Rancho P.V. : Hearing Set on Utility Tax

The City Council will hold a public hearing March 4 on a proposed utility-users tax, which the city staff said is necessary to cover anticipated annual budget deficits of $350,000 and a five-year, $17-million capital improvement program.

The unanimous vote to hold the hearing came after the council this week heard several residents question the need for the tax during an informal hearing.

Residents said the city should reevaluate what it spends money on and, instead of taxing residents, should lobby the state Legislature to provide more money for cities. “The citizens should vote on this tax,” one person said.

Council members said that city facilities, particularly roads and storm drains, are getting old and will create liability problems for the city if they are not repaired. “We’ve gone beyond putting it off any further,” said Councilman John McTaggart.

The proposed utility tax on telephone, water, electric and gas bills, which City Manager Donald F. Guluzzy said would be 7% or 7.5%, would raise about $3.4 million a year. More than half of the $17-million capital program is for improving and maintaining streets and storm drains.

The council amended a draft utility-tax ordinance to provide for automatic repeal at the end of five years. It also would be subject to an annual council review, but the tax rate could be changed or the tax eliminated at any time. Households with a combined income of less than $11,500 a year would be exempt from the tax, and exemptions would be reviewed every two years. The council also directed Guluzzy to get an opinion from a major accounting firm on whether the tax would be deductible from federal income taxes.

Councilman Robert Ryan said he wants the council to consider a parcel tax on property instead of a utility tax. Such a tax--deductible from federal income taxes--could be used only to pay for police and fire services, provided under contract from Los Angeles County. The tax would require an election and approval by two-thirds of those voting.

In a report to the council, Guluzzy said the police budget is $1.3 million and offsetting that amount of money would not solve the problem of budget deficits and the need for capital improvement funds. The city is part of a special county fire protection district and those costs are covered by a county property tax. City Atty. Steve Dorsey said that while several cities have enacted parcel taxes, such a tax in San Marino is now being challenged in the state Supreme Court on grounds that it is based on the value of property, which is prohibited under Prop. 13.