Faced with having to cut city services
– ranging from police to fixing potholes – or lay offs, the City
Council has spurred a committee into identifying additional sources
of revenue, otherwise known as taxes and fees. Council has also
directed the Economic Development Committee to find ways to
encourage tax-rich ventures and, in the
meantime, will fill some of the gap with the city’s reserve –
rainy day – fund. At least one council member considers any tax
increases at the bottom of the list. “Make sure everyone knows any
tax increases would be a very last resort,” Councilwoman Hedy Chang
said Monday. “First we wi
ll cut, then we will use economic development and third, we
would consider the new fees.” At a special meeting tonight, the
Finance and Audit Committee will look at a three-page list of
possible additional “revenue sources” that city staff has compiled
over several months. Once the committee
has decided which ones, if any, to recommend, it will send the
list on to the council, according to Jack Dilles, finance
director.
Faced with having to cut city services – ranging from police to fixing potholes – or lay offs, the City Council has spurred a committee into identifying additional sources of revenue, otherwise known as taxes and fees.
Council has also directed the Economic Development Committee to find ways to encourage tax-rich ventures and, in the meantime, will fill some of the gap with the city’s reserve – rainy day – fund. At least one council member considers any tax increases at the bottom of the list.
“Make sure everyone knows any tax increases would be a very last resort,” Councilwoman Hedy Chang said Monday. “First we will cut, then we will use economic development and third, we would consider the new fees.”
At a special meeting tonight, the Finance and Audit Committee will look at a three-page list of possible additional “revenue sources” that city staff has compiled over several months. Once the committee has decided which ones, if any, to recommend, it will send the list on to the council, according to Jack Dilles, finance director.
Committee chair Mike Roorda, the elected city treasurer, said the committee is working diligently trying to give council enough time to consider each item and, if council chose, to gauge public opinion in several ways.
“They could look for feedback through surveys, advisory votes or, potentially, a ballot issue in November,” Roorda said Monday.
Definitely on the Nov. 2 ballot will be positions of mayor and two council seats. Mayor Dennis Kennedy and Councilman Greg Sellers have announced they will both seek the mayor’s seat. Councilman Larry Carr and Chang have not announced whether they will run for re-election.
The Finance and Audit Committee consists of Roorda, Chang, Carr and city finance staff, Dilles, Tina Reza and Chu Thai plus Garrett Toy, business assistance and housing services director and Melissa Stevenson Dile, assistant to the city manager.
A few items on the list can be implemented without a public vote, though Mayor Dennis Kennedy and other council members are on record as saying they would not go that route. Most, however, need a majority or two-thirds vote to pass.
One which that no vote is an emergency response fee.
“It is often called a 911 fee,” Dilles said. Such a fee would be assessed on every phone line in the city to cover dispatch 911 costs in the Morgan Hill Police Department.
San Francisco has adopted this fee, though it has been challenged as illegal by Pac Bell. Santa Cruz has passed it and Los Altos is considering it. The fee would potentially produce $500,000 a year.
Dilles made it clear that an emergency response fee is charged to everyone with a phone; it is not a fee paid by people who call 911.
“The cost is recovered from all citizens,” he said. “You don’t get penalized when you call.”
With a two-thirds approval, the city could raise the sales tax one-half cent and earn $2.2 million, more than enough to keep services and staffing at current levels.
Sales taxes are the general fund’s single largest source of funds. Police, fire, some city administration and recreation programs are paid through the general fund.
An admissions tax would require a majority vote and would levy a flat fee or percentage rate on tickets to movies, sporting events, concerts around town; Dilles said the annual earn might be $5,000 per 1 percent tax rate.
One way to raise capital money for new libraries, parks and open space purchases is through a Mello Roos district tax – again a two-thirds yes vote needed. Mello Roos can also pay for services, maintenance and operation of existing facilities, unlike Redevelopment Agency funds.
“Mello Roos is more flexible than a traditional assessment district,” Dilles said. Only property owners in a specific area – called an assessment district and most likely those benefiting from the project – would be taxed, he said.
The most interesting tax to Dilles, though he means the concept and not the tax, is a small amount that would be added to restaurant checks but, though it is under consideration in Carmel, no area city has such a tax.
Other fees and taxes on the list include some already on the books: development, parcel, police and fire. They could be raised but would need a two-thirds vote. Business license, utility users and transient occupancy taxes (raised 1 percent from its current 10 percent) need only majority approval.
The last time the council levied a utility tax it led to a successful recall effort in 1992, which Chang said she remembers vividly.
New businesses on the immediate horizon – Home Depot and Cinelux Movie Theatres – are not expected to change the budget picture much, Dilles said.
“Those revenues are already factored into our projections,” he said. “Some other businesses – like the Ford dealership – haven’t been factored in.”
The council still does not have a good picture of what revenues the state will leave them and what it will take.
“With the governor’s new budget we are definitely going to be short,” Chang said. The budget shortfall in 2003-04 will be about $900,000. In 2004-05 it is projected to be more than $2 million. Dilles said that the city will cut costs for 2004-05 by $800,000, but $400,000 must come from new sources.Some reserve funds, Chang said, would be used to stimulate the economy.
“We absolutely have to look at all resources before we can to increasing taxes,” she said. “We will use some of our reserves to tide us over until the new sources appear. We will be spending the reserve down to 25 percent.”
Morgan Hill’s total budget tops $101 million; the general fund is $16,073,853.
She isn’t certain how she will face the fee/tax list when it appears on a future council agenda.
“I might even recommend a no,” Chang said.
“It’s an interesting balancing act,” Roorda said, “trying to understand what dollar amount the city council might need to shoot for.”
The Economic Development Committee, he said, is trying to discover what new ventures it could prime to move into Morgan Hill, bringing revenues with them.
“This would be based on what the citizens would want,” Roorda said.
The committee’s action tonight and at a second meeting Wednesday, March 24, would be to whittle down the list for council.
“We might not even make a recommendation,” he said.
Tonight the committee will also look at business assistance guidelines – how to help the EDC make Morgan Hill a friendlier place for business.
Finance and Audit Committee, 6:15 p.m. tonight in the West Conference Room, off council chambers at City Hall. The meeting is open to the public. 17555 Peak Ave. Details: 779-7271.
