Stockton Approves Sales-Tax Hike To Ease Bankruptcy Exit
06 November 2013
Posted by: Author: Alison Vekshin
Author: Alison Vekshin (Bloomberg)
Voters in Stockton, California, the
biggest U.S. city to file for bankruptcy after Detroit, approved
a proposed sales-tax increase that’s a key part of its plan to
Stockton residents voted 53 percent in favor of a ballot
measure to raise the city’s sales tax to 9 percent to generate
about $28 million annually, which would go toward exiting
bankruptcy, restoring city services and paying for law
"This is the last step that’s going to get us out of
bankruptcy and really help Stockton move into recovery mode,”
Kathy Miller, a Stockton council member, said in a telephone
interview ahead of the vote.
The city of 296,000, an agricultural center about 80 miles
(130 kilometers) east of San Francisco, filed for bankruptcy
last year after city employee retiree costs, the housing bust
and accounting blunders drained its coffers. The three-quarter
cent tax increase proposal, known as Measure A, is part of a
bankruptcy exit plan the Stockton City Council approved on Oct.
3 and filed with the bankruptcy court on Oct. 10.
"The alternative would be brutal, consisting of
approximately $11 million in more service cuts,” triggering the
elimination of the city’s library system, community center
programs and an additional 14 percent cut in the fire
department, according to a report prepared for the Oct. 3 city
The failure of the tax increase would have likely resulted
in a loss of control over the city’s arena, some public parks
and golf courses, the report said.
The city’s sales tax is currently 8.25 percent. The
increase will go into effect on April 1.
The additional tax will expire after 10 years, and the city
council could reduce or eliminate it based on the city’s
economic recovery, according to the city attorney’s analysis
posted on the city’s website.
Stockton’s bankruptcy plan also calls for paying some
creditors less than they are owed while maintaining its pension
obligations to city employees.
This article first appeared in bloomberg.com.