April 15, 2009

Less than a week into his tenure, Interim City Manager Mike Letcher Tuesday proposed raising taxes and fees by $12.8 million above $5 million in hikes his predecessor proposed.

The $12.8 million in higher taxes would help avoid $3 million worth of proposed cuts to outside agencies, $4.3 million in cuts to city employee benefits, contribute an extra $2 million to the city's pension systems and add $1.5 million to the city's rainy day reserve fund.

The higher taxes and fees would also give $2 million to the city's affordable-housing trust fund — a contribution not previously included in the budget.

The taxes and fee hikes proposed by Letcher raise money for additional services in the midst of the city's worst budget crisis in modern history.

In February, then-City Manager Mike Hein issued a report outlining $20 million in taxes and fee increases to help bridge a revenue shortfall for next year that is estimated to be as much as $80 million.

Hein, who was fired last week, included only $5 million of those tax and fee increases in his budget proposal.

Letcher, on the other hand, proposes including $17.8 million of the $20 million in new taxes and fees from the Hein report in the budget for next year, which begins July 1.

Letcher said the $4.3 million rollback in employee benefit cuts was all the city could negotiate with its unions, and said the $2 million increase in pension fund contributions was absolutely needed as well.

All that was added by the revenue increases, Letcher said, was the $3 million reduction in cuts to outside agencies, the $2 million contribution to the affordable-housing trust fund and the $1.5 million contribution to the city's rainy day fund.

Assistant City Manager Richard Miranda said all the tax and fee increases will come from the $20 million outlined by Hein.

The five biggest tax and fee increases included in Hein's report were:

• A new 2 percent tax on rental property to generate $12 million.
• An in-lieu property tax on Tucson Water that would be paid by ratepayers and would generate $1.6 million.
• An increase in the public utility tax in city right-of-way to generate $3.4 million. This would be paid by ratepayers of companies such as Tucson Electric Power or Southwest Gas.
• A new 2 percent tax on advertising to generate $964,000.
• A $1 increase in the nightly hotel bed tax to generate $1.8 million.

The council had no comment on Letcher's presentation, other than from Mayor Bob Walkup, who told Letcher his presentation was "nicely done" and "what the council wants to see."

In other business, the council:

• Voted 6-0 to affirm the Tucson Convention Center and a new convention hotel as the top priorities for Rio Nuevo, the city's Downtown redevelopment effort.
• Voted 5-1 to grant a 10-year extension for the lease of gas pipelines in the city with Kinder Morgan. Councilman Steve Leal voted no.