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City manager floats utility tax balloon
TOP 3 TAXES - photo by Bulletin graphic
A looming 20 percent drop in property tax revenues could make Manteca municipal budget deficit projections for the 2010-11 fiscal years swell by $1.3 million.

That would up the deficit projection for that fiscal year to $14.2 million. While those are straight numbers based on today’s revenue trends and committed expenses and doesn’t account for at least $5 million in annual savings that are in the process of being put in place, it nevertheless underscores the quandary that city leaders find themselves in.

It is against that background that City Manager Steve Pinkerton outlined the concept of a utility tax at the last meeting of the 15-member citizen’s budget committee appointed by the City Council.

Pinkerton noted that the anticipated drop in property tax assessment will put money back into the pockets of homeowners. Pinkerton said the city would probably like to make a case to ask for some of that back in the form of a new tax that would keep service levels from deteriorating further.

A utility tax can’t be hijacked by the state like property taxes can.

Although exact figures aren’t available, a one percent utility assessment could generate at least $800,000. That means if Manteca proposed a 5 percent utility tax – which is the average for California cities that have such a tax in place – it could generate $4 million a year.

If such a tax was proposed, it would have to be approved by the voters. The earliest it legally could go on the ballot would be June 2010. That means it couldn’t do anything to help with the current budget or the 2009-10 fiscal year that has a projected $11.3 million deficit.

Pinkerton indicated strategies being put in place are expected to reduce next year’s deficit by half. That means even with a utility tax in place now at 5 percent, the city still would have to make cuts. That also is the case in subsequent years.

The city is updating revenue projections five years out on a daily basis to make sure that they keep heading in the right direction.

Various tidbits about utility taxes offered by Pinkerton are as follows:

• It can be assessed on electricity, gas, water, sewer, telephones including long distance and cell service, garbage collection, and cable TV.

• 46 percent of the state’s population is subjected to a utility use tax.

• Utility user rates range from 1 to 11 percent with the most common being 5 percent.

• On average, the utility users’ tax provides 15 percent of the general purpose revenues in cities that levy it.

• The tax is levied by the city and collected by the utility as part of the billing procedure.

• It can be established as a special tax requiring a two-third voter approval or a general tax that requires a majority approval.