Mayor Sam Jones made his case Monday afternoon for a one-percent sales tax increase to close the city of Mobile’s budget wound, taking the proposal to the City Council’s finance committee after abandoning the plan he had been pushing for weeks.
From pay cuts to tax increase
Until now, the centerpiece of the Jones administration’s answer to an $18.4 million hole in the fiscal 2010 budget was a 10-percent across-the-board pay cut for city employees. That plan produced exactly the reaction anyone might have predicted: restless city workers descending on City Hall, arguing that a citywide problem was being solved on their paychecks alone.
The administration reconsidered. In place of the pay cut, Jones now proposes raising the city sales tax by a penny on the dollar as the key to balancing this year’s budget.
The numbers the mayor is selling
Among the points Jones is expected to press as he works the council and the public:
- A one-percent increase would generate roughly $7 million for the remainder of this fiscal year and about $28 million in fiscal 2011.
- The proposal carries a sunset clause: the increase would automatically be reduced to a half-percent — half a penny on the dollar — after the end of fiscal year 2012 on Oct. 1, 2012.
- Mobile’s combined sales tax rate would be equal to that of several other Alabama municipalities, including Birmingham, Montgomery, Prichard, Bayou La Batre, Gulf Shores and Orange Beach.
- City departments have already cut $21 million in costs since the beginning of the current fiscal year.
That last figure is the administration’s answer to the obvious objection — that City Hall is reaching into taxpayers’ pockets before it has finished tightening its own belt.
The politics of a penny
The sales tax has long been the instrument of choice for Southern governments in a squeeze, for the simple reason that it arrives in small increments and no one receives a bill. It is also, in a recession, the shakiest of foundations: Mobile’s sales tax collections have been trending down, which is a large part of why the budget gap exists in the first place.
The sunset provision is meant to blunt the objection. A tax that shrinks by half in October 2012 and could disappear entirely afterward is easier to sell than a permanent increase — though residents who have watched temporary taxes elsewhere calcify into permanent ones may take some persuading.
The alternative Jones has ruled out entirely is layoffs. His aversion to cutting into the city’s roughly 2,500-member workforce has been apparent at every stage of the crisis. Whenever he has mentioned layoffs, it has been to describe them as an outcome he finds personally unacceptable but legally unavoidable if the council does not act.
What the council must weigh
The proposal needs five votes on the seven-member council — a super-majority requirement written into Mobile’s form of government when it was created 25 years ago. That threshold has quietly shaped the city’s politics ever since, and it means that two determined council members can stop almost anything.
The finance committee’s deliberations are only the first step. A formal vote is expected in the coming days, and the council members who have spoken about the shortfall have staked out very different ground on whether the city should be managing expenditures to fit its revenues or manufacturing revenues to fit its expenditures.