O.C. Will Push ‘Sin Taxes’ in Revenue Search

SANTA ANA —  Searching for new revenue following the defeat of a proposed sales tax increase, Orange County plans to push forward on other ways of getting into taxpayers’ pocketbooks, according to two confidential memos obtained by The Times.

The two most lucrative proposals for generating revenue for the county center on so-called “sin taxes”: a new 10% levy on alcoholic drinks sold in bars, restaurants and at special events; and an additional 17-cent-per-pack tax on cigarettes. Those taxes alone could raise an estimated $158 million a year, county officials said.

The county wants to piggyback on the alcohol “tippler” tax that Los Angeles County is trying to impose, by amending a bill pending before the Legislature in Sacramento to cover Orange County as well.

The tobacco tax, being advanced by the California Medical Assn., would give four of the 17 cents collected statewide on the sale of every package of cigarettes to help Orange County.

“These sin taxes add up to serious money,” Supervisor William G. Steiner said Tuesday. “In essence they are equal to what [the unsuccessful Measure R sale tax hike] would have raised. They need to be looked at seriously.”

County Chief Executive Officer William J. Popejoy summarized all of the revenue-raising proposals Monday in a confidential memo to the county Board of Supervisors. The memo told the supervisors that county lobbyists would be instructed to support all of the proposed bills, unless the supervisors objected to specific proposals by noon Tuesday.

Only four of the 13 legislative proposals were dropped.

The proposals that passed muster include authority to:

* Impose a tax on entertainment activities.

* Create a special countywide assessment district to help pay for services ranging from police and fire protection to libraries.

* Tap Measure M transportation funds and fund reserves such as those of the county’s flood control district, its harbors, beaches and parks division and its trash agencies.

All of these proposals would require legislative approval, but some would be effective only in Orange County, while others would also be effective elsewhere.

Although some of the ideas have been cursorily discussed here in the past as ways to dig the county out of its bankruptcy, they have taken on a renewed and greater importance following county voters’ rejection last month of Measure R, the linchpin of the county’s recovery plan, which would have raised sales taxes from 7.75% to 8.25% for 10 years.

Supervisor Marian Bergeson acknowledged that the county faces an uphill battle in winning approval for some of the proposals, but said they need to be pursued nonetheless.

“Just because the tax didn’t pass doesn’t mean the problem went away,” said Bergeson, who added that the taxpayers feel the pinch of the crisis. “The effects of the bankruptcy are going to continue. We are not out of the woods.”

Board Chairman Gaddi H. Vasquez said he believed sin taxes may be more palatable to the public because not everyone smokes or drinks.

Several state lawmakers from Orange County who would be expected to carry the legislative baton for the county said they felt the proposals ignored the anti-tax sentiment voiced by voters on June 27.

Assemblyman Mickey Conroy (R-Orange) said Popejoy “apparently didn’t get the message from Measure R. If he gets those taxes, it will be over the objections of the Orange County delegation.”

“Taxes aren’t the answer to this,” added Assemblyman Curt Pringle (R-Garden Grove). “The voters made that point loud and clear.”

Some of the proposals Orange County hopes to take advantage of already have been floated by legislators representing Los Angeles County, which is in the midst of its own budget crisis. One proposal being pressed by Los Angeles officials is a program that would allow motorists to pay delinquent traffic fines without facing late penalties, which are seen as a disincentive to paying overdue fines.

Others measures are being pushed by special interest groups or statewide county associations. For example, the county is throwing its support behind a proposal from the California State Assn. of Counties that would give boards of supervisors discretion to withhold welfare payments.

Even though Orange County officials are desperately seeking new sources of cash, some members of the Board of Supervisors have drawn the line as to how much to seek from the taxpayers.

Bills that would increase taxes on hotel rooms, utilities and residential and business properties will not be supported in Sacramento, because one or more supervisors objected, county sources said.

In a confidential memo sent to supervisors on Monday, Popejoy originally recommended that the board support those actions. He asked them to contact his office by noon Tuesday if they had any objections to the legislative agenda.

Vasquez said the renewed legislative push seeks to “get this crisis behind us.”

“At this juncture, the proposals are conceptual proposals,” Vasquez said. “These are just that, proposals, ideas.”

Popejoy, who was in Sacramento on another matter Tuesday, could not be reached for comment.

In a memo to the board dated July 6, Popejoy asked for board direction on a variety of bankruptcy recovery issues, including the possibility of raising utility and hotel taxes. But because those taxes would apply only in unincorporated areas of the county, county officials have said they would not generate much revenue.

The memo, which was written shortly after the board demanded that Popejoy seek more guidance from supervisors on policy issues, also asks for direction on other recovery options, including the sale of John Wayne Airport and the plan to import trash from outside the county for additional revenue.

Among the most controversial matters Popejoy raised was the possibility of revisiting the question of how much more would be paid to the nearly 200 cities, school districts and other agencies that, along with the county, lost $1.7 billion when the county’s investment pool collapsed Dec. 6.

“This is a pivotal issue,” Popejoy wrote.

According to the pool settlement agreement, the other investors were paid 77% of their pre-bankruptcy balances in cash, and the schools have since been paid an additional 13% from the proceeds of some special recovery bonds floated by the county. Still to be repaid is the final 10% to schools and roughly 20% the county has promised to pay the cities and special districts.

If the county seeks to renegotiate the settlement agreement, it could try to reduce the amount of money it has agreed to pay the agencies. County officials and supervisors, however, said that scenario is highly unlikely.

Times staff writers Rene Lynch and Eric Bailey contributed to this report.