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A few thoughts on a users tax on municipal utilities

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POSTED January 11, 2009 1:03 a.m.
 Manteca up until earlier this decade assessed a utility users tax on municipal water, sewer, and garbage bills that came to $2.35 a month.
It was imposed in the late 1980s to cover the cost of major storm run-off improvements. The council jettisoned the tax and made a refund for the three previous years of collection after a challenge was made to its legality.
What made it questionable was a change in California law after a previous council put it in place. The tax was also not restricted. It went to the general fund although it generated roughly enough to cover storm system costs at the time. The city decided to drop it instead of going through legal challenges.
City Manager Steve Pinkerton has floated the idea of some form of utility tax to help bridge the city’s $11.3 million deficit that looms in the upcoming fiscal year. It had a mixed reaction from the City Council during Thursday’s retreat at Chez Shari at the municipal golf course.
First of all, don’t slam Pinkerton. He’s simply doing his job by laying all options on the table.
Pinkerton’s predecessor Bob Adams often talked about trying to reinstate the utility tax to cover future storm system improvements as the system’s upkeep was burdening the general fund.
Manteca leaders should keep a couple things in mind about exploring a tax.
• Voters respond better when the purpose of the tax is restricted to its use and has an implementation program that accompanies the ballot measure. Measure M — the public safety tax — passed after failing because the city took those measures. The same was true of the Manteca Unified Measure M school bond as well as the Measure K sales tax for transportation that is collected countywide. It should be noted that in both the school bond and public safety tax, the measures that failed as general taxes needed simple majorities, the restricted taxing that passed had higher thresholds for approval and succeed in passing.
• No one has a crystal ball, but if the economy starts improving in late 2009 — the optimistic outlook — or sometime in 2010 by the time a ballot measure came up they’d be an argument that it isn’t needed. Whether that is the case, would be debatable. Of course, if the economy took two to three years to recover, it would come up at an opportune time.
• City leaders have pressing problems before them now but they can’t ignore planning for the future.
• If there is a utility tax in place, it should have different levels just like the previous tax did. Single family homes were $2.35 per month and multi-family units were $1.35 per month while commercial users had a 10 percent tax on their utility bills.
The year the utility tax was dropped, the city was generating $690,000 on an annual basis. They also had to refund close to $1.7 million.
The storm retention system improvement bonds sold in 1990 to make improvements to Central Manteca drainage that tied in with the Shasta Park retention basin came in at $2.2 million in principal. The final payment of $223,890 is being made this year.
The current municipal budget has $316,130 in personnel costs to maintain the storm run-off system and $178,740 in capital improvements.
A $3 a month utility tax charge on single family homes (17,509 homes as of Dec. 31, 2007) and a $2 a month utility charge (5,033 units as of Dec. 31, 2007) would generate $1,377,046 a year. The 10 percent commercial tax could bring receipts up to $1.8 million annually.
No matter how much more faith people have in local government than state or federal counterparts, it is doubtful that people are going to be clamoring to support a tax that simply gives the city more money regardless of how dire the budget gets.
But what if the city addressed an ongoing general fund need and a long overdue project at the same time? If one third of the tax was restricted at the time of the vote to the storm retention system and two thirds to provide a revenue stream to bond for a new library, it might just get traction.
This year’s storm system costs would be $500,000 with the bond payment. The one-third set aside would generate $600,000. That leaves a cushion of $100,000. The city would argue they have deferred maintenance that needs to be addressed. Fine. But instead of going for the Lexus version, they need to reduce the level of service and accept some slight local flooding in areas and use any gain in general fund receipts during good times to address deferred maintenance.
That leaves $1.2 million dedicated to cover bond payments for a library as well as possible materials and staffing.
The city shouldn’t simply throw a tax out there nor should they just worry about today’s problems.

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