SAN BENITO — Residents here can’t remember when — or if — the city’s cut its tax rate.
So this week is going into the history books.
On Tuesday, city commissioners unanimously passed a 2-cent tax cut, trimming the property tax rate from 72 cents to 70 cents per $100 valuation.
“I’m happy we’ll give some savings back to the taxpayers,” Commissioner Pete Galvan, who proposed a tax cut last month, said Wednesday. “I think it’s sustainable. I think with the growth we’ve had, we’ll regain some revenue.”
During a meeting Tuesday, City Manager Manuel De La Rosa proposed the tax cut.
For every cent, the tax rate generates about $80,000, Elisa Rosas, the city’s finance director, told commissioners.
“I believe that with inflation that’s going on, with COVID, with increases in food, gasoline, that we can sustain … the 2-cent reduction,” De La Rosa said.
Dipping into unassigned funds account
As part of his plan, De La Rosa’s pulling $500,000 from an $11 million unassigned funds account to help finance a $1.5 million street project — bigger than the current $1 million paving program.
As part of a proposed $15.8 million general fund budget, he’s hiring a procurement agent while planning to hire a police officer and a firefighter beginning about Feb. 1.
“I think it’s manageable,” Galvan told commissioners, referring to the tax cut. “Most departments have to do what they’re tasked to do — manage their departments and balance their budgets and be a little more efficient. These are taxpayer dollars. We’re trying to save the citizens some money and you guys achieved it and you balanced the budget.”
Meanwhile, Commissioner Rene Garcia voted for the tax cut after warning last month finances might be too tight.
“We don’t want to affect our public services in any way. We don’t want to cripple departments, especially public works and street repairs. We have a lot of work to do,” he told commissioners, adding, “whatever we can do for our residents to help them out in these times. Who knows, next year we can do better.”
Bailing out utility system
As commissioners plan to boost businesses’ water rates, officials are planning to dip into the city’s big stimulus check to help bail out the utility system.
After months of debate, in June commissioners set commercial water rates to climb by 8.3 percent to as much as 9.8 percent each year over five years, based on water usage, starting in next month.
Now, commissioners are planning to pull more than $3 million from the city’s $9 million share of the American Rescue Plan Act to help bail out the utility system, which ran a $2.8 million deficit last year.
For years, previous city administrations held off on raising rates, leading the utility system’s annual deficits to swell to $2.8 million.
To offset annual shortfalls, officials had been dipping into the city’s general fund budget.
Despite the higher water rates’ revenue stream, officials are planning to pull $1.5 million from the American Rescue Plan account to help cover the water department’s shortfall while dipping into the big federal stimulus check for $643,000 to help bail out the sewer department, Galvan said in an earlier interview.
Meanwhile, households are getting a two-year break before their rates start climbing by 10 percent over a five-year period starting October 2024.
Background
In 2012, a previous commission passed a 4-cent tax increase, boosting the property tax rate to 72 cents per $100 valuation.
In 2003, the city raised its tax rate from 67 to 68 cents.
