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December 7, 2010 > How Measure AA helps

How Measure AA helps

By Simon Wong

More than 60 percent of Union City voters approved Measure AA (half-cent sales tax increase for four years) on November 2, 2010 to raise additional revenue and avoid further cuts to essential public services. Sales tax will increase to 10.25 percent as of April 11, 2011 and applies to all items currently subject to sales and use tax administered by the California Board of Equalization. The revenue-enhancement measure is expected to generate $3.5M in FY 2011-12, with the first allocation of receipts scheduled in June 2011.

Council will create a five-member committee consisting of members of the public. Its primary role will be to review Measure AA revenues and expenditures. A resolution will be adopted before April 1, 2011 to establish the committee's composition and wider remit.

During Measure AA's four-year term, tax revenues are expected to increase by $100,000 annually from $3.5M (FY 2011-12) to $3.8M (FY 2014-15) and close anticipated budget gaps between $1.7M (FY 2011-12) and $1.1M (FY 2014-15), assuming expenditure levels remain relatively unchanged.

Taking into account likely increases in expenses, the city forecasts a General Fund deficit of $1.9M in Measure AA's first year will increase to $3.5M in the fourth year, leaving sales tax-revenue surpluses of only $1.6M in the first year, and $300,000 in each subsequent year, to restore or fund new programs and services.

FY 2011-12 retirement costs for sworn police officers and all other employees are set to increase by 2.6 percent and 1.5 percent, respectively, because CalPERS needs to recoup losses incurred during the economic downturn. This equates to an additional $245,000. These costs will rise in subsequent years with a four-year cumulative impact of $1.045M.

After 18 years, Union Sanitary District will make its final, annual payment of $500,000 to the city in June 2011 for FY 2011-12.

An American Recovery and Reinvestment Act three-year grant funds a sergeant and three police officers and requires the city to assume responsibility in the fourth year in the amount of $739,000, commencing FY 2012-13 (Measure AA's second year).

According to official sources, economic recovery is likely to be slow and painful with unemployment remaining at current rates before falling to high single-digits for several years. A lack of consumer confidence, subdued real estate market, foreclosures and downwards reassessment of property values will continue to dampen property tax income, the city's largest revenue source.

The bi-annual FY 2009-11 Budget was reduced by $6M ($3.9M for FY 2009-10; $2.1M for FY 2010-11). The city eliminated 32 positions in the current and previous fiscal years and has reduced or terminated services, supplies, contracts and capital purchases totaling $563,000, such as the police computer lease, police team building and training and safety consulting and training.

Staff and Council will review previous reductions when setting the bi-annual budget for FY 2011-12 and FY 2012-13.

Measure AA is a short-term, revenue-enhancement solution to prevent severe cuts to essential public services. Without it, further budget reductions are likely to impact public safety and jeopardize the quality of life in Union City. The additional sales tax revenue and current spending cuts will help the city maintain existing services and begin to restore some of those which have been lost.

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