COTTONWOOD -- As Cottonwood continues to look at options to resolve a more than $1.5 million deficit through a budget balancing process, scenarios of a potential sales tax increase are currently being discussed.
Sales tax comparisons:
Cottonwood: 3 percent
Camp Verde: 3.65 percent
Clarkdale: 3 percent
Jerome: 3.5 percent
Sedona 3.5 percent
Prescott: 2.75 percent
Prescott Valley: 2.83 percent
Cottonwood isn’t the only city in the Verde Valley to consider raising its sales tax. Last October, in order to help fund traffic mitigation projects, Sedona vote 6-1 to add a half-cent to its sales tax, bumping it up to 3.5 percent.
In an unusual move for citizens, many attended Cottonwood’s work session Tuesday with signs advocating for a .65 percent sales tax increase.
Council member Karen Pfeifer said that in all her years on council, she had never seen anything like it.
“It’s like being at a ball game,” she said.
During a call to the public, Cottonwood resident Terri Clements said she strongly supports a .65 percent sales tax increase as several members of the audience raised their signs.
“It has been a decade since the [economic] downturn,” she said. “A decade that we’ve had to tap into reserves that somebody in prior times was smart enough to set up so it would be there. There will be another downturn.”
Clements continued, “As far as I’m concerned, we are overdue for an increase in the sales tax.
We need to build adequate reserves. We’re 10 years into a recovery so 10 years closer to an economic downturn.”
Right now, Cottonwood has a 3-percent sales tax. Combined with the state and county sales tax, it is around 9.35 percent. This rate hovers slightly below average for the region.
A full-service city, Cottonwood is one of the only municipalities in the region of its size that doesn’t have a property tax or a special district tax.
Cottonwood Budget Manager Kristen Lennon noted Tuesday that other cities don’t have all the same services that Cottonwood provides such as the fire department, recreation center, cemetery, etc.
“We provide a lot of services on a 3-percent sales tax,” she said.
Lennon added that because Cottonwood doesn’t have a property tax, much of the city revenue rests on the sales tax.
“The majority of [cities] who are the same size, who have the same or higher sales tax rate also have a property tax that funds certain projects,” she said.
Lennon presented several scenarios during the work session of potential sales tax increases between .25 and 1 percent, and what an increase would do to the overall budget. Another scenario included no sales tax increase but also meant potential cuts in city departments and programs.
Phil Terbell, who owns a business in Cottonwood said during a call to the public that we was concerned over how a potential sales tax increase would affect the price of food.
“That makes this a very regressive tax to the lowest income in our community,” he said. “I would consider that some consideration be put in there for removal of food tax.”
Cottonwood City Council will meet again tonight to discuss possible direction on the Fiscal Year 2019 budget. Council meets at their Chambers Building, located at 826 N. Main St.
--Follow Kelcie Grega on Twitter @KelcieGrega