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October 26, 2004 > Fremont Chamber of Commerce opposes Measure V

Fremont Chamber of Commerce opposes Measure V

by Billy Sandbrink, Director of Government Affairs

At its recent Board of Directors Meeting, the Fremont Chamber of Commerce has decided to oppose Measure V, the Utility User Tax. In coming to this decision, the Fremont Chamber of Commerce has been diligent in listening to the information offered, organizing meetings between the business community and City Councilmembers and staff, and actively seeking the opinions of the Chamber's membership. The answer to Measure V is clear; this tax, while aimed at an important public benefit, misses the mark.

The first reason for this conclusion is the financial impact of this tax on businesses. The Chamber conducted two separate surveys of its membership. When asked what the impact of the tax would be on their business, respondents indicated that this tax will result in suspended operations, employee lay offs, reduced investment, etc. As the mayor noted in last year's State of the City address, Fremont has lost many key businesses in recent years. These businesses have left the City without the additional cost of this tax. Teamed with rising worker's compensation costs, increases in health insurance costs, and rising costs for housing and rental space, this tax will either push people out of the city or bring them closer to leaving. The purpose of Measure V is to have a safe and well-maintained city, but if businesses cannot afford the price of Measure V, the benefit of the tax is lost.

The Chamber also opposes Measure V because of the basic structure of the tax. Measure V is a general tax, whose revenue will be deposited into Fremont's General Fund. The City Council has the discretion to spend General Fund money for any general purposes without restriction, unlike a special tax which can raise revenue for specific programs or purposes. In addition, Measure V allows for the Council to adjust the rate of the tax by enacting an ordinance at any regular meeting, does not have a sunset clause when the tax is no longer needed, and functions as a double tax because it taxes the total cost of utilities, including other taxes and surcharges. Each one of these facets of the tax allow for an unacceptable level of discretion in implementing the tax.

The Chamber's contention with the level of discretion built into this tax is not dissimilar from the reasoning used by the City when dealing with the state and Propositions 1A and 65. The City wants the greatest degree of protection from the state because of Fremont's inability to see any more revenue leave its coffers. At the same time, businesses are faced with growing financial concerns and want every assurance possible under the law that if any more taxes are levied upon them, the money will be spent for the purposes they approve. By its very nature, Measure V cannot legally provide this assurance.

Another issue the Chamber has with Measure V is that it seeks to secure more money than the City needs to maintain its current service levels. The City has identified a gap of $7 - $9M the City must close in order to maintain FY 04/05 services levels. Instead of asking for enough money to keep the City at its current levels, which would be about a 2.5% utility tax, Measure V, with a 6% maximum, would raise an additional $12M/year for additional services. Even with the City looking to reduce the tax burden and phasing in the tax at 4%, the City would be generating between several million dollars more than it would need to keep services where they are. The additional services the City wants to restore may be necessary to have, but businesses are in the situation where they are merely trying to stay afloat. They are not in the position to make the same profits, offer the same benefits, and retain the same number of employees as of a few years ago. The Chamber feels the time is inappropriate for the City, or any governmental agency, to seek additional revenues to return to the higher service levels of years past.

All of the stakeholders in Fremont are faced with difficult choices every day. In Fremont's case, budget problems exist despite the difficult choices made by the City Council over the last few years, including cutting $20M and over two hundred positions. Built in cost drivers, like employee-related costs, are highly attributable to the problems Fremont faces and must be addressed by the City for a true solution to be reached.

Taxpayers at the same time have to willing to be a part of the solution. The Chamber has taken a step forward to work with the City in officially supporting Proposition 1A. The state can no longer be allowed to take local government money because of their inability to balance the budget with the means provided.

The Chamber is also contributing a member to the Utility User Tax Oversight Committee to help with the implementation of the tax. If the tax were to fail, the Chamber urges the City Council to create a Budget Oversight Committee and to use the Chamber's Utility User Tax Oversight Committee member for that committee. Also, if this tax were to fail, the Chamber will accept any invitation by the City to discuss potential solutions to the problem.

It is easy for any two groups who have differing opinions on an issue to forget the commonalities they share and instead focus on what separates them. Despite the Chamber's opposition to Measure V, the Chamber has not lost sight of the ties it has with the City and the shared goal of creating a prosperous Fremont.

 
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