MODESTO — Modesto voters will decide this fall whether they want to pay an additional 1 percentage point in sales tax to help the city balance its budget, hire more police officers and firefighters, and for other services cut during the recession.
The City Council voted 7-0 on Tuesday night to place the tax measure on the Nov. 5 ballot. If it passes, the measure would increase Modesto's sales tax rate from 7.625 percent to 8.625 percent, the highest in Stanislaus County and second-highest in the Northern San Joaquin Valley. At 9 percent, Lathrop has the highest sales tax in the valley.
The tax would end after six years and would raise an estimated $26 million annually for Modesto's financially strapped general fund. The general fund makes up about a third of the city's $344 million operating budget, and 67 percent of the fund's revenues will be spent this budget year on public safety.
Because it's a general tax, the ballot measure needs a simple majority to pass. And as a general tax, the council can use the tax money for any general government purpose.
Council members are expected to pass a resolution before the November election outlining how they intend to spend the money. Mayor Garrad Marsh has suggested spending half on public safety, a quarter on roads and the rest on other purposes. But nothing would prevent this or subsequent councils from spending the tax for other general government purposes.
Marsh said because it's a general tax, the council can't guarantee how the money would be spent. The best the council can do is pass the resolution outlining its intent and create an oversight committee that will monitor how the money is spent.
Marsh said voters will need to trust their elected officials to keep their word.
The city says the tax increase would fall to a half-cent if a countywide road tax passes. The Modesto Chamber of Commerce has said it wants to put a half-cent road tax on the November 2014 ballot. Chamber officials say if voters passed a road tax, Stanislaus County and its cities would get $2 from the state and federal governments for every $1 raised by the tax.
Chamber of Commerce Chief Executive Officer Cecil Russell told the council Tuesday that his organization opposes the 1 cent tax.
He said the chamber is concerned that the city has not developed a plan for how it will remain fiscally sound once the tax expires, that a higher sales tax makes Modesto businesses less competitive, and because the tax proposal is vague and could lead to a lack of accountability in how the tax is spent.
Other speakers also voiced concerns about how Modesto would remain financially sound once the tax expires and the city no longer could count on the $26 million annually the tax is expected to generate.
Modesto officials say they are developing plans on how they would spend the tax if voters pass it and an exit strategy for when the tax ends. They also are developing plans on how to cut spending if the tax fails. Both sets of plans are expected to come before the council in September. The council is holding a workshop July 19 as part of this process.
Help for general fund
Unlike other city funds, the general fund nose-dived in the recession, losing about $20 million in revenues since the city's 2007-08 budget year. Much of the general fund's revenues come from sales and property taxes, which are strongly tied to the economy.
City officials say they have made budget cuts, reduced staff and drawn down reserves as general fund revenues fell. But they say that without additional revenue, Modesto faces cutting roughly $11 million from its general fund next year, in the 2014-15 budget, which starts July 1.
Marsh has said no one expected the recession to be this deep and this enduring. He expects the Modesto economy won't make a full recovery for five more years.
Council members Steph-anie Burnside and Dave Geer had voted June 25 against bringing the sales tax increase forward to Tuesday's meeting. Burnside had favored a dedicated half-cent sales tax for public safety, and Geer thought six years was too long for a temporary tax.
Burnside said Tuesday that although she still favors a half-cent public safety tax, her concerns had been addressed and she would support the 1 cent tax. Geer said he was supporting it because of the need to increase public safety staffing and resources.
Bee staff writer Kevin Valine can be reached at firstname.lastname@example.org or (209) 578-2316.