Gilbert to hike sales tax by quarter-cent

The Gilbert Town Council voted just before midnight Tuesday to raise the town sales tax by a quarter-cent, in a move with a 30-month sunset clause attached.

Everyone on the council voted for the increase except for Mayor Steve Berman. The increase is projected to raise about $7.3 million a year before the sunset clause kicks in, after which the council would have to re-adopt the ordinance if they want it to continue.

The council also voted to adopt a 1.5 percent use tax, which can be collected on purchases of items bought outside of town and used inside the town. Berman and Councilmen Les Presmyk and Dave Crozier voted against the use tax.

The council also voted to remove an exemption for single-property landlords from paying rental tax. Berman provided the only dissenting vote on the rental tax as well. These other changes also are subject to the 30-month sunset clause.

The use tax could raise an estimated $2.3 million, largely from fuel purchased by Salt River Project's Santan Generating Station. The amount that could be raised by removing the rental tax exemption is unknown.

Discussions about Gilbert's town budget ran late into the night Tuesday as the council haggled over how to erase a $14.7 million shortfall in the budget for the fiscal year that begins July 1.

The council had made some headway by agreeing to transfer $5.5 million from funds set aside for purchasing vehicles, keeping its contribution to operating the Southeast Regional Library even, which would save $300,000 but would likely force the Maricopa County Regional Library District to make severe programming cuts. Council members also agreed to reduce Gilbert Fire Department overtime spending by $1 million and reduce special events funding by $208,000. Along with pulling funding for 14 vacant positions and charging park improvement districts, the full cost for maintenance had gotten the deficit down to about $7 million.

Presmyk got things started for the discussion by proposing a 15-cent sales tax increase and a 1 percent use tax.

But what was ultimately adopted was an identical figure to the sales-tax increase proposed by Town Councilwoman Linda Abbott, though she proposed that the money be dedicated to public safety spending.

Crozier said he would have been happier if the sunset clause had lasted three weeks rather than 30 months, but he didn't see how else to balance the town budget by June 30.

"Even with the spending cuts being proposed by people, by (councilwoman-elect Jenn) Daniels and others, there's no way we were going to make up the 6 or 7 million dollars in the next three weeks as required by state law," Crozier said. "The only way to get a balanced budget in that amount of time would be to say we were going to cut all the parks and recreation." He said it was the first time in his 14 years on the council that he's voted for a tax increase.

Gilbert's total municipal sales tax is now boosted to 1.75 percent, the same as Mesa's and higher than Chandler's. Gilbert and Chandler were formerly tied for having the lowest sales tax rate in the Valley at 1.5 percent.

The proposal has split the politically conservative community, with some residents arguing that the increase is necessary to maintain public safety programs, and others contending any tax hike would hurt families more than it would help.

Abbott put the tax hike on the table shortly before the May 19 Town Council runoff election, though many of the 17,496 voters who turned out would have already made their choice through early ballots. Two tax hike opponents, Mayor-elect John Lewis and Councilwoman-elect Daniels, and one supporter, Councilman-elect John Sentz, will join the council on June 16. They will replace Mayor Steve Berman and Councilman Don Skousen, who finished behind Lewis in the mayoral primary, and Councilwoman Joan Krueger, who lost her re-election bid in the general election May 19.

Some recent council meetings have been filled with debate from residents both for or against the sales tax increase. The rancor lessened somewhat over the last two sessions, but a few spoke Tuesday. The majority were, like Mark Hunsaker, in favor of the quarter-cent sales tax hike.

"All I've heard for months is 'cut the fat, cut the fat, cut the fat,'" he said. "There's no fat left to cut, you've had the police chief and fire chief stand here and tell you they've done everything they can do."

But there are still many factors, both inside and outside the town, which could affect how Gilbert approaches the budget. Daniels and the others take office in less than two weeks, and her list of suggestions which she said could yield $9.3 million in budget reductions was mentioned several times by council members during the five-hour meeting.

But the worsening state budget picture could spill over to Arizona's cities and towns, with the Legislature pondering proposals that could affect the amount of money passed on to them on several levels.

"Two months from now we could be saying, 'I wish we only had a $14 million deficit to deal with.' It could be $20 millon," Councilman Steve Urie said.

The tax changes will likely eliminate the need to lay off approximately 20 full- and part-time employees and furlough employees 12 days a year.

The council voted to raise water, sewer and reclaimed water rates by 6 percent, voting 7-0 on the across-the-board increase for water rates rather than a "conservation" plan, which would have increased the rates more for bigger water users such as schools and apartment complexes.

One resident, Nicki Reber, spoke against the water rate increase but said she preferred the across-the-board increase over one that penalized larger users. The rates don't affect the operating deficit because the utilities are run as self-sustaining operations.

The council also voted to keep the town's secondary property tax rate at $1.15 per $100 assessed valuation. This money is used to pay off bonds for brick-and-mortar projects.