Wednesday, December 2, 2009

Pohlman's Comments

Here's the text of Councilwoman Pohlman's comments regarding budget alternatives from last night's city council meeting:

I’d like to thank Mayor Cole for his comprehensive look at our budget options that he presented at the end of our last City Council meeting November 17th. The options he put forth have generated a good deal of public discussion, but Council members as a group are not permitted to discuss this outside of an official announced Council meeting. Since the council members and public have now had some time to digest the contents of the document Mayor Cole presented, I believe that some of us might appreciate time to discuss the various options presented – and perhaps others. At our next meeting, December 15th, we must vote regarding the possible abatement of property tax. Rather than making extemporaneous motions at our next meeting with possible amendments from the floor, I would like the opportunity to discuss our preferences as to such motions at this time. This will give guidance to staff on the recommendation (singular or plural) that we would like to consider.

Some sentiment has been expressed in support of a combination of property tax and sales tax increase. One question I would like answered is it possible to abate only a portion of the property tax levy – for example – abate half of it? As I understand the projections Mr. Gill presented, half of the property tax levy would produce only $645,000 for Fiscal Year 2011 and $675,000 for FY 2012. Clearly, half of the property tax levy alone would not come close to balancing the projected deficit of 2.6 million in FY 2011 and 3.2 million in FY 2012. The full property tax levy would produce approximately 1.3 million annually.

Mr Gill optimistically projects a ½ % increase in sales tax revenues without any increase in our sales tax rate. With these optimistically increased sales it is estimated that we would collect only $57,500 over previous projections in FY 2011 and $116,685 for FY 2012. According to Mayor Cole’s figures, a ¼ % sales tax rate increase would yield $1 million over a full year of sales tax collection. The earliest we would realize increased revenues from such an increase implemented in July would be October, thus for FY 2011 the most we could anticipate from a ¼ % raise in the sales tax rate would be half a million, but in 2012, if sales are strong, we would realize the full million. We could double both of these projections with a ½ % sales tax rate increase.

Last week I requested staff to come up with the figures for a partial property tax abatement and ¼ % sales tax proposal. I recognize that this was Thanksgiving week. Since I did not receive this information, I did some figuring on my own. If it is permitted to abate half of the property tax levy and raise the sales tax ¼%, I projected increased revenues of 1,145,000 for FY 2011 and 1,675,000 for FY 2012.

So I have my set of three options:

A. PProperty tax – this is Mayor Cole’s Option B

B. SSales tax with ½% increase in the Home Rule rate, bringing the applicable sales tax rate to 8.25%. This is Mayor Cole’s Option C changed to ½% rather than ¼% sales tax increase and eliminates the need to cut six positions in Development Services, Finance and Public Works.

C. HHalf and half (abate half the property tax and increase sales tax ¼%). Implementing two tax increases is complicated to justify, though to some it may seem more equitable than relying on either property tax or sales tax alone. However, it seems to me the relatively small amount to be realized from half of the property tax levy doesn’t seem to justify the trouble of adding it to the mix.

The three options yield roughly the same revenue. One can make an argument for any one of them on philosophical, economical or political grounds. Clearly, with any of these options, we still need to make cuts in our spending, including administrative adjustments and personnel changes in order to come near to closing the 5 million dollar 2-year deficit.

I would welcome further input from my colleagues and from the public.


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