The City Council is close to accepting an offer for an eight-year sales tax agreement that some city officials say will ruin the city.
Councilmen Carl Erikson and Vince Riggi said the agreement was tantamount to “gambling with constituents’ money.”
The county has offered to give the city $500,000 more in sales tax next year, for a total of $11.9 million. The towns would get $7.7 million. But the county gets to keep the rest, estimated at $60 million.
Over the years, the city would also get a small bump up if sales tax revenues overall increased.
That’s a big change from previous contracts, and it’s a change that city officials have wanted for years. Council President Denise Brucker said it would be a great improvement.
“For the first time, it allows the city to share in the growth in the county,” she said.
Mayor Gary McCarthy also noted that the agreement added $100,000 a year from the county for demolition, as well as $100,000 total for the land bank. He plans to use that money to finance the demolition of the 25 to 100 “worst of the worst” buildings this fall or winter.
The county also agreed to offer labor contract negotiation attorneys and its purchasing department to the city, which Brucker said would save a substantial amount of money.
It amounts to about $600,000 more each year than in the current contract, while the county collected $7 million more in sales tax last year — a record — and is on pace to top that by more than $1 million this year.
In total, before distribution, the county collected $89 million last year and will likely collect $90 million this year. The city gets slightly more than $11 million of that.
“It’s not even close to fair distribution,” Erikson said, noting that 42 percent of the county’s residents live in the city.
Riggi added, “It’s a low-ball offer.”
Both men wanted to pass legislation for a pre-emptive sales tax, which they said had been recommended by the state’s Department of Taxation and Finance. The others on the council disagreed, and no vote was held, eliminating it from the city’s options.
Pre-emptive sales tax legislation must be passed by Sept. 1, so city officials would have had to ask for a waiver if the council had voted on the proposal. They believed the tax department would grant a waiver if the proposal were passed in early September.
With pre-emptive sales tax, the city would instantly get the first 1.5 percentage points of the 4 percent county sales tax collected in the city, then split another 1.5 percentage points with the towns. The county would keep the rest, unless all sides agreed to a contract sharing the sales tax. In addition to the county sales tax, the state also collects a 4 percent sales tax that it keeps.
Erikson and Riggi argued that passing pre-emptive sales tax would give the city a better negotiating position, allowing for a better contract. But Brucker and Councilwoman Leesa Perazzo said they were afraid the county wouldn’t negotiate and the city would be stuck with whatever it collected.
“We may have 42 percent [of the population], but it’s where they’re spending their money,” Perazzo said. “We have no way of knowing what the sales tax would be. I don’t think that’s a risk we can take.”
Brucker agreed, saying the city would be forced to raise property taxes if it didn’t collect enough in sales tax.
But Erikson said simply passing a pre-emptive sales tax would force the county to negotiate. The city wouldn’t have to rely on what was actually collected — it could simply use the tax as leverage to push for a better contract.
“Not passing pre-emptive legislation is the gamble,” he said. “I think we have the ability to demand more.”
Perazzo disagreed, saying a hardball negotiation could “endanger the welfare” of the library system and the community college, which receive county funds.
Erikson responded: “We seem to want to play nice. This is kind of what we’ve always done, status quo, slight little carrots to entice you to stay on the end of the leash.”
The contract passed in committee by a vote of 2-1, with Perazzo and Councilwoman Margaret King voting in favor and Erikson voting against. It will be on the agenda for the full council vote on Monday.
With Riggi and Erikson clearly opposed, and three others clearly in favor, the decision will fall to Councilwoman Marion Porterfield. She was not at Tuesday’s committee meeting because she is a delegate at the Democratic National Convention this week. She’ll be back for next week’s vote, however.
Councilwoman Barbara Blanchard is ill and is expected to remain at Sunnyview Rehabilitation Center for some time, so she will likely not be available to vote on the issue.
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