In a hotly contested vote on May 16, the Cottonwood City Council made a big step toward raising the city’s sales tax, voting 4-3 to file a notice of intent for a public hearing and vote on a 0.5 percent increase on Tuesday, July 17.
While all seven members of council expressed support for a tax increase and a need to deal with revenue shortfalls even after years of cuts, Councilwomen Tosca Henry and Deb Althouse and Councilman Ruben Jauregui all preferred a smaller number, hoping for something closer to a 0.25 percent increase.
Henry and Althouse both expressed a need for cuts to accompany any tax increase, especially focusing on the need to abandon plans for a new city hall rather than ask taxpayers to pay more for it.
“I’m still in favor of reasonable cuts, and a small increase,” Henry said. “I think the 0.25 [percent] is adequate to meet the anticipated shortfall. We’re asking our department heads to cut. I think council can cut. We can cut out city hall.”
On the other side, Vice Mayor Kyla Allen and Councilwomen Karen Pfeifer and Linda Norman expressed a desire for an even higher increase than 0.5 percent, but felt that a half-percent increase was a worthy compromise.
“Everybody kind of knows where I stand,” Allen said. “I think 0.25 [percent] is not quite enough. I think we’re going to be back here in a very short period of time, so I do favor an increase in the tax.
“I know it’s going to affect us. I’m one of the people out there it’s going to affect. I would be for 0.65 [percent] but I don’t think this council is going to go for that. So I am willing to compromise, as I hope they will, to a 0.5 [percent]. But I think anything below that, we’re going to end up coming back to council in a very short time. Let’s do it right now and hopefully we’ll go another 10, 20 years before it comes up again.”
“I voiced that I would go for 1 [percent]. I would settle for 0.65 [percent],” Pfeifer said. “I don’t think we have the votes for that but I hope we have the votes for 0.5 [percent].”
Pfeifer’s desire for a 0.65 percent increase was mirrored by many demonstrators at the packed council meeting, bearing signs calling for an increase of that number for the second week in a row.
“0.65 is something that I think we should have done, personally,” said Terri Clements, a de facto leader of the group that has been seeking to increase taxes, with a goal of replenishing the city’s reserves, implementing maintenance projects that have been deferred and paying down some of the city’s growing pension liabilities.
“I’m very pleased that they did anything at all, and I think 3.5 [percent] is a reasonable compromise,” Clements said, referencing the full sales tax rate after the increase is added.
Joining the demonstrators was a cohort seeking to stop that movement, bearing signs calling to limit or prevent any potential increase.
“Twenty-one-and-a-half percent of our residents live in poverty,” said Michael Mathews, a Cottonwood real estate agent who is seeking a seat on the council in November and has taken up the mantle against the tax increase.
Mathews took issue with one of the main arguments of the increase’s proponents, that Cottonwood’s sales tax rate is lower than that of surrounding communities and could be raised to match theirs. “Per capita income is $20,000, well below the national average. When you compare tax rates of our surrounding communities, take a look at their income and poverty rates, compared to Cottonwood.”
Camp Verde’s poverty rate is 22.2 percent; Jerome is 13.5 percent; Sedona is 9.6 percent; Clarkdale is 7.77 percent; Flagstaff is 23.3 percent and Prescott is 13.9 percent.
Mathews argued that the budget shortfall that the city is facing could be better fixed by cutting pay of some city employees that he felt were overpaid.
The argument that the sales tax would have undue burden on the city’s poor became a point of contention, with opponents of the tax increase worrying that it would affect basic purchases for the city’s low-income residents, and supporters arguing that the bulk of the tax would be paid by the city’s richer residents, and could be used for services that benefit its poor.
Mayor Tim Elinski ended up being the tie-breaking vote in favor of the tax increase. Elinski questioned whether the impact of the tax increase on low-income residents could be ameliorated by removing taxes on food in Cottonwood.
“It’s a regressive tax, and there’s no two ways about it,” Elinski said. “I think that to move forward on an increase on a tax that’s already regressive seems contrary to what we’re trying to do, which is to have the 70 percent [of customers at Cottonwood businesses that are not residents] that come in and use our services and shop here fill our coffers.”
Deputy City Manager Rudy Rodriguez argued that cutting the tax on food would eliminate any increase in revenues from the tax increase, leaving the city’s budget in just as bad shape as if there had been no tax increase at all, and reminding the council that residents had previously voted to maintain the food tax in a ballot initiative.
Despite expressing reservations throughout the meeting, the mayor ended up supporting the tax increase.
“The mayor was the one disappointment,” said Mathews, who had expected the decision would come down to Elinski as a swing vote. “Listening to him talk I had a glimmer of hope we might see a quarter of a percent. I had no expectations we would see zero.”
After the vote on taxes, the council voted to seek an outside attorney to assist the council in contract renegotiations for the coming year, starting soon with the contract of City Clerk Marianne Jiménez, a move that could lead to more aggressive negotiations and lower pay for certain contract employees.
Clements and Mathews both agreed in expressing hope that cutting the pay of some city employees they felt were overpaid could benefit the city’s finances.
“I’m glad they’re doing it,” Clements said. “That’s one thing Michael Mathews and I can agree on. Those four contract employees are grossly overpaid and that needs to be dealt with. I’m glad that the city listened and is doing something about it.”
Jon Hecht can be reached at 634-8551, or email jhecht@larsonnewspapers.com
