Politics & Government

Sales Tax Up, But Revenues May Come in Lower Than Expected

With the departure of OneSource Distributors, the second largest sales tax generator, Union City will take a significant blow to its budget, officials said. Census figures, property values and sanitary district fees will also impact the city's finances.

As Union City’s sales tax rate rose to 10.25 percent this month, city officials acknowledged at a recent special budget meeting that tax revenues may come in lower than projected.

Much of the discrepancy is due to unforeseen circumstances that include the departure of businesses and a slowing in population growth, officials said at the March 24 meeting.

OneSource Distributors, an electrical parts warehouse with several locations throughout the state, is in the process of moving to a larger location in Oakland, according to Carol Ulak, marketing director for OneSource. The branch outgrew the facilities in Union City, she said.

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The company is the city's second largest sales tax generator next to , according to Rich Dirge, administrative services director for the City of Union City.

“It’s a very important business in Union City,” Digre said. “They just appeared on our sales tax reports. From one quarter to the next, they went by leaps and bounds – up, up, up. I was betting they’d be number one within the year.”

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The closure of the local Borders bookstore would also have an impact, but a far less significant one, Digre said.

At the meeting, City anager Larry Cheeves said that the increased sales tax would offset the lost revenues from these businesses.

Warehouse Expansion May Help

The city may also recoup some from its expanding warehouse market.

According to an article in the San Francisco Business Times, a number of local businesses are growing, including . The alcoholic beverages distributor recently signed a lease for a 192,000-square-foot warehouse on Dowe Avenue. The new facility will be in addition to the two facilities the company already runs in Union City.

Golden Apple Corp., an after-market car parts provider previously located in Hayward, recently purchased a 60,000-square-foot building on Volpey Way. In addition, local technology businesses such as Abaxis, which expanded their operating space from 90,000 squarefeet to a 150,000-square-foot building late last year, .

But while growth in the business sector is vital, sales tax revenues only account for 17 percent of the city’s general fund, Digre said.

Property Taxes

Property taxes are the number one revenue generator for Union City, which make up 43 percent of the city’s general fund, Digre said. But property taxes remain stagnant, down to 0.5 percent growth, Digre said.

“That’s almost negligible,” Digre said. “There’s not going to be any (new) property tax revenue.”

The housing market continues to be a key concern for Union City and all cities across the state, Digre said.

“The median price of a home that sells in Union City is at a level not seen since 2002,” Digre said. “The median price has gone from around $4000,000 up to $800,000 and back down to $400,000, where it was in 2002."

Foreclosures, however, are beginning to recede, Digre said. He said that there fewer than 100 of the 16,000 housing units in Union City are in foreclosure.

Impact of 2010 Census

Another unexpected factor the city faces is slow population growth.

With the new U.S. Census data, Union City’s population is actually lower than the population projected by the California Department of Finance, the data set on which the city bases its reports and studies.

The Department of Finance reported the population at 75,054 in January 2010. The new data released last month listed Union City’s population as only 69,516.

That drop in numbers – 7.4 percent – could add up to a loss of revenues between $30,000 and $100,000 from vehicle license fees, gas tax fees and special grants that cities are awarded based on population, Digre said.

Sanitary District Funding

Another substantial impact to the city’s budget is the cutoff of funds from . According to Digre, USD has paid Union City $500,000 each year for the last 18 years for the expansion of their facilities. Those payments will cease in 2012-2013 fiscal year.

On top of that, the city will enter its last year of an American Recovery and Reinvestment Act grant cycle. Through the grant, the city received $2.4 million to fund four police department employees for four years, Digre said. The federal government provided $600,000 the first three years but requires the city to pay for the fourth and final year, according to Digre.

Union City police chief Greg Stewart does not want to lose the positions created through ARRA, so the City Council will have to wrestle with implementing the $600,000 program into its budget plan the following years, Digre said.

According to Digre, the city has a current expenditure budget of $37.6 million. About 50 percent of the city’s expenditures are employee salaries, which have remained flat since 2007, Digre said.

If the city’s community redevelopment agency is shut down, which Gov. Jerry Brown has proposed, it will only make budget matters worse. With its closure, the city would lose five employees paid for through redevelopment project funds, including two , two Youth Violence Prevention and Intervention Program counselors and an economic development coordinator. The positions would need to be eliminated or paid for through the city’s general fund.

On April 26, the city will present a proposed third quarter budget to City Council, with a budget review on May 31. The city is scheduled to adopt the budget on June 14.

“We east, sleep and drink nothing but budget these days,” Digre said.


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