State Center Case Study Solution

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State Center’s city treasurer revealed that the city is projected to run a $1 million deficit and proposed a 0.75 percent increase in sales taxes and other measures to cut spending and increase revenue to prevent defaulting at yesterday’s City Council meeting.
City Treasurer and Clerk E.Z. Million announced that he, Mayor Rudy Walker and the City Manager John Paul Black had developed a plan to prevent a shortfall in the yearly budget, with a majority of the new revenue coming from increasing the sales tax to two percent from 1.25 percent, this plan was controversial with the members of the City Council’s No New Taxes Coalition.
“This deficit is not in any way the fault of the City Council nor is it the fault of the city administration,”
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To halt spending, the plan proposed freezing all city hiring which would save $300,000, freezing any non-essential equipment purchases saving $200,000, and postponing all rehab projects the city has planned for the rest of the year which would save $100,000.
Most of the new revenue proposed by Million would come from increasing the sales tax to two percent which would generate an estimate $447,000, other revenue would come from raising ambulance fees by 30 percent generating $46,000, and doubling parking fines from $10 to $20 generating an estimated $30,000.
City Councilwoman Barbara White began the questioning of Million’s proposed plan, asking what effect the increased sales tax would have on businesses and citizens.
“Most cities our size have a two percent sales tax, if we raised it to two percent then it would put us even with all the other cities in the area,” said Million. “Individually I don’t think that would have a great impact on the individual citizens.”
For $100 worth of groceries, consumers will pay $2 in taxes, which is a 75-cent rise from the current $1.25 rate, but for a $30,000 car purchase, consumers would now be taxed $600, instead of the $375 they paid before.
Both Walker and
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