Petaluma, Cotati hit hard by plunging tax revenues

<p>Times are tough for California cities, but they're especially difficult in Cotati and Petaluma, where sales tax revenue has plummeted far below previous estimates, the state Board of Equalization said Friday.</p><p>The two cities are among 15 statewide that will not receive checks this month from the agency charged with tax administration and fee collection because they did not meet second quarter projections, said Anita Gore, an agency spokeswoman.</p><p>The state had expected to pay Petaluma $375,000 and Cotati about $109,000, based on a formula that takes into account past sales tax performance, Gore said.</p><p>But as actual receipts were counted from the three-month period ending in June, it was apparent the cities would be overpaid, Gore said.</p><p>So, for the month of August, Cotati and Petaluma will get nothing, Gore said.</p><p>“We're in the midst of a statewide sales tax slump and some local areas have had a greater decline than others,” Gore said. </p><p>The announcement came as the Board of Equalization sent out letters to 337 local governments notifying them they could expect a reduction in tax allocations for August. Fifteen of those will receive nothing.</p><p>An unprecedented drop-off in taxable sales experienced earlier in the year had continued through spring, and the state taxing agency was forced to adjust its advance payments to cities and counties to compensate.</p><p>Statewide, actual cash receipts for the second quarter, which ended in June, were down 18.74 percent rather than 14.4 percent, as expected, and cities faring the worst had to “true-up,” Gore said.</p><p>“In an economic downturn, this shouldn't be a surprise,” Gore said.</p><p>Cotati and Petaluma were the only North Coast cities that got no payment. The remainder were scattered across the state, including a number of Central Valley cities, such as Gustine, Maricopa and Ripon.</p><p>According to data supplied by the board, the most serious declines in taxable sales in Sonoma County have been in Cotati and Petaluma. Payments to Cotati were down nearly 27 percent in the fiscal year ending June 30 and dropped by close to 14 percent in Petaluma.</p><p>Cloverdale, Rohnert Park, Santa Rosa and Windsor were down about 10 percent each. Sonoma had the best numbers. Sales were off by about 1 percent.</p><p>Just what impact the lack of a monthly payment will have on Cotati and Petaluma was unclear Friday. Both City Halls were closed because of budget cuts.</p><p>Jone Hayes, Cotati's finance director, said the city had planned for reduced tax revenue in its budget, which is expected to be approved Wednesday, and the city has gone without a monthly check before, last in February.</p><p>She said the decline in taxable sales is happening across all industries but was unsure why Cotati was doing so poorly compared to other cities.</p><p>“Two years ago we were at the top. Now we're at the bottom,” Hayes said. “I can't really say why.”</p><p>In Petaluma, which like other cities is suffering from reduced property tax revenue, the loss of $375,000 will add to a budget deficit that is projected to grow to $2 million by next fiscal year.</p><p>City Councilman Mike Healy said the city had anticipated an 11.4 percent decline in sales taxes but it will probably be more like 13.8 percent.</p><p>“It's a significant drop but it's manageable,” Healy said. “It will probably mean additional cuts.”</p><p>Mayor Pam Torliatt said slumping car sales along the city's auto row likely were behind some of the declines.</p><p>She said the council has developed an economic strategy that includes several public works projects that could help a turnaround. The city also is considering proposals to build several large shopping centers that could generate additional revenue, she said.</p><p>But she said building stores alone wouldn't solve the problem.</p><p>“If you have a retailer and don't have anyone with a job, it doesn't really matter,” Torliatt said. “People have no money to shop.”</p>