Moody's Suggests Local Sales Tax Hike
- Sales Tax News
- Oct 16, 2015 | Gail Cole
Marysville, California, is not a “healthy community.” For more than 5 years, the city’s declining budget has necessitated cuts in various public services. A 1% local sales tax would generate enough revenue to restore many of those services. Yet voters rejected a proposed sales tax hike in November 2014.
That no vote had far-reaching consequences. In late September 2015, Moody’s Investors Services downgraded Marysville’s issuer credit rating and declared the outlook “negative.” It noted that the downgrade “reflects significant financial challenges bearing upon the city” and cited the city’s inability to pass the sales tax measure in 2014.
If the current rating is linked to the actions of the past, it is also linked to the future:
“Importantly, the ratings reflect our assumption that the city will return to voters for a 1-cent sales tax increase in June 2016. If successful, the estimated $1.5 million increase in annual revenues would significantly stabilize the city's credit profile, as the revenues would be sufficient to cover maximum lease payments and support spending at existing service levels. However, the city council has not yet formally adopted such a sales tax measure, and the city narrowly failed to pass a similar sales tax measure in the November 2014 election.”
If Marysville voters once again reject a sales tax increase, the rating will likely be further downgraded.
A brighter future
There is hope. The 2014 sales tax measure lost by only 75 votes. If the City Council decides to place a sales tax measure on the June primary ballot by March 11, 2016, a majority of the voters might just approve it.
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