City to declare a state of fiscal emergency on Feb. 12
By Alyssa Morrisey
While voters passed Measure O last June, a half cent sales tax to help solve the city’s budget deficit, voters may be asked to return to the polling station to pass a Utility Users Tax (UUT) this June.
“We’re in a position where we still think we’re in a fiscal emergency,” Duran said.
At their regular meeting tonight, February 12, the City Council will vote on whether to declare a fiscal emergency. Once the emergency is declared, the Utility Tax could pass on the June ballot by a simple majority. The council declared a similar state of emergency in early 2012 before placing Measure O on the June 2012 ballot.
The proposed tax would hike up the current UUT by 2%, possibly adding $800,000 per year to the general budget. City staff and the Council will also discuss including a tax on cable as part of the ballot measure, which would likely bring another $300,000 to the city’s budget, possibly eliminating the budget crisis.
City Manager Steve Duran said that the city has cut its budget and staffing to “bare bones,” and without an additional boost in revenue, it could look to sever four more police officer positions, as well as ax $50,000 from the senior center, teen center and other parks and recreation programs.
“I can’t sit here as a councilman and see the destruction of our town,” Dan Romero said.
Though, City Council members worried that a new tax would be a harder sell than Measure O was last year. The Council worried that many Hercules voters may have believed they were solving the debt problem by passing Measure O, and might not be as receptive to another tax proposal.
Romero said that the city made a mistake last June by asking voters to approve a half cent sales tax measure that only yielded 500,000 of revenue, as opposed to a full cent. Mayor John Delgado said that last year, the council was concerned about raising the sales tax rate above that of other cities in the West County area. Hercules’ sales tax ties with others in the county at 8.75 percent.
Finance Director Nickie Mastay said the newest tax hike would distribute equally among each of Hercules’ residents and businesses. It would also bring Hercules’ comparatively low UUT in line with neighboring cities. The City’s current UUT has remained at 6%, while Pinole and El Cerrito have an 8% UUT.
Alternatively, Richmond has imposed a separate 9% “telecommunications tax” on cable and other services, in addition to its 9.5% UUT. Council members expressed interest in imposing a similar tax structure. Though, City Attorney Patrick Tang said that doing the same as Richmond may require scaling boundless legal hurdles.
“It’s been a [misconception] among the community that our cable bills are covered by the UUT,” Council member Dan Romero said.
He added that most cities do not include cable services as part of their standard UUT. He explained that telecommunications companies have taken advantage of the lack of taxes on cable by using cable to support broadband television, internet and telephone services, rather than using traditional telephone lines.
In order to turn the tax measure around in time for the June ballot, the City will need to finalize ballot measure language and paperwork by early March. Duran said the city will rehire Lew Edwards Group, an Oakland based political consultant firm who helped with the 2012 Measure O and Measure N campaigns.
Staff will return with their recommendations for the specifics of tax the tax measure at the February 12 regular meeting. During the same night, the public will also have a chance to respond to the city’s declaration of fiscal emergency.