Atwater sidesteps bankruptcy, but cash woes not over

mnorth@mercedsunstar.comNovember 13, 2012 

— Any immediate threats of bankruptcy came to an end during Tuesday's council meeting, but the financial battle continues and a sales tax increase is in the works.

The City Council unanimously approved a motion to end Assembly Bill 506 fiscal emergency hearings. An AB506 fiscal emergency would have been a precursor to bankruptcy.

Before putting an end to the hearings, the council also approved a special March 5 election for a half-cent sales tax aimed at supporting public safety. The council passed the item on a 4-1 vote, with Mayor Pro Tem Joe Rivero dissenting.

The special election will cost the city between $50,000 and $75,000. To pass, the half-cent sales tax measure would need a two-thirds vote from residents.

While many were relieved that the city stopped its slide toward bankruptcy, not all are supportive of the proposed half-cent sales tax.

Some still have questions and reservations about the move.

Atwater resident Jim Price, vice president of operations for Gemini Flight Support at Castle, noted that the cost of a special election is a big expenditure for a measure that might not pass.

But resident Judy Bowling said since the half-cent sales tax would be used strictly for police and fire services, it has lots of support from the community.

"This is going to be strictly for law enforcement, fire department -- that's it," she said.

Though the original language in the proposed measure called for the tax to last for 10 years, Councilman Craig Mooneyham pushed for that to be altered so that if two-thirds of the council decides that the city is financially sound and no longer needs the tax, it can be rescinded before its 10-year expiration. That language was included in the resolution.

"I've seen these special half-cent, one-cent taxes before," Mooneyham said. "What happens is that the entity that implemented the tax begins to rely on that tax and it never goes away. So I would like to at least give us a special option or provision that if we do reach stability, we can get out of it."

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

During Tuesday night's meeting, Dash affirmed that the money from the half-cent sales tax would only go toward public safety and is aimed at making sure that there isn't another incident in Atwater similar to what happened to Stephan Gray.

A half-cent sales tax was also proposed in Merced nearly two years ago, but the plan was rejected by the City Council.

Sales and use tax rates total 7.25 percent in Atwater, Livingston and Dos Palos, according to the state. Rates in Merced, Los Banos and Gustine are 7.75 percent.

But a financial sustainability report by Municipal Resource Group at Tuesday's meeting shows the city needs to get control of its finances. The temporary tax in addition to utility rate increases for the water and sanitation funds are part of the formula.

Managing Consultant Mike Oliver said the city needs to develop a contingency plan in case the sales tax measure doesn't pass.

Frank Pietro, Atwater's interim city manager and police chief, said he isn't sure what would happen if the temporary sales tax increase doesn't pass, but he did say it could mean more cuts.

Reporter Mike North can be reached at (209) 385-2453 or

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