The City Council is reluctantly edging toward one of two tax
increases to balance its $84 million 2004-05 budget, according to
city staff.
The City Council is reluctantly edging toward one of two tax increases to balance its $84 million 2004-05 budget, according to city staff.
The city is considering placing a tax increase on a future ballot and the county may impose – with voter approval – a countywide sales tax increase and share the proceeds 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.
Gilroy City Manager Jay Baksa said he plans to get a briefing on the county’s tax plan next week, after which time the city will consider participating.
“At this time, there’s nothing that’s been formally presented, but we’ll listen to what they have to say and decide what we plan to do,” Baksa said.
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.
County Supervisor Don Gage, who represents the southern part of the county, isn’t a fan of the possible tax 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.”
The Morgan Hill City 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.
The stances are the first significant differences between Kennedy and Sellers, both of whom 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 expenditures.
Of special concern is the $17 million general fund, which varies widely depending on income from sales and hotel taxes and other 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 the emergency number. The Finance and Audit Committee, however, said in its report that a 9-1-1 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.
