KINGMAN - The city has three options to choose from when it comes to maintaining services: Keep spending without cutting like it's still 2006 and risk losing its bond rating; cut city staff and services that have already been sliced to the bone; or raise the sales tax by one-half or .65 of a cent.
So said Mayor John Salem Monday when he addressed the Kingman Republican Men's Club at its monthly meeting.
On July 1, a one-cent state sales tax expires. That is the penny the city hopes to use when the fiscal year begins that same day. If the City Council opts to increase the sales tax as a means to generate additional revenue, the current rate of 8.85 would not fall to 7.85, but 8.35 or 8.50, depending on what rate the city adopts.
Two more proposals up for possible action call for reducing the bar and restaurant tax by 1 cent and reducing the monthly water rate by $2.
Sales taxes are the only funding mechanism to pay for city services in Kingman, unlike Lake Havasu City and Bullhead City, which have property taxes and a fire district, respectively.
The long-struggling economy has put a serious dent in those taxes.
"In (fiscal year) 2006-2007, the sales tax started to dwindle. It became a trend and it has never bottomed out," said Salem.
In 2006 the city collected between $13 million and $14 million in sales tax, formally known as a transaction privilege tax, but that figure has dwindled to roughly $10 million in 2012 - which is $2 million more than what it cost to provide police and fire protection, never mind other services such as courts and the city attorney's office, parks and pools.
Since 2008, the city's general fund has shrunk by about $7 million, from $32 million to $25 million, said Salem.
The city's ending fund balance of $9 million is now about $6 million, meaning it has been spending more than it takes in for the past several years. While the city can hold its own this fiscal year, next year is when the rubber hits the road.
"Those are just the facts," Salem said. State funds have also been slashed, he said, as the Legislature in an attempt to balance its own budget redistributes far less tax revenue back to cities than it has in the past.
Residents have one more chance to learn about the proposals before the Council begins to formalize its budget for fiscal year 2013-14 starting July 1.
At 6 p.m. Thursday, Councilman Mark Wimpee will host his latest Town Hall meeting at the Powerhouse Visitors Center, 120 W. Andy Devine Ave. Joining him will be Salem and Vice Mayor Janet Watson. The trio will focus on the sales tax proposal.
The City Council will hold a special budget meeting starting at 8:30 a.m. Friday.
Tonight's regularly scheduled meeting has been canceled.
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