The purpose of today’s letter is to address citizen concerns over the increase in taxation and several fees that the City levies for utilities and services that we all collectively benefit from. Before any discussion can begin, a history of where we came from should be discussed. In our 2016 comprehensive annual financial report, CAFR, a statistical table is compiled yearly. In this chart, the City of Gonzales had an effective tax rate of .2831 cents in 2006. This means that a home valued at $100,000.00 would pay $283.10 per year in City tax in 2006. By 2016, this rate declined 43.66 percent to .1595 cents or $159.50 per $100,000 in home value. In essence, the City collected $123.60 less per $100,000 in evaluation after a period of ten years.
This method of tax revenue collection is contrary to any discussions that involve forecasting, economic analysis, and finance principles. In the period from 2006 through 2016 inflation increased 22.50 percent. What this means is that everything that the City produces, provides, and delivers in the form of service increased in cost by 22.50 percent. Our rate of decline in taxation was almost two to one to the rate of increase in inflation.
In real numbers if the tax rate was held at .2831 cents over the same period the City’s coffers would have $2,243,930.93 more in revenue. This is only a partial truth though. When a loss of revenue occurs, it takes double the loss to be made whole again. Regaining the two million would only take the City to break even.
The facts as presented are the defining reason that the City had no choice but to increase taxes and fees on the services that are provided. The unfortunate reality of government is that the only revenue sources that we derive are from taxation, utility revenue, and fees for services. As a City, we cannot produce widgets for profit. This being said, revenue collection becomes the catalyst to providing essential services.
The amenities that we as residents of Gonzales enjoy have a cost associated with them. To deliver electric, provide sewage and water, to put out fires, and to be protected by our police are all deliverables that the City provides. The cost of this bundle has increased 22.50 percent, inflation adjusted, over ten years. Our homes, our businesses, and our City cannot be sheltered from increases in cost. The City has operated in an artificial environment where costs decrease. The unfortunate part of a vacuum is that it cannot support life as we have come to enjoy.
There is no easy solution to the issues that we as residents share. The City’s mission is to be transparent and forth wright in our endeavors. The solution to decades of artificial financial principles will take years to recover from. This process will have heart burn, but the alternative is to stop providing essential services and to allow the City of Gonzales to fail. This alternative is not something that any resident would want.
Sean Lally is the Gonzales City Manager.