Fear of Prop. 136 Passage Prompts a Flurry of Taxes

Like so many shoppers rushing to a going-out-of-business sale, local officials in several Southland communities are scrambling to levy new taxes in anticipation that Proposition 136--the so-called “poison pill” initiative--will pass on Tuesday and wipe out their power to raise revenues without a direct vote of the electorate.

Lynwood acted so quickly last week to adopt an emergency 10% utility tax that officials there said they did not have time to figure out the cost to the average consumer.

Downey adopted a 3% utility tax at a special council meeting Tuesday and the San Diego County Board of Supervisors last week voted to enact a first-ever license tax for businesses in unincorporated areas.

Other communities, including San Fernando, Compton and West Hollywood, have scheduled meetings for Monday to vote on tax levies before the controversial initiative takes the matter out of their hands.

Orange County and its cities apparently haven’t joined the rush to tax, nor has the city of Los Angeles. But Los Angeles County Supervisor Ed Edelman this week suggested that his colleagues consider levying new taxes to beat out Tuesday’s vote on Proposition 136. He did not push for a roll call vote because of an apparent lack of support from the conservative-controlled board.

The impetus for this sudden flurry of fiscal activity is the kickoff time contained in the ballot measure. If voters approve Proposition 136 on Tuesday, it will take effect at midnight that day. And, if approved, the proposed constitutional amendment would dramatically change the way local governments address the issue of taxes.

Under Proposition 136--the brainchild of those allied with the Jarvis-Gann anti-tax crusaders--before a city or county could levy a general-purpose tax or increase an existing one, a majority of the voters would have to approve. A new or increased special-purpose tax, those raised for a single purpose, such as increased police protection, would require two-thirds voter approval.

The measure--bankrolled largely by the alcohol industry--also would impose limits on the size of excise tax hikes, but it does allow some exemptions for tax hikes needed for emergencies or after natural disasters.

It is known as the “poison pill” initiative because it could also wipe out key funding elements of at least three other propositions on Tuesday’s ballot. If passed, it would require tax levy propositions such as 134, which would put a new tax on alcohol, to pass by a two-thirds margin.

“This is far more reaching than most people realize,” said Iola Williams, who until last month was president of the League of California Cities, which strongly opposes 136.

Said Compton Councilman Maxcy D. Filer: “Any time you cannot tax or raise funds, I don’t know how you can run a government, because you’re at the mercy of someone else.”

Williams said that without direct taxing power, city and county governments become virtual creatures of the state and will have to depend on the governor and the Legislature for more and more financial aid--assuming voters turn thumbs down on the local tax requests.

“To me,” Williams said, “it’s the same as not giving your kid an allowance and telling him to go mug the neighbor.”

But some elected officials have held off on any last-minute tax push, fearing voter backlash.

In San Jose, where Williams is a councilwoman, officials worked for weeks to come up with a list of possible new revenue sources. But on Tuesday, the City Council abandoned the tax hike idea, fearing voters would resent the end-run around Proposition 136.

San Bernardino Mayor Bob Holcomb has been trying for a month to persuade his City Council to raise the utility tax from 8% to 9%. But even with a promise not to implement the tax if Proposition 136 fails, Holcomb has been unable to get enough votes for it.

“I think it’s doing what logic dictates,” the mayor said of the attempted tax hike. He said he plans to make one last try at the City Council meeting on Monday.

Backers of Proposition 136 are chortling over the beat-the-clock tax measures, saying they cinch the case for 136.

“It absolutely helps us enormously,” said Ray McNally, the Sacramento public relations strategist helping to orchestrate the 136 campaign. “These guys slink around and underscore the voters’ suspicions that they can’t trust politicians and that’s a big selling point on Proposition 136.”

Meanwhile, opponents of 136 cringe at news of the election eve tax push.

“If cities all rush to do this, it makes it bad for us,” said Lenny Goldberg, director of the “No on 136” campaign.

Said Los Angeles City Council President John Ferraro, of the possible boon to 136 from a hasty tax vote: “That would give people all the more reason to vote for it.”

But for some municipal officials, the fear of Proposition 136--and the concern over future funding of local services in an era of shrinking federal and state aid to cities--has been strong enough to prompt the tax push.

West Hollywood Councilwoman Babette Lang was loudly booed by the audience when she left her sickbed this week--where she is recuperating from a broken hip--to break a monthlong deadlock over her city’s proposed business license tax. She cast the third and deciding vote for the tax, which comes back for final approval on Monday.

The measure is designed to raise $1 million a year in revenue and would cost a business with annual sales of $565,000 about $270 a year.

“This (tax) is something that is really needed, and we have to do it now,” Lang said. “Besides, the tax is minimal. I don’t believe it will really hurt the business community.”

Times staff writers Stephanie Chavez, John L. Mitchell, Douglas Shuit, Jane Fritsch, Richard Simon, Lee Harris, Franki Ransom, Mike Ward, Jenifer Warren and Berkley Hudson contributed to this story.