County eyes sales tax hike

Move would offset lower property tax revenues, finance director says

KINGMAN - Increasing calls from residents, groups and the state Legislature for property tax reform has Mohave County thinking about alternative forms of funding.

County Finance Services Director John Timko is recommending to the Mohave County Board of Supervisors swapping dollar for dollar an increase in the county's sales tax with a decrease in the county's property tax.

Counties have the statutory authority to levy up to a half a cent in sales tax. Currently, Mohave has just a quarter-cent sales tax. Timko said making the dollar-for-dollar tax swap would decrease the county's reliance on property tax dollars as a main source of income.

"The Legislature keeps attacking the property taxes or limiting the property taxes, because that is a tax they can take credit for cutting," he said. Cutting property taxes, however, which the voter-passed Proposition 101 does, cuts into county revenues.

Prop. 101 passed in November, allowing the county to raise the percentage of the property tax rate by only 2 percent a year.

"Two percent growth isn't very much growth if you're trying to run a business," Timko explained.

He said Prop. 101 could cause problems in the future for the county depending on how much inflation increases. If the price of gas increases by 5 or 6 percent and the county can only raise tax rates by 2 percent, then something else is going to have to get cut in order to keep the budget in balance.

"So if they [Legislature] are going to continue to attack our major source of revenue, we need to reposition ourselves so that we aren't so reliant on real estate [property] taxes for our priorities," Timko said.

The majority of the state's revenue comes from sales tax. Moving the county's major source of revenue from the property tax to a sales tax protects the county's income because the state is less likely to cut its own source of funding, he said.

Mohave County Manager Ron Walker also weighed in on the matter. "I'm no advocate of property taxes. It's simply the system that we have inherited," he said.

Walker also likes the idea of swapping out some of the property tax for a sales tax.

"That just sounds like good business to me, because we're a retail economy. The county is in a position where it is not going to be able to participate on the revenue side for a booming economy. In fact, it's going to be punished if the economy booms," he said.

A quarter of a cent increase in the sales tax would be less noticeable to residents than an increase in their property taxes, he said. And while a quarter of a cent tax doesn't sound like much, it adds up. It would also spread the burden of paying the tax to more people including tourists and other visitors, and it would automatically increase when inflation increased.

When asked what might happen if the economy took a downturn and shoppers started to limit their spending, Walker said that the county did not have a history of those kind of economic hiccups. "We have within our realm the ability to continue to reduce the property tax, which people think is so egregious, and replace it dollar for dollar with a sales tax," Walker said.

"What's not to like about that deal? If you could take 40-some-odd cents off of my property tax rate and replace it with a quarter cent on the dollar [sales tax], sign me up."

Walker, however, was not confident that the idea would gain support. "The sales tax thing is just good business, but It's not going to happen because there are some people who don't want the county to succeed," he said. He didn't say who specifically might be against an increase in the sales tax.

He did admit that some cities in the county might not like the idea of the county raising the sales tax rate because it might limit their ability to generate revenue. "It really is a way for the county to participate on both sides of the economy," he said.