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Council Sends Utility Tax to Voters

John VanLandingham
The Emeryville Connection Staff
August 2007

Emeryville voters are being asked to decide at the November 6th city election between continuing the city’s existing 5.5 percent utility users’ tax or reject it and contend with reduced or eliminated programs.

As much as $1 million annually would be cut from the city budget and the city also could be compelled to refund as much as $1 million to residents and businesses, should the tax be rejected, a staff report notes.

Earlier this year, the city released the results of a poll that showed a majority of residents were satisfied with their city services and were likely to support continuing the tax.

Although the tax first went on the books in 1984, recent appellate court decisions and statewide ballot measures are prompting the city to put it before the voters to assure its constitutionality and prevent any costly challenges, City Attorney Michael Biddle said in a report to the council.

The tax began with a 3.5 percent rate for gas, electricity and telephone services. In 1992, it was increased to 4.5 percent and then to the current 5.5 percent in 1993, without a vote by residents. Biddle said the city relied on earlier California Court of Appeal decisions to justify no referendum.

In 1995, however, the state Supreme Court handed down a ruling that suggests that the portion of the tax above the 3.5% rate may be subject to legal challenge, with a risk of refund liability, indefinitely into the future unless the tax is submitted to the voters, Biddle said in his report.

The tax is imposed by the city but collected by the utility companies who add it to Emeryville residents’ and business’ bills and then pay it to the city. Literally dozens of cities throughout California enacted utility users taxes after the passage of Prop. 13 in 1978. The taxes are of different rates and different utility services, levied at the discretion of the City Council.

Biddle’s report states just how much the city depends on the tax to fund many services.

“If the city no longer receives revenues above the 3.5% tax rate, services will need to be reduced or eliminated in the 2008-2009 fiscal year. A reduction in the city’s work force will impact established programs and services such as increased response times (by) the police and fire departments, a cut in recreation and senior services and a decrease in park and infrastructure maintenance. This situation creates uncertainty about the city’s ability to fund its current level of general services and could lead to difficulties in retaining and recruiting city employees,” he wrote.

To avoid that scenario, Biddle recommended that the council put the tax before the voters on the November 6 ballot.

During the council’s July 17 deliberations, Councilmember John Fricke moved to lift the $75,000 cap on the tax.

“What is the rationale for capping it at $75,000 if we are getting much less than could have been collected from major users?” Fricke asked.

Councilmember Ken Bukowski said the city is interested in maintaining what it has now and lifting the cap could prompt some of the major users to relocate out of Emeryville.

Fricke‘s motion died for lack of a second.

John VanLandinham is a writer for The Emeryville

Connection. If you have a question or comment, please contact him at ecocnews@gmail.com