Having pared every spare dime from the $84 million 2004-05
budget, the City Council has been reluctantly edging toward the
tough terrain of tax increases to meet its expenses.
Having pared every spare dime from the $84 million 2004-05 budget, the City Council has been reluctantly edging toward the tough terrain of tax increases to meet its expenses.
But now the county may give the city a helping hand by offering to impose – with voter approval – a countywide sales tax increase and share the results with the city.
Santa Clara County officials told city staff that the county is considering placing a sales tax increase of one-half cent on the Nov. 2 ballot. Any city that wanted to participate would receive one-third of the revenue, with the county keeping two-thirds to cover its own programs.
An alternative, according to the city staff report written by Finance Director Jack Dilles, is for the county to present voters with a one-quarter cent sales tax increase in unincorporated areas.
Councilman Larry Carr, a member of the Finance and Audit Committee that reviewed the county’s proposal, said a rough estimate of potential revenue adds up to $1 million from the county proposal and $1.1 million if the city were to receive approval of its own one-quarter cent tax increase.
A two-thirds majority vote would be required if the city placed the increase on the ballot but, Carr said, not if the county placed the issue.
“That would only need 50 percent approval,” Carr said, according to county staff.
County Supervisor Don Gage, who represents the southern part of the county, isn’t a fan of the possible taxc increase.
“Right now I’m not supporting it,” Gage said Monday. “It’s the wrong time to ask for a half-cent sales tax; there are too many issues on the ballot.”
Council had considered a variety of revenue enhancing possibilities, ranging from user fees to a small sales tax increase, with Mayor Dennis Kennedy leaning toward the sales tax solution and Councilman Greg Sellers wanting to wait and possibly use more of the city’s reserve fund to fill the gap before hitting up the taxpayers.
What kind of increases the council settles on may show the first significant difference between Kennedy and Sellers, both who are seeking the mayor’s position in the Nov. 2 election.
While council is not sure a small sales tax increase is the way it wants to go, council members said they must do something to close the persistent gap between income and outgo, especially when two more years of tax funds that had the city’s trundling off to Sacramento loom ahead.
Of special concern is the $17 million general fund, which bottom line varies widely depending on income from sales and hotel taxes and other revenue making fees, especially considering that 65 percent of the general fund goes to support police and fire protection. These are services which council (and the public) feels are critical and cannot be reduced.
Morgan Hill does already receive a portion of the property taxes collected by the county. Dilles estimates that Morgan Hill will receive about $2.3 million from property taxes during the 2004-05 fiscal year. In 2003-04 the estimate was a bit less at $2.2 million.
Council considered the 9-1-1-dispatch fee, which is proving popular elsewhere. The fee would be paid by everyone, and not incurred by people calling 911. The Finance and Audit Committee, however, said in its report that a 911 fee could weigh heavily on some lower income residents and could be challenged. It does not require voter approval.
A one-quarter percent sales tax increase, which would have to be voter approved in an election when at least one council member was running for election, was the favorite of Kennedy.
“The nut we have to crack is $1.2 million (gap in next year’s budget),” Kennedy said.
Dilles said – as has the council – that, unless $1.2 million is found in new and ongoing revenues for the general fund, he projects that the city will not be able to maintain its current level of services.
Council was clear that they wanted whatever increases they chose be fair and obvious to the taxpayers. The Finance and Audit Committee has prepared a matrix rating each revenue possibility by fairness, visibility, neutrality, certainty and efficiency, which council will consider Wednesday.
The complete Council agenda is available at the City Clerk’s desk in City Hall and on line. City Council and/or the Redevelopment Agency meets at 7 p.m. most Wednesdays in City Hall Chambers, 17555 Peak Ave. Details: www.morganhill.ca.gov or 779-7271. Council meetings are broadcast live on cable access channel 17.
