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SANTA CRUZ COUNTY UTILITY TAX REPEAL INITIATIVE. Repeals the existing Santa Cruz County utility users tax, and prohibits the County of Santa Cruz from imposing any utility users tax in the future. |
IMPARTIAL ANALYSIS BY COUNTY COUNSEL MEASURE L EFFECT OF THIS MEASURE ON EXISTING LAW This initiative measure proposes
the repeal of the existing utility users tax of the County of Santa Cruz, and
would prohibit the County from adopting any future utility tax (unless
approved by the voters). The County
utility tax is imposed pursuant to
County Code Chapter 4.25 on utility bills of customers within the County
unincorporated area for natural gas, electricity, telephone (in-State calls),
sewer, and cable television services.
The utility tax rate is generally 7% of monthly utility charges.
Chapter 4.25 exempts low income customers from paying the utility tax on the
first $34 of monthly charges for natural gas and electricity; and exempts
agricultural service users of natural gas and electricity, and provides a
reduced rate structure for the largest users of natural gas and electricity.
In addition, the County Board of Supervisors has ordered the utility tax rate
reduced to 4.5% on natural gas and electricity monthly bills issued to all
customers in January, February, March, and April, 2002, to offset unexpected
utility tax revenues which the County received as a result of high energy
prices during 2001. If this measure
is passed, its repeal of the utility tax would replace the approved reduction
in utility tax rates as of the measure’s effective date. OPERATION OF THE MEASURE A “YES” vote on Measure L is a vote to
repeal the existing County utility tax, and to prohibit the County from
adopting any utility tax in the future unless approved by the voters. A “NO” vote on Measure L is a vote to
continue the existing County utility tax in effect. The County utility tax was originally
adopted in 1991 based on new statutory taxing authority granted to counties,
and on court decisions which indicated that cities and counties were not
required to obtain voter approval of local taxes pursuant to the provisions
of Proposition 62. A lawsuit was
filed in 1998 challenging the legality of the County utility tax based on a
later change in the case law which upheld the voter approval provisions of Proposition
62 as to counties and general law cities.
This lawsuit is still undecided as to the County utility tax, and the
Court has not yet determined whether the County utility tax should be
invalidated because it was adopted without voter approval even though it
complied with then existing case law.
(The Court did issue a final decision that the voter approval
provisions of Proposition 62 could not legally apply to the taxes adopted by
the charter cities of Watsonville and Santa Cruz.) It is difficult to anticipate what the Court’s ultimate
decision will be on the County utility tax.
However, if Measure L passes repealing the County utility tax, the
County could also face additional financial losses pursuant to Proposition
62; and if Measure L is rejected, the County utility tax could be determined
to be in compliance with the voter approval provisions of Proposition 62. s/
DANA McRAE, COUNTY COUNSEL |
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FULL
TEXT OF BALLOT MEASURE L THE
PEOPLE OF THE COUNTY OF SANTA CRUZ DO ORDAIN AS FOLLOWS: SECTION
1. Chapter 4.25 of the Santa Cruz County Code, imposing a Utility Users Tax,
is repealed. SECTION
2. The County of Santa Cruz shall not impose a utility users tax based on
consumption or use of natural gas, electricity, telephone, sewer and/or cable
television services. SECTION
3. If any provision of this measure is found to be invalid, that invalidity
shall not effect the remaining portions of this measure. |
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44-523
VOTER
INFORMATION PAMPHLET
MEASURES, ANALYSES AND
ARGUMENTS (whichever is applicable to
your ballot) Arguments in support of, or in opposition to, the proposed laws are the opinions of the authors. |
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FISCAL IMPACT STATEMENT BY COUNTY AUDITOR MEASURE L
In 1991 the County Board of Supervisors established a 7% Utility Users Tax. The Utility Users Tax has been used to make up for the lower percentage of property taxes received by Santa Cruz County compared with the average received by the other 57 counties, and to replace other revenue shifts. The repeal of the Utility Users Tax would result
in an estimated revenue loss of $2,000,000 in 2001-02 and $9,900,000 each
year thereafter. A legal challenge to the tax is now pending in the local
courts. If successful, additional adverse financial impacts could occur. The total General Fund Budget is $332 million for
the 2001-02 fiscal year. After subtracting restricted revenues and
expenditures controlled by maintenance of effort requirements and other
commitments, the remaining $70.3 million is used to fund mostly State
mandated programs. This sum is used to finance the net operating costs for
services including: judicial, jail and detention, public assistance, health,
legislative, legal, administrative, and financial functions and a reserve for
contingencies. It also finances programs which are not specifically mandated
including Community Programs and other activities ($6,000,000). The
budget includes funding from one-time revenues for working capital-paying
bills ($6,500,000, on June 30, 1980 the provision was $6,639,000),
debt payments ($1,000,000), emergencies ($2,300,000), accounts receivable and
health program reductions ($2,700,000), and 2002-03 road improvements
($3,000,000). The budget also provides for a General Contingency for
Unanticipated Needs of $6,300,000. The State of California defines a prudent
reserve for contingencies as 3% of the total budget requirements or $9.9
million; $6,300,000 is 1.9%. The
fund balance available over the past twenty years has averaged 3% at year
end. The County does not maintain any unbudgeted surpluses. The audited fund
balance available has ranged from $34,000 in 1991 to $31,000,000 in
2000. The $34,000 balance was not
favorable and did not provide adequate working capital. The $31,000,000
should be considered appropriate given the economy and one-time economic
gains. If the one-time tax audit of $9.6 million, unbudgeted tobacco
settlement of $2.5 million, and the unexpended balance in contingencies of
$3.4 million are subtracted from the $31,000,000 in 2000, the fund balance is
equal to 5.9%. These conditions have
resulted in major road improvements and an upgrade of the County’s Bond
Rating from a medium to a high grade. The effects of a Utility Tax repeal could be postponed
briefly but not permanently by using one-time financial resources. It would
require restructuring the budget by making reductions equal to about 14% of
those programs not tied to specific
revenue reimbursements or |
maintenance of effort
requirements. This is equivalent to about 170 budgeted positions based on
average cost. Historically, a revenue loss of this magnitude would be shared
among almost all County Departments and Programs resulting in reduced budget
service levels and increased fees.
The repeal of the Utility Users Tax would have a greater fiscal impact
than the net property tax shifts of the 1990’s by the State of California. Respectfully
Submitted, Gary A. Knutson
County Auditor-Controller |
44-524