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July 29, 2009 > Utility Users Tax will generate $2.6 million annually

Utility Users Tax will generate $2.6 million annually

By Meenu Gupta

Newark City Council voted unanimously (5-0) on July 23 to place a Utility Users Tax on the Nov 3, 2009, Election Ballot.

If approved by a simple majority of voters, the 3.9% tax will be implemented starting Jan 2010 for 20 years. City Manager John Becker confirmed it will take approximately 60 days to implement.

The City has worked to reduce costs and increase revenues to balance the budget deficit. Contract services have been reduced; capital projects have been defunded; salary cuts have been implemented. Despite all these efforts and use of reserves, the budget has not been balanced. The actual FY 2009-10 operating budget is $4.4 million less than for FY 2007-08.

An additional $1.4M in cuts, discussed at the budget work session on May 28, was also approved by the council. These cuts will further reduce police staffing, community service programs, contract services, part-time staffing, maintenance in all areas, and continued employee salary cuts. An estimated $3.5M deficit is projected for FY 2009-10 even after implementation of all the reductions. According to City Manager John Becker these cuts, which are almost 10% of the City's $38M operating budget, will have to be made later this year if a new revenue source is not found soon.

The only alternative to cutting services further is to develop additional revenues. Property and sales taxes account for more than half of the City's total revenue. This fiscal year property taxes have declined by 4%; further falls are expected next year. Sales tax revenue is forecast to be 15% less than last year. Other revenue sources on which the City relies include transit occupancy tax, franchise fees, business and construction taxes, vehicle-in-lieu fees, fees for services provided by the City, environmental protection fees and investment income. The economic downturn means almost all of these revenues have also been impacted this year.

Last year the City contracted with the Lew Edwards Group to conduct a community survey and budget education outreach program. A telephone survey in May 2008 revealed there is majority support for a Utility Users Tax (UUT) to maintain City services such as police, fire, 911 emergency, youth and anti-drug programs, senior services and street maintenance. A second telephone survey, conducted last month, indicates continued high levels of satisfaction with City services. The survey also found continued majority support for a UUT provided the tax rate is within a certain range. Former Councilwoman Shirley Sisk supported the measure at the council meeting.

The ballot measure proposal faces public opposition.

"The City expects the economy to improve in the next three years so why will the tax be implemented for 20 years?" asked Newark resident Margaret Lewis. She requested the ballot wording should explicitly mention the 20-year term.

"It's misleading the way it's stated," complained resident Dean Lewis who participated in both surveys and did not recall any questions related to the 20-year period

City Manager Becker clarified City Council by can reduce or eliminate the tax by legislative action at any time during the next 20 years if the economy is healthy enough.

The tax will be levied on electricity, gas, telecommunications and video services for residents and businesses and cost an average household about $12 per month. The tax will be collected by the utility companies as part of their regular billing procedure and remitted to the City. Low-income seniors, 65 and older, enrolled in PG&E's California Alternate Rates for Energy (CARE) program will be exempt as will government agencies such as Newark Unified School District and Ohlone College.

"It (UUT) doesn't solve our problem but it significantly reduces the service impacts that we're going to have to implement regardless of whether it passes or not," concluded City Manager Becker.

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