Atwater considers sales tax increase

Bankruptcy hearings avoided; election eyed

mnorth@mercedsunstar.comNovember 12, 2012 

ATWATER -- With cuts made and a financial plan in place, Atwater leaders expect to put a stop to their Assembly Bill 506 hearings, marking an end to the city's move toward bankruptcy, but a sales tax hike is looming.

Although the council declared a common-law fiscal emergency in October, that maneuver was made to give the city more flexibility to negotiate with contracted employees. A fiscal emergency under AB 506 would've been a precursor to bankruptcy.

An AB 506 hearing appeared on agendas in September and October and is included on Tuesday's agenda. But Frank Pietro, interim city manager and police chief, said he will ask the council to close the public hearing and take no further action on it.

Pietro's plan to pull the city out of its monetary woes included eight layoffs, large pay concessions from employees and budget reductions not related to personnel. The action is estimated to provide nearly $3 million in savings.

"I'm hopeful that this plan is going to help us immensely," Pietro said.

However, the city may call for its citizens to help in the form of a half-cent sales tax. Tuesday's agenda calls for the item to be placed on the ballot in a special election March 5.

Staff documents show the proposed tax could generate about $1 million a year to help pay for public safety.

The special election measure would, however, need a two-thirds vote from residents to pass. Holding a special election could cost the city $50,000 to $75,000.

Linda Dash, a former Atwater councilwoman, worked on the sales tax proposal with Michelle Gray, the widow of Stephan Gray, a Merced police officer who was murdered in the line of duty in 2004.

Dash said she thinks the council will support the special election for the sales tax measure. "I think it should get enough support," she said. "They're all for it."

During an Oct. 22 meeting, the council unanimously passed an item that authorized Pietro to initiate the special election process. Tuesday's anticipated action would implement the March 5 election.

Dash also thinks the proposal will get backing from residents.

"Right now, the community is not real happy with the council, and the way this has transpired, but they'll support the police," she said.

A general fund deficit of more than $3 million along with deficits in the city's water and sanitation funds led to the financial crisis that resulted in layoffs, pay cuts and other reductions. Many residents have voiced their disapproval at recent council meetings.

Not all are in favor

One of those residents is Jim Price, vice president of operations for Gemini Flight Support, who said he backs public safety but takes issue with the half-cent sales tax measure.

He said there's not enough specificity as to what the additional money would be used for, noting that public safety is a term that can be widely defined.

"I want to see details," Price said. "What do they specifically intend to spend this money on?"

Price said he is uneasy about the city spending thousands of dollars on an effort that might not come to fruition, especially with taxpayers who may be reluctant to give up more during "recessionary times."

At this point, Price said, there are more negatives than positives with the proposal and the city needs to be smart about the plan and the decision to spend $50,000 to $75,000 on a special election.

Price also noted that a half-cent sales tax was proposed in Merced but was shot down by the City Council about a year and a half ago.

Councilman Gray Frago said he agrees with the idea of a half-cent sales tax. "I'm not in favor of taxes, but I really don't see any other way to go right now," he said.

Frago said he thinks residents will support a small tax increase specifically aimed at supporting public safety, unlike a general tax increase.

Pietro said he isn't sure what the ramifications would be if the sales tax doesn't go through, but added he should have a better idea of the impacts next month.

Tuesday's regular session council meeting starts at 6 p.m. in the council chambers at 750 Bellevue Road in Atwater.

Reporter Mike North can be reached at (209) 385-2453 or mnorth@mercedsunstar.com.

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