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As the City Council and City staff embark on preparation of the City’s budget in early 2024, it is helpful to understand the revenue sources including funds that support the City’s programs, project and activities. Here is an overview of two key sources of revenue that contribute to the City’s General Fund and support City activities:
• Property Taxes and
• Sales Taxes
Overview of General Fund Revenue:
The general fund is a key component of a government’s overall budget and finances. The general fund is flexible and covers a wide range of government activities, including public safety (Police & Dispatch) and a host of administrative functions such as Finance, Risk, Information Technology, Public Works, and Planning. The allocation of general fund revenue is determined through the City’s two-year budgeting process, where priorities and spending decisions are made to meet the community’s needs while maintaining fiscal responsibility.
Property Taxes
Property taxes constitute the largest share of the City’s revenue stream, serving as a cornerstone for funding essential services. These taxes are levied on real estate properties within Cloverdale and play a pivotal role in shaping the budget. It’s crucial to understand how property taxes are assessed, collected, and allocated to various City functions in order to provide residents with a comprehensive picture of how this revenue source impacts their community.
Assessment Process:
Annual Assessment: Property taxes in California are primarily ad valorem, meaning they are based on the assessed value of real estate. The county assessor evaluates property values annually. Proposition 13, a landmark property tax initiative passed in 1978, limits the annual increase of assessed values to 2% or the inflation rate, whichever is lower. This ensures property owners have predictability in their tax obligations.
Tax Rate Calculation:
The base property tax rate in California is 1% of the assessed value. This rate is applied to the assessed value determined by the county assessor. Local jurisdictions, including cities, school districts and special districts, may propose additional assessments, known as voter-approved indebtedness or bonds. When approved, these assessments contribute to the overall property tax rate.
Distribution of Revenue:
Property tax revenue is distributed to the City by the Sonoma County Auditor-Controller which is a position elected by the county voters. A significant portion (approximately 75-79%) of your property taxes are not distributed to the city but rather go to the county (~39%), schools (~33%), and special districts (Fire District 4% and Library 2%). A substantial portion of property tax revenue supports K-12 education, following the implementation of Proposition 98, which guarantees a minimum level of funding for schools. The remainder, approximately 21% of total property tax revenue, is distributed to the City. In the City’s current budget, the City is forecast to receive approximately $2.95 million in property tax revenue which constitutes nearly 52% of the anticipated general fund revenues.
Sales Tax
Sales taxes, another key contributor of approximately 20% of all General Fund revenue, are derived from sales transactions within the City. Understanding the dynamics of sales tax collection, rates, and distribution can offer insights into the economic vitality of Cloverdale. Of the total sales tax percentage (8.5%) paid In the City of Cloverdale, one percent (1.0%) is returned to the City.
A handful of businesses stand out as major contributors to the City’s sales tax revenue, collectively forming the backbone of economic sustenance. The following top 25 sales tax generators play a crucial role, accounting for nearly 80% ($792,398) of the City’s total sales tax revenue:
Top 25 Sales Tax Remitters
7-Eleven Food Stores
Ace Hardware
Chevron Service Station
Classic Mill & Cabinet
Cloverdale Automotive
Cloverdale Saw & Mower Center
Cocina Mexicana “El Milagro”
CVS/Pharmacy
Dollar General Stores
Fast Gas & Mini Mart
Grocery Outlet
McDonald’s Restaurant
Molyworks Materials Corporation
Napa Auto Parts
No Limit Fine Wines
O’Reilly Auto Parts
Papa’s Pizza Cafe
Patriot Service Stations
Quik Stop Service Stations
Ray’s Food Place
Red Door Remedies
Sinclair Service Stations
Taco Bell
Valley Pacific Petroleum Services
West Coast Professional Door
The revenue generated by the City’s top 25 contributors plays a pivotal role in funding critical City services, infrastructure development, and community initiatives. Understanding the concentration of sales tax revenue among these businesses empowers residents to appreciate the interconnectedness between their local commerce and the financial health of Cloverdale. Businesses including service stations, restaurants, and grocery stores contribute significantly to the City’s total sales tax revenue of approximately $1.1 Million annually. Sales taxes collected at service stations alone contribute nearly 32% of the City’s sales tax revenue while restaurants contribute approximately 15% and food stores 8%.
When at all possible, Shop Locally! The community’s continued support for local businesses ensures the sustained growth and prosperity of Cloverdale, creating a symbiotic relationship between our business community and community welfare.
Addressing the Financial Challenge: Meeting the Growing Needs of Cloverdale
While property and sales taxes serve as significant revenue sources for Cloverdale, they are facing challenges in keeping up with the escalating costs essential for sustaining existing services and initiating new projects. The demands on the City’s resources have outpaced the growth in these revenue streams, necessitating a comprehensive review of funding options to meet the evolving needs of the community.
Revenue Challenges:
Existing revenue, primarily generated through property and sales taxes, has reached a plateau, falling short of meeting the rising costs associated with maintaining and enhancing essential services. The financial strain has become evident in the City’s struggle to fund existing programs and address critical projects that are vital for the well-being of Cloverdale.
Exploring New Avenues:
Recognizing the imperative for additional resources, the City Council is actively exploring opportunities for a local tax measure in 2024. The decision to seek additional revenue is rooted in the commitment to ensuring the sustained growth and prosperity of Cloverdale. Recent polling indicates community support for increasing revenue through either a sales tax measure or a parcel assessment.
Community Support and Decision-Making Process:
While no final decisions have been made regarding the introduction of a revenue measure, the City Council is set to receive a presentation from staff in the coming months. This presentation will shed light on the potential components of such a measure, outlining the services and projects that could benefit from the additional revenue. The decision to place a revenue measure on the ballot will ultimately rest on the needs of the community and the potential positive impact such a measure can have on Cloverdale’s future.
Several Sonoma County cities have already taken proactive steps by enacting local revenue measures to fund special programs and projects. Cloverdale aims to draw inspiration from these successful initiatives, considering the diverse ways in which additional funding can be channeled to address critical community needs.
