SAN BENITO — As long as folks here can remember, the city’s tax rate has only gone up.
Not any more.
Earlier this week, city commissioners cut 2 cents off the property tax rate that has stood at 72 cents per $100 valuation for 10 years.
The cut slashes the city’s revenue stream by about $160,000.
This month, City Manager Manuel De La Rosa proposed the tax cut about two weeks after Commissioner Pete Galvan floated the plan.
During a meeting Tuesday, the move came as commissioners passed a $15.8 million general fund budget that comes along with the first of a series of water rate hikes aimed at pulling the utility system out of an annual deficit that swelled to $2.8 million last year.
Meanwhile, the city’s fund balance stands at about $4.5 million, Commissioner Rene Garcia said in previous interview.
To offset the tax cut, Galvan is counting on projections showing sales tax revenue remaining at $5 million while property tax revenue is set to climb from $5.5 million this year to $5.6 million during the upcoming fiscal year.
As part of the budget, De La Rosa is planning to hire a police officer and a firefighter along with a procurement agent while proposing to pull $500,000 from the city’s $11 million unassigned funds account to bolster a $1 million street paving project.
To turn the utility department into a self-sustaining operation, commissioners in June 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 next month.
Meanwhile, households are getting a two-year break before their rates start climbing by 10 percent over a five-year period starting October 2024.
Until household water rates kick in, De La Rosa is planning to pull more than $3 million from the city’s $9 million share of the American Rescue Plan Act to help offset shortfalls in the utility system, which ran a $2.8 million deficit last year.
For years, previous city administrations held off on raising water rates, leading the utility system’s annual deficits to swell.
To offset shortfalls, officials had been dipping into the city’s general fund budget.
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.
