Atwater's bankruptcy threat coming to a close, tax increase possible

11/09/2012 5:05 PM

11/10/2012 1:46 AM

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.

Though 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 also included on Tuesday's agenda. But Frank Pietro, interim city manager and police chief, said he'll be asking 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 bring nearly $3 million in savings.

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

However, the city may soon be calling for its citizens to help out in the form of a half-cent sales tax.

Tuesday's agenda is calling 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 fund public safety.

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

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 funds will 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 is also 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.

"Where are we supposed to come up with that kind of money when we're broke already?" he asked.

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 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 also thinks residents will be supportive of a small tax increase that's specifically aimed at supporting public safety, unlike a general tax increase.

Pietro said he isn't yet 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 City 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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