Modesto council weighs tax hike failure, will outline $11M in cuts

kvaline@modbee.comJuly 2, 2013 

    alternate text Kevin Valine
    Title: Reporter
    Coverage areas: City of Modesto and nonprofits
    Bio: Kevin Valine has been a copy editor and reporter at The Bee since January 2006. He's worked at the Reno Gazette-Journal, Sarasota (Fla.) Herald-Tribune and Paradise Post as a reporter and copy editor. He's a graduate of San Jose State.
    Recent stories written by Kevin

— The City Council directed staff Tuesday to develop plans for how Modesto could add or cut millions of dollars from its general fund budget depending upon the fate of a proposed 1 cent sales tax increase.

The council is expected to vote next week on whether to place the tax measure on the November ballot. The tax would end after six years.

City officials say the tax would raise $26 million annually for Modesto's roughly $110 million general fund. The fund mainly pays for public safety and other basic services, such as parks.

Unlike other city funds, the general fund took a nose dive during the recession. Much of its revenue comes from sales and property taxes, which are closely tied to the economy. The council also has the most flexibility in how it spends general fund revenues.

If the council votes not to put the tax on the ballot, or the tax fails, then Modesto faces cutting $11 million from the general fund for its 2014-15 budget, which starts July 1, 2014.

Mayor Garrad Marsh repeated Tuesday his warnings that those budget cuts would be devastating.

City officials say that since the 2008-09 budget, they have cut 227 positions from the general fund, including many in public safety, and had employees give up more than $5.9 million in pay through furloughs. Officials say employees are paying $1 million annually in pension contributions once paid by the city.

Officials say they have diverted money from other accounts to help balance the general fund. For instance, about $6 million in funding for the city's workers compensation fund has been used for the general fund in the past four years.

Marsh has said that's a practice the city must end.

But Modesto Chamber of Commerce officials have said that Modesto has not done enough to live within its means and that a tax increase is not warranted. The chamber hopes to put a half-cent countywide road tax on the November 2014 ballot.

Modesto officials have said the general fund has declined by about $20 million since the 2007-08 budget. But general fund revenues were a record $126.5 million that year. Modesto's general fund revenues have topped $120 million in only two years. The second was in the 2006-07 budget when they were $120.4 million.

Before those two pre-recession boom years, general fund revenues had averaged $107 million during the preceding four years.

The city balanced its roughly $110 million general fund for the 2013-14 budget, which started Monday, by using about $10 million in one-time money, such as general fund reserves, and about $2 million in spending cuts.

Officials will report back to the council in September with the plans for additional spending and budget cuts. The council will participate in developing the plans by holding a July 15 workshop and vetting them at meetings of its various subcommittees.

Bee staff writer Kevin Valine can be reached at or (209) 578-2316.

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