January 5, 2006

Utility Users Tax Background

Local cities' revenues at risk.
This article is from the Long Beach Press-Telegram.

Publication Date: 04-FEB-96
Author: Peterson, Thair

Millions of dollars in utility taxes and other levies enacted by Los Angeles County and local city halls in recent years have been placed at risk by a state Supreme Court decision which suggests that those taxes might require voter approval.

The decision could cost cash-strapped Los Angeles County more than $50 million a year in revenues raised in unincorporated areas, ranging from utility taxes to surcharges on tickets for Magic Mountain and Universal Studios.

The ruling could grab a 5 percent to 20 percent chunk out of the general fund budgets of cities like Artesia, Bellflower, Hawaiian Gardens, Lakewood and Norwalk.

``It would be an extraordinarily catastrophic impact,'' said Lakewood city spokesman Don Waldie. Lakewood gets $2 million from the its utility tax.

``It's pretty serious,'' said Ben Harvey, assistant to the Bellflower city manager. ``We'd have to cut services, lay off people or shut down facilities.''

In a late December ruling on a related issue, the state supreme court said that utility taxes, business license fees and the like, were a violation of Proposition 62, a 1986 voter-approved measure that requires such taxes receive voter approval.

But despite several legal requests to do so, the Supreme Court's final ruling in late December left certain key questions unanswered, such as whether the ruling invalidated taxes enacted beginning in 1987.

The Howard Jarvis Taxpayers Association has threatened to sue any cities that do not put the taxes before the voters this November.

Association President Joel Fox said he wants cities to pass resolutions by next month saying they will put the matter on the November ballot.

``Let them make their case to the people .T.T. If they don't, we'll start suing them,'' Fox said.

However, local governments say that they are on solid legal ground.

Lakewood's Waldie said cities enacted their levies at a time when Sacramento was shifting massive amounts of tax revenues to the state, and when local government needed a revenue source that ``did not pass through the grasping hands of the state Legislature.''

The cities acted in good faith, based on lower court decisions which had declared Proposition 62 unconstitutional.

Hoping to avert a legal challenge, the League of California Cities has drafted a bill that would make it clear that only taxes enacted after the Dec. 14 Supreme Court decision would need voter approval.

The Supreme Court decision applies only to general law cities, and does not affect communities with city charters, such as Cerritos, Downey, Long Beach, Los Alamitos and Seal Beach.

Here is a breakdown of how local cities are affected:

Artesia gets $200,000 a year from its 2 percent utility tax about 10 percent of its budget. ``It's a lot to us,'' City Manager Paul Phillips said.

Bellflower is faced with the possible loss of $3 million equal to nearly half of its law enforcement budget. Most of that is from a 5 percent utility users tax enacted in 1993.

Hawaiian Gardens gets about $300,000 to $500,000 a year from its 6 percent utility tax, which helps pay for the new city police department and amounts to about 20 percent of its budget, City Clerk Dominic Ruggieri said. Revenues from a new card club could make up for it, Ruggieri said.

Lakewood enacted a 3 percent utility users tax in 1992 that now brings in around $2 million a year, more than 7 percent of its budget.

Los Angeles County lawyers have suggested that October 1995 increases in bed taxes and landfill taxes could be at risk, along with the amusement park tax. They have suggested the board of supervisors impound $6 million received from those sources.

Norwalk passed a 7 percent utility tax in 1992, which, along with another small levy, raises $5 million and provides 20 percent of its budget.

Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
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