If voters opt to reject Proposition 2 on Oct. 3, the administration is prepared to set the sales tax at the current 2 percent, not the 3 percent the proposition’s defeat would require, Mayor John Williams said Tuesday.
In a memo to the assembly presented during Tuesday afternoon’s Finance Committee meeting, Williams said the administration had only just realized that if voters reject ballot Proposition 2, a referendum on Ordinance 2005-09 passed in June of last year, a 1-percent sales tax increase established by that ordinance, would go into immediate effect, causing problems for the borough and for businesses unprepared to collect it.
Williams submitted a new measure, Ordinance 2006-35, which would set the sales tax rate at the current 2 percent, but leave the assembly the option of increasing it during the next budget-writing cycle next spring if necessary. Williams asked that the ordinance be included on Tuesday night’s consent agenda for introduction and the assembly set a public hearing date of Oct. 10.
That would be a week after the Oct. 3 municipal election and the night the election results would be certified barring some reason to declare the election invalid.
If voters approve Proposition 2, thus repealing Ordinance 2005-09 in its entirety, the mayor’s new ordinance would be unnecessary because the sales tax would be capped at 2 percent and any future sales tax increase would require the approval of a 60-percent supermajority of voters.
If Proposition 2 is not passed, the assembly could then adopt Ordinance 2006-35, formally setting the sales tax rate for fiscal year 2007 at 2 percent.
Ordinance 2005-09, passed June 7, 2005, was a controversial revenue enhancement measure that included a 1-percent increase in the borough’s sales tax, raising it to 3 percent. The ordinance also changed the way the sales tax was to be applied to recreational sales packages and created a mechanism for spending money in the borough’s Land Trust Fund.
On Aug. 16, 2005, the assembly amended the effective date of the sales tax increase to Jan. 1, 2006.
In the 2005 municipal election last October, voters approved Proposition 5, which rolled back the 1-percent increase and imposed the supermajority requirement for future sales tax increases.
In November 2005, members of the Alliance of Concerned Taxpayers, the group that had sponsored Proposition 5, submitted a new petition, this one calling for a referendum on all of Ordinance 2005-09. That became this year’s Proposition 2.
However, not only did Proposition 2 include the ordinance’s recreational sales and Land Trust Fund provisions, but also the sales tax increase voters had just reversed in October, effectively and perhaps a bit confusingly providing the electorate another chance to decide the fate of the increase.
In February, the assembly amended Ordinance 2005-09, making Jan. 1, 2007, the new effective date for its revisions of the way the sales tax was to be applied to recreational package sales. Perhaps because voters rejected the 1-percent increase to the sales tax, no one noticed that its effective date remained Jan. 1, 2006.
That is, until this week, when independently members of the administration and some members of the assembly noticed that the wording of this year’s Proposition 2 would require the sales tax increase be implemented immediately if the referendum failed.
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