The $3 million permanent tax hike question

City Council can't afford raises already promised to employees without bump in sales levy

Finance Director Tina Moline

Finance Director Tina Moline

KINGMAN - Explained as a way to avoid nearly $3 million in budget cuts down the road, the City Council voted 6-1 at Tuesday's meeting to hold a public hearing with the goal of making permanent a temporary half-cent sales tax increase enacted two years ago.

The Council has a budget of about $28 million for the fiscal year beginning July 1, about $4 million more than last year but still less than 2008. A little more than half of the $4 million is attributed to across the board pay increases approved this year, the first meaningful raise for the city's more than 300 employees in years.

Finance Director Tina Moline told Mayor Richard Anderson and Council members that they would have to cut $2.8 million from the budget if they allowed the half-cent increase to sunset on June 30, 2016.

As things stand now, she said, the revenue generated through the half-cent increase has allowed the city to restore and maintain the unreserved general fund balance to no less than 25 percent of the fund's operating expenditures. The additional tax also funds the necessary police and fire mobile data terminal system, replaces outmoded breathing apparatus and replaces fully depreciated equipment and fleet vehicles.

The tax also helps the city comply with the state-mandated automated fingerprinting system along with the reconstruction and improvements to Airway Avenue west of Stockton Hill Road.

That was the objective when the City Council adopted the increase in May of 2013.

However, as Councilwoman Carole Young pointed out, the Council that was in place at that time also agreed to make a concerted effort to find a secondary permanent revenue stream.

Relying solely on sales taxes has proved to be unstable, as the city's ending fund balance eroded by 50 percent from 2008 to 2013 - $8 million to $4 million.

"We have not looked at other revenue sources and we said we would," said Young.

Anderson agreed, saying the lack of a more dependable money generator makes it "considerably more difficult" for the city to annex property.

The Council briefly floated the idea of asking voters to reinstitute a primary property tax in 2013, but the fallout from the public was swift and the issue went away.

Another idea is the possible creation of a fire district, which would cut the Kingman Fire Department out of the city's obligations. Either way, property owners - and the people who rent from them - would pay taxes and both plans require voter support.

Councilman Larry Carver cast the lone nay vote, saying he would support extending the temporary tax increase until a new revenue source could be identified, but he could not support making it permanent.

Councilwoman Jen Miles, who was not on the Council when the increase was made, indicated there was no choice, saying, "If we do not pursue this, we'll look at reducing $2.8 million really quickly."

The public hearing to discuss the sales tax will take place July 21.