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Sales tax keeps city out of red
Written by Lu Stitt   
Wednesday, 08 April 2009 13:37

If it were not for the 0.8 percent sales tax increase the Cottonwood City Council added Nov. 1, the city’s books would show another year in the red.

City Finance Director Rudy Rodriguez said he tracks the 0.8 percent increase separately from the established 2.2 percent sales tax so he can compare apples to apples.

“Including the 0.8 percent, we’re up for fiscal 2008-09. If we actually compare just the 2.2 percent, we’re down 11.75 percent over fiscal 2007-08. We were off 8 percent at this same time last year,” Rodriguez said.

The books for the city, looking over the past five years, show a decline in sales tax revenues for fiscal year 2006-07 as well. Going back to FY 2005-06, the revenues were up 10 percent over the previous year.

“We went from having gains to losing our shirts. The 0.8 percent is the only thing that’s keeping us above last year,” Rodriguez said.

Several factors contributed to the dip in revenues. Of course, Rodriguez said, the big reason is the decline in the economy. People are not spending; they are not traveling and are keeping an eye on their budgets.

“Gasoline peaked in July 2008, but we were already trending downward before that,” he said.

To make up for the losses, departments made cuts and have dipped into the city’s reserves account to absorb the difference. Rodriguez said he can absorb maybe $100,000 to $150,000 if necessary.

“We can’t do much more than that or we’ll run out of reserves. Then we’re really in trouble,” he said.

More cuts are expected, he said, but for the upcoming year the priority is to protect merit increases for employees, and the city is not looking at any new employees except 12 new firefighters partially funded by a grant and staffing the recreation center. No additional vehicles or new computers are in the budget either.

“All we’re trying to do is what’s necessary to balance the budget,” Rodriguez said. “We’ve also talked about changing work schedules to cut back on utilities.”

As far as projections for FY 2009-10, Rodriguez said he called some of his colleagues around the state to get a feel for where things are going.

“It was difficult to determine anything. It’s all over the board. Some are experiencing growth bursts like in Phoenix. Others in the rural areas are stagnant. We’re real fortunate we have had a good, steady growth, but what’s down is retail,” Rodriguez said. “It’s just tough all over.”

For example, income from retail sales tax for FY 2004-05 was $5.1 million. Then in FY 2005-06, it went to $6.2 million, followed by $6.8 million for FY 2006-07. In FY 2007-08 the retail sales tax collected was $6.2 million.

Rodriguez’s preliminary estimates are that the city will experience another 6 percent drop in revenues, comparing the 2.2 percent. The 0.8 percent will help keep things afloat.

“That should be sufficient to cover the two big items — the firefighters and making sure we have money to open the recreation center in late 2009-10,” he said.

Services are not in trouble so far, but Rodriguez said the City Council may have some very tough decisions to make to keep the city running if the downturn continues for long.

“We’ve been very fortunate though. We’ve been frugal, and we’ll have to continue to be even when the economy turns around,” he said.

Lu Stitt can be reached at 634-8551 or e-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

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