Modesto to gauge voters’ appetite for sales tax increase. How could it be spent?
Modesto plans to find out how willing its residents are to pay more in taxes and how they would want those taxes spent.
The City Council on a 7-0 vote directed City Manager Joe Lopez at a Wednesday workshop to hire a polling firm to gauge interest in a sales tax increase. The firm also would ask residents where they would want the increase spent, such as on parks and-or public safety, how much they’d be willing to pay, and the type of tax increase they would support.
A general sales tax increase requires a majority vote to pass and can be used for any general government purpose, though cities often pass nonbinding resolutions stating how they will spend the tax. A dedicated tax, which can be spent only for a specific purpose, such as public safety or roads, requires two-thirds’ voter approval.
Lopez did not give council members a timeline on how soon he could hire a polling firm, when it could conduct its work and when he could report the firm’s findings to the council. But Modesto is on a tight deadline if the council plans to place a tax increase on the November ballot.
City officials have said they expect they would have to get any ballot measures for the November election to the Stanislaus County election office by no later than June 30.
The council’s decision to explore a sales tax increase came after a presentation from city officials and a consultant about the state of Modesto’s general fund budget. The roughly $153 million fund makes up about a third of the city’s annual operating budget.
Costs outpace revenues
About 78% of the general fund is spent on police and fire. The fund’s main revenues are property, sales, business and other taxes tied to the local economy.
City officials at the workshop retold the same story they have been telling for years: While Modesto’s general fund revenues are growing, they are not growing as fast as the city’s expenses, primarily the city’s employee costs. The city has balanced its general fund by not filling or eliminating vacant positions and reducing discretionary spending.
Several council members praised city officials for their ability to continue providing services to residents despite budget constraints and the need to continue addressing such problems as public safety, homelessness, blight and the condition of the city’s urban forest.
“I don’t know how we survive as a city over the next few years,” Councilman Bill Zoslocki said about the city’s general fund. “It’s going in the wrong direction.” Zoslocki said he could support a dedicated tax to be spent only on a specific purpose.
Modesto’s sales tax rate is 7.875%. That includes a 0.5% sales tax for Measure L (the countywide road tax voters approved in 2016) and a 0.125% sales tax for the county library system.
Sliver goes to cities
Budget Manager Steve Christensen told council members that Modesto — like other California cities — keeps one percentage point of the 7.875%, with the bulk of the sales tax going to the state and for other governmental purposes. Christensen said a 1% percent sales tax increase would bring in about $33 million annually, and the city would keep all of it.
There was no discussion at the workshop about the relief funding Modesto has received to deal with fallout of the pandemic. For instance, Modesto received about $23 million last year and expects to receive about $23 million more this year from the federal American Rescue Plan Act.
But city officials have said while the relief funding is welcome, it is one-time money and has restrictions on how it can be spent.
Other Stanislaus County cities have asked their voters to approve sales tax increases.
For instance, Turlock voters in November 2020 approved increasing the city’s sale tax rate from 7.875% to 8.625%. Voters approved a general sales tax increase. Voters in Ceres and Oakdale also have approved increases.
Previous Modesto councils put general sales tax increases on the November 2013 and November 2015 ballots only to see voters reject them.
This story was originally published January 13, 2022 at 10:29 AM.
