Sales tax measure to go on bankrupt California city's ballot

SAN FRANCISCO Wed Jul 10, 2013 1:51am EDT

The City Hall is seen in Stockton, California June 27, 2012. REUTERS/Kevin Bartram

The City Hall is seen in Stockton, California June 27, 2012.

Credit: Reuters/Kevin Bartram

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SAN FRANCISCO (Reuters) - Stockton, California's city council voted on Tuesday night to put a measure increasing the city's sales tax on the November ballot to raise revenue to help the city exit from bankruptcy and to increase spending on public safety.

The vote came more than a year after the city of roughly 300,000 residents in California's Central Valley became the biggest U.S. city to file for bankruptcy protection from its creditors.

If Stockton's voters approve the measure, it would go into effect next April and lift their sales tax to 9 percent from 8.25 percent to raise more than $300 million over 10 years, according to City Manager Bob Deis' office.

Roughly a third of the new revenue would go to help Stockton exit from bankruptcy and the rest would go to public safety programs and to hire 120 new police officers.

"This is a win-win for everybody," said City Council member Michael Tubbs before the council's vote.

Mayor Anthony Silva criticized the measure, saying he had concerns about how its revenue would be used as intended by future city leaders. But he joined the council's six other members in putting on the November 5 ballot.

The tax measure can be included in Stockton's plan to adjust its debt, the next hurdle for the city's effort to restructure its finances, said Michael Sweet, a lawyer with Fox Rothschild in San Francisco who helps municipalities repair their finances.

"It sends a message to the intended audience that the city is working on a global approach," said Sweet.

That audience is U.S. Bankruptcy Judge Christopher Klein, who so far in Stockton's case has overseen disputes over spending the city wants to cut, notably cuts in payments to its so-called capital markets creditors.

Klein ruled in April that Stockton could proceed with a plan to adjust its debts, a blow to bond insurers Assured Guaranty and National Public Finance Guarantee. They have led the court challenge to Stockton's bankruptcy and have tried to block the city's plan to keep paying into the state pension fund while forcing losses onto bondholders.

Klein has said the issue of pension payments, which the U.S. municipal debt market is watching closely, may be reviewed after Stockton files its plan to adjust its debt. The city aims to file the plan with him in September.

Stockton has said it is preserving pensions to retain and recruit city employees, adding that its workers have already suffered job and pay cuts due to its tattered finances.

With revenue plunging as its housing market crashed, Stockton cut $90 million in spending from 2008 to last year. That included cuts to police while crime jumped and put Stockton on the FBI's list of the 10 most dangerous U.S. cities.

Concerned deeper cuts would endanger public safety, Stockton's city council last year approved a bankruptcy filing, hoping it would help them win concessions from its employee unions and creditors to help bolster its finances.

The city's unions have agreed to concessions and representatives for retired city workers recently agreed to accept a modest $5.1 million from the city to settle disputes over the loss of their subsidized medical coverage.

Stockton and its capital markets creditors are in confidential talks even as they prepare for the next round of litigation over the city's debt-adjustment plan. Klein may accept or reject it.

Stockton's city council last month adopted a $159.5 million general fund budget for the fiscal year that began on July 1. The spending plan is balanced by eliminating $12.6 million in payments to creditors along with $9.9 million in subsidies for retired city employees' health care.

(Reporting by Jim Christie; editing by Elizabeth Piper)

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Comments (4)
susette wrote:
I believe this measure will not work, even if the vote passes. No one wants more taxes to run a corrupt city council. Our government gets all our money and has no one at the helm to make sure it is spent justly. Meanwhile, there isn’t enough homeland security, theire aren’t enough jobs, tuition costs so much that there is no hope of ever being paid back, interest on back taxes are couple with usarious fees, loans and all the penalties associated with doing business with corporate America keeps middle class from expanding. There just isn’t any light at the end of the tunnel. No matter which party takes office next. We seem to be in a donward spiral.

Jul 10, 2013 7:38am EDT  --  Report as abuse
morbas wrote:
Municipality revenue unfairly burdens the lower 4/5th, that is why municipalities are revenue poor in a poor economy. Transaction tax burdens entrepreneurial personal businesses which must pass on costs to their clients, unfairly burdening the lower 4/5th quintile owners & clients. We need industry to be proactive to force a political constitutional change.
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Nationalize the tax code eliminating all other taxation, immediately balancing the budget(s), through a margin flat income tax principle. My numbers are margin $30k single, $60K joint, income above this linear increasing rate (Income-[30k,60k])*(Income/300k)*90% [a single tax rate at less than the 1960-63 federal income rate]. This revenue proportioned per voter to (1/3rd) federal, (1/3rd) state and (1/3rd) municipality governments. The effective rate for all would be less than the 1960-1963 federal rates. Import Export fees separate from this law; business shall not be taxed. Interstate commerce Federal taxes are prohibited by constitutional law.
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Clean and simple, no other taxes period.

Jul 10, 2013 8:49am EDT  --  Report as abuse
morbas wrote:
Hear let me help you petition the Federal Government. Address three postcards to congress and Senate.
two to
to: US Senate
Honorable (name of senator)
Washiington DC 20510
one to
to: US House of Representatives
Honorable (name of representative)
Washington DC 20515

From: Signed Name
(9 digit ZIP Code)

Jul 10, 2013 9:11am EDT  --  Report as abuse
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