years.
"This is coming before the board because of one reason, and that’s because we have a federal administration that is targeting our vulnerable populations and is attempting to dismantle the Affordable Care Act," Board Chair Monica Martinez stated during a board meeting. "We have many residents who ask, ‘What can we do; what can we do to stand up against this federal administration?’ This ballot measure is an opportunity for them to do something."
County Executive Officer Nicole Coburn warned that the financial strain could extend beyond the county budget, impacting the entire healthcare system and local safety net. Officials project that local hospitals might face increased pressure from uninsured patients seeking emergency care, and providers collectively could lose approximately $200 million annually if healthcare coverage continues to shrink.
However, the proposal has met with some opposition. Resident Becky Steinbruner argued that the sales tax would disproportionately affect lower-income residents and retirees, calling it a "regressive tax." County officials acknowledged that the tax is intended as a stopgap measure to prevent the unraveling of essential services, rather than a complete replacement for the anticipated funding losses.