The City Council has voted to tax all utilities and impose a special charge on landlords to balance its budget, after giving up hope that its half-finished card casino would ever solve the city's financial woes.
The council on Saturday adopted a $1.2-million budget that includes a 4% tax on monthly electricity, natural gas, water, telephone and trash bills, and a new business license fee assessing landlords $30 a year per unit they rent.
"We are only taking what we need to get through the year," said Councilman Joseph Fregeau, who is a landlord. "We are not going hog wild . . . . The alternative is to go bankrupt."
Cudahy must impose taxes because, unlike previous years, the council is not counting on anticipated revenues from the Silver Saddle Casino to balance the budget . The card club is languishing unfinished in a city industrial zone, its owners entangled in a financial dispute.
The casino has been a continual source of frustration to Cudahy leaders who had counted on it to provide hundreds of thousands of dollars a year in tax revenue.
Like many other cities, Cudahy's problems began in the mid-1980s, when the federal government stopped its revenue sharing program. In 1986, the last year of the program, the city received almost $400,000 in federal funds. Without that money, the council looked to the Silver Saddle Casino to make up the difference, City Manager Jack Joseph said.
"We kept hoping the casino would open and bring in money," Joseph said. "It was a painless way to balance the budget. We didn't have to tax anybody."
For six years, the council continued to pencil in anywhere from $400,000 to $650,000 a year in anticipated casino revenues. But the card club failed to open and the council found itself operating the city in the red. Last year, the council once again balanced its budget with casino revenues after the owners said it would finally open. It did not.
"We've been spending more money than we brought in for six years because we depended on money from the casino," Fregeau said. "So I guess now we have to bite the bullet and do something which is not pleasant."
The council needed to make up an $800,000 deficit to balance its 1991-92 budget. Utility taxes will bring in an estimated $368,000, and the business license fee is expected to generate an additional $120,000 in revenue. With a combination of the new taxes and cuts in spending, including elimination of the city's annual parade, Christmas decorations and Miss Cudahy Pageant, the council was able to balance the budget.
Council members are expected to give final approval to the utility tax and the landlord fee at a special meeting Friday morning.
Councilman John Robertson voted against raising taxes. He was opposed to charging landlords for a business license, he said.
"They (the other four council members) want to increase taxes," Robertson said. "They haven't even thought that once they raise taxes, those landlords are going to raise rents."
Robertson said that his fellow council members should have cut City Hall staff to save money. There are 25 full-time city employees. However, Joseph said that the council would have had to cut more than half the staff to make up the $488,000 the new tax and fee will provide.
Joseph and council members Fregeau and Joseph Graffio said that landlords should be charged a special fee because they make money in the city and contribute nothing toward its tax base. According to 1990 census figures, 83% of Cudahy residents are renters, and the city staff estimates that there are at least 4,000 apartment units in the city.
"Why should a businessman who operates a hardware store as his primary income be assessed a business license tax, while the person whose income is based on the ownership and management of rental properties be exempted?" Joseph wrote in a memo to the council.
One Cudahy landlord who declined to be named argued that the council made a mistake when it began relying on casino revenues to balance the budget.
"They mismanaged their money terribly," he said. "They counted on money they had no business counting on and now they are going to pass the buck and penalize landlords because they made a mistake."
Joseph said the owners had assured city leaders that the casino would be open and the council approved conservative estimates on what the Silver Saddle Casino might bring in. The council, he said, has been burned one too many times, and now feels it must balance a more realistic budget.
"The point is we've got to raise taxes," said Graffio, who also is a landlord. "It's going to hurt me, too, but we have to put the city on an even keel. Otherwise, we are in big trouble."