OAKDALE — Will residents pay a half-cent more in sales tax to keep the budget ax from cutting too deeply into city services?
That's been on the minds of some city department heads and elected officials, though no formal action has been taken on placing such a tax on the November ballot.
Oakdale must close a $1.1 million gap in its general fund for the fiscal year that starts July 1.
The general fund pays for basic city services. Police and fire make up about 75 percent of the general fund. The city has cut $2.3 million from the fund over the past two years because of the recession and drawn down its reserves to balance its budget.
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The city's 2010-11 general fund budget will be about $8 million after cutting the $1.1 million.
"Residents have the potential to say, 'We are tired of this. What would a public safety or general tax keep open?' " City Manager Steve Hallam said last month.
City officials say raising the sales tax by a half-cent would bring in $1.1 million annually, enough to wipe out the deficit. The increase would add a nickel in tax to a $10 purchase.
"We need another stream of revenue, and having it on a temporary basis until the economy turns around and property taxes go back up may be the thing to do," Councilwoman Katherine Morgan said last month after a budget workshop.
"The demand for services has not gone down," she said. "There's a higher demand for services. It's really in the hands of the citizens about what they are willing to pay for."
Hallam has said the council would need to make a decision fairly soon to get the tax measure on the November ballot.
It would require a two-thirds council vote to put the tax on the ballot, according to Michael Coleman, a fiscal policy adviser to the League of California Cities. In Oakdale's case, that means four of the five council members voting for it.
Oakdale could choose from two types of sales taxes: one dedicated to a specific purpose, such as public safety, or a general tax. A dedicated tax requires two-thirds voter approval. A general tax requires a simple majority.
Even with a half-cent sales tax, the city will need to make cuts for the upcoming budget. Finance Director Albert Avila has said the city would not start receiving revenue from the tax until March or April of next year.
City officials have talked about the possibility of laying off five police officers and three firefighters. But that's assuming no wage and benefits concessions from the city's labor groups, which could offset any layoffs.
Sales tax is one of the primary revenue sources for a city's general fund. Oakdale has seen its sales tax revenue fall from $3.299 million in the 2006-07 budget year to $2.881 million in 2008-09. Oakdale expects sales tax revenue to be $2.355 million for its current budget year, which ends June 30.
Other cities in California have looked at sales tax increases to shore up their general funds. Forty-one city tax measures were on November's ballot, according to information compiled by Coleman. Twenty-six passed.
But Oakdale Councilman Tom Dunlop is not sure whether a sales tax would pass here because of the sour economy and an unemployment rate he says is more than 20 percent when workers who have given up looking for a job are included.
"Presently," he said, "I'm not in support of that. I still think there is work to do to make sure the city operates as efficiently as it can. But I'm not opposed to looking at it."
Bee staff writer Kevin Valine can be reached at email@example.com or 578-2316.