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Morro Bay leaders look at possible sales tax to overcome budget shortfall

Posted at 5:51 PM, Aug 30, 2019
and last updated 2019-08-31 00:02:41-04

Morro Bay city leaders are considering a sales tax to avoid future budget deficits.

Next fiscal year, they'll be short nearly half a million dollars, a gap they say will grow if they don't find a way to pay for it.

On Tuesday, city council members approved nearly $85,000 (Item C-2) to hire a consultant to get community input and find out how big of a tax increase is needed to fund things like fire and police services.

"Everything is getting so expensive, especially in Morro Bay," said Mary Torres, a Morro Bay resident.

Many residents expressed concerns about the cost of living on the Central Coast.

Morro Bay city officials say they are doing their best to fund community services, but the city manager says it's getting more difficult and more expensive to keep up with demand.

"I think the community benefits greatly from our services," said Scott Collins, Morro Bay City Manager. "We have very low crime, we have nice parks and beaches, we take care of our children and seniors through programming, but it's harder and harder to meet those."

City council members want to hear from the community to see which services they should keep and which services could potentially be cut.

Some say an increased sales tax is worth paying if it means keeping firefighters and police officers on deck.

"They know what they need so I am okay with it," Torres said.

If a sales tax is approved, both residents and visitors would pay more.

The only council member to vote against a sales tax, Jeff Heller, says he'd rather see a property tax, which would have a stronger impact on local homeowners.

"I don't think the sales tax increase by itself will solve the structural deficit, whereas property owners here are able and I think should be paying for infrastructure," Heller said.

The city manager says a half-cent tax increase would generate about $1 million per year.

"We're doing the best we can in terms of reducing our costs. We've cut seven positions from the city's budget over the last several years," Collins said.

The potential percentage increase is unknown.

A local non-profit business hopes it doesn't drastically impact store prices.

"I hope it's not too exorbitant because we don't want to have our prices lowered to do a sales tax accommodation when we are not getting paid," said Betty Forsythe, a Fabulous Finds volunteer. "We are all volunteers and our mission is to help the community. "

According to city documents, employee benefits like pensions are the biggest factor in the budget shortfall.

If the city does nothing to fill the financial gap, they could face a nearly $2 million deficit in the next 5 to 10 years.

City leaders are also considering a tax measure specific to the harbor district to focus on infrastructure needs there.

Over the next few months, the city consultant will be reaching out to people by mail, phone and even going door to door to get community input on services.

If they find that a tax measure is the best solution, it would have to be approved by voters.

If survey results show enough support for a sales tax increase, voters could see it on the November 2020 ballot.