As the City’s financial drawstring tightens with the recent adoption of a balanced budget for the next fiscal year, the Turlock City Council this week began looking at additional sources of revenue that could help boost its starving treasury.

City Manager Bob Lawton put forth a budget for FY 2019-20 that will not be the “new normal,” for Turlock, he said, but rather a means of getting by following several years of deficit spending which left the City’s reserves depleted. While the 2019-20 budget does not lay off any employees, it does defund 16 currently vacant or soon-to-be vacant positions and calls for cuts in public safety overtime budgets.

The Council approved that budget June 11, and the budget for FY 2020-21 will likely look very similar, Lawton explained at Tuesday’s meeting.

“Under prior administrations, the City has committed itself to certain recurring expenses that did not have concurring sources of revenue attached to them,” Lawton said. “We’re in a budget situation now where we can make do for one year, and during this year we’re going to learn a lot of things about ourselves, about what we do, about how we do them and that will position us to do the same thing for another year.

“It does not position us to do the same thing for three years. I can’t stress that enough.”

Lawton presented different revenue options to the Council that could potentially produce additional funding to help City government operate. Currently, the City’s General Fund Reserves — or savings account — is at about $2.5 million. Should the City need to rely solely on its reserves, this amount would be enough to cover just three weeks’ worth of its General Fund expenses.

Possible sources of revenue for the City presented by Lawton on Tuesday included both increases to existing taxes as well as entirely new taxes — either of which would require approval by Turlock voters.

Increasing Turlock’s sales tax, which is currently 7.875 percent, could serve as a source of revenue, but can sometimes be a volatile, unreliable means of income. For example, Turlock’s sales tax revenue consistently fell from mid-2017 to the end of the first quarter in 2018; however, the most recent report from the first quarter of 2019 shows that the City of Turlock increased its sales tax revenue by 12.4 percent over the same period of 2018.

The first quarter of 2018 saw the City collect $3,099,111 in sales tax revenue, while the first quarter of 2019 collected $3,483,753.

If the City were to increase its sales tax by one percent, or one cent (comparable to cities like Fort Bragg and Ukiah), it could generate approximately $14 million comparatively. An increase of ¾ cent would see $10 million generated, and a ½ cent increase, which would put Turlock at the same sales tax rate as Ceres and Oakdale, would generate about $7 million.

Other tax increases were discussed during Tuesday’s City Council meeting, including the Transient Occupancy Tax. The City’s current TOT rate is nine percent and generated $1.6 million in revenue during FY 2017-18. Increasing the TOT rate by one, two or three percent would raise revenue by approximately $178,000, $356,000 or $534,000, respectively.

“We do okay, but TOT is not going to be a game changer for the City when we have what is essentially a $4 million structural deficit,” Lawton said.

The City of Turlock could also increase, extend or remove altogether the maximum annual amount “cap” on its current Business License Tax. This would likely only add an extra $260,000 to the revenue source which in FY 2017-18 brought in $1.3 million, however. A Documentary/Property Transfer Tax would likely bring in little revenue as well, compared to other methods, Lawton said.

New taxes presented as options by Lawton included a Parcel Tax, which is considered a “Special Tax” that requires two-third voter approval even if used for general purposes that’s placed on a unit of real property, whether commercial, industrial, residential or any other zoning.

Also discussed was a Utility User Tax, which in cities like Ceres (3 percent) and Modesto (6 percent) produces $1.5 million and $20 million annually. This tax can be imposed on electricity, gas, water, sewer, telephone, sanitation and cable television service providers, though the amount of revenue generate in Turlock would depend on which utility service is taxed and the tax rate percentage.

While there was a myriad of options for increased taxation presented during Tuesday’s meeting, Lawton encouraged the Council to think long-term before considering any of the choices.

“I think it’s better for us, for the city, for City government, if we don’t try and cobble together a bunch of different approaches and try to seek approval for them in an election,” he said. “If we’re going to seek a solution through revenues, my recommendation would be do something that has a growth potential — don’t do something that just solves the problem for a year or two.”

Any tax would require public approval, and after community outreach and gauging voter approval, the City would likely place any measure on the November 2020 ballot.

While those delayed funds were described by Lawton as “bad news,” there is good news, he said: the City’s cannabis pilot program, which was adopted in May and is already partially through the application process. The City will soon enter into development agreements with four dispensaries, which will provide a source of revenue as early as January when the businesses are expected to open.

The City of Ceres has several development agreements currently in place and expects to receive approximately $2.2 million in revenue for FY 2018-19 from the agreements. Ceres voters also passed a 15 percent tax on the sale of cannabis in November 2018, which will increase revenue received from cannabis sales.

Given that marijuana is still illegal at the federal level, Lawton suggested that the City of Turlock not rely on the money generated from its new cannabis pilot program to develop new programs or fund those that already exist, but rather use the unpredictable money to boost its reserves.

“It certainly looks great and I have no doubt that this will yield additional revenue for the City…my concern as the manager is how reliable is the revenue,” he said. “We live paycheck to paycheck — the City has virtually no savings account. If we get uncertain revenue, revenue that may not be here next year, revenue that may be repealed, revenue that depends entirely on the sufferance of the state government and, more than the state, the sufferance of the federal government being willing to — for the lack of a better phrase — turn a blind eye to certain things, to me that’s not revenue that you build programs on, but it’s good to put in the savings account.”

As the City waits for the pilot cannabis program to get up and running, the Council in the meantime will weight its options when it comes to creating a new tax or increasing those that already exist. Should they decide to go down this route, the process of exploring community interest in the various revenue-generating options will begin in August and September, with community polling to take place October through December.

Any resolution for the consolidation of a measure to be placed on the November 2020 ballot would need to be submitted to the Stanislaus County Board of Supervisors by July 6, 2020.