Troubled finances may prompt the city of Paso Robles to put a sales tax hike of up to 1 percent on the November 2012 ballot.
The City Council on Tuesday reviewed tax increases along with other ways to generate more revenue for the city.
Raising the sales tax a full 1 percent within the city would generate about $6.3 million annually and could eliminate the city’s projected deficit, officials said.
The move would bring Paso Robles out of its current ranking as one of the two lowest sales tax districts in San Luis Obispo County. Atascadero is the other.
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Other local cities have opted to tack on half-cent increases to the state’s 7.25 percent sales tax base.
Paso Robles currently receives 1 percent of the 7.25 percent sales tax that shoppers see on their receipts.
The city can propose raising its share in increments of 0.25, 0.50, 0.75 or 1 cent.
It also has options on the purpose of the increase.
A general sales tax increase requires simple majority approval, while one for a specific project, such as a bridge, requires two-thirds voter approval.
Upon a unanimous council agreement, Paso Robles will host a public workshop to gather community feedback on what residents think the extra money would be best used for if the measure were to pass.
A date for that workshop has not yet been set.
The move is just one more step in maneuvering through the city’s money troubles during the recession. The city’s general fund is budgeted for $24 million in the current fiscal year.
In June, the council opted to dip into city reserves to cover a $2.1 million gap for the next three fiscal years and asked staff to bring ideas on how to build revenue.
In the past three years, the city has reduced spending more than $7 million per year by cutting 76 positions through attrition and a hiring freeze to address its multimillion-dollar deficit because of sluggish revenues from sales tax, property tax and other public fees.
Most routine maintenance has also been cut.
The roads in town are also noticeably shabbier, say many residents, and the city’s departments, including police, have been trimmed significantly.
“The result is diminished police and fire services, road and public facility maintenance, and recreation — virtually all public services,” administrative services director Jim Throop wrote.
Other tax increases that Throop outlined as possible options include adding a parcel tax to residences or buying a general obligation bond, where payments appear as increases in property tax. These options also require two-thirds voter approval.
The bond could be passed only for a specific project.
If the city does nothing and deficits increase, an additional $1.2 million annually could be cut from operations; possible cuts include closing the senior center, reducing library hours, closing the remaining city pool, cutting all city event staffing and eliminating all marketing contracts to help attract tourists.
The 7.75 percent solution
San Luis Obispo County’s base sales tax rate remains at 7.25 percent, as set by the state. Five of the county’s seven cities have passed half-cent increases, taking their sales tax rates to 7.75 percent each. They are Arroyo Grande, Grover Beach, Morro Bay, Pismo Beach and San Luis Obispo.