Vol. XV, No. 9
March 8, 2002

UUT ROUNDUP: VOTERS APPROVE REPEAL IN SANTA CRUZ COUNTY

Voter approval in Santa Cruz County of an initiative to repeal the county’s 7 percent utility users tax (UUT) may have shocked March 5 election observers as much as voter rejection of a UUT reduction in Stockton.

Elsewhere in California, voters appeared willing to maintain existing UUT where their legality required ratification. This was the case in Cupertino (Santa Clara County) and La Palma (Orange County). A ratification election in La Habra (Orange County) was too close to call with the measure only five votes ahead pending the counting of absentee and provisional ballots.

Here is a rundown of UUT election activity that was spurred by skyrocketing electricity costs in 2001 that left some cities and counties enjoying windfalls of UUT revenues:

Santa Cruz County. Measure L, an initiative to repeal Santa Cruz County’s 7 percent utility user tax on electricity, natural gas, telephone, cable TV and sewer bills, was approved by 55.2 percent of the vote.

According to the Santa Cruz Sentinel, the measure’s success surprised even its proponents, who raised only $5,400 for the campaign, compared to $117,000 by the opposition campaign. The Board of Supervisors had approved the tax in 1991, before passage of Proposition 218 in 1996 required voter approval of all local taxes.

Voters within the city of Santa Cruz voted 55 percent in support of the $10 million-a-year tax, but voters elsewhere in the county wanted it repealed by a margin of 60 percent to 40 percent. A low turnout of voters, particularly among Democrats, resulted in an “overrepresentation of conservative voters who are notoriously anti-tax,” lamented County Supervisor Mardi Wormhoudt.

Tax-repeal proponent Bob Suhr: “I think it began to sink in that the Board of Supervisors was getting a little arrogant about this.”

Although the tax is collected only in unincorporated areas of the county, the board put Measure I on a countywide ballot, including voters in the city of Santa Cruz. This made the countywide result much closer.

Stockton. In San Joaquin County’s largest city, the proposal to reduce the UUT failed passage, but another tax-cut measure could make the November ballot. The election results in Santa Cruz and Stockton were somewhat baffling, since the former is considered a liberal bastion almost on a par with Berkeley, while Stockton is the antithesis of that political category.

Measure I sought to reduce Stockton’s utility user tax from 8 percent to 6 percent, in 1 percent increments over the next two years. The measure was defeated, getting only 44.5 percent of the vote.

Measure I proponent Dean Andal told the Stockton Record (March 7): “I can still see a lot of support for cutting the tax. I think the election was Act One; Act Two still to come.” He did not elaborate.

A former city council member, Ralph Lee White, has collected signatures, which are still being verified, for a November ballot initiative to cut the tax to 2 percent. City officials say they want to talk about reducing the tax in a more gradual way, the Record reported.

Huntington Beach. Huntington Beach (Orange County) proposed to repeal the utility user tax exemption for natural gas used in electricity generation. Only 34 percent of voters agreed. An advisory measure on the same ballot, suggesting that the UUT on electricity power plants be devoted to infrastructure, was supported by 57.5 percent of voters.

La Habra. Also in Orange County, this city was on the losing end of an appeal to the California Supreme Court last June that denied its claim that the three-year statute of limitations had expired on challenges to its UUT on grounds that it lacked voter approval, a requirement of Proposition 218 of 1996. La Habra began its UUT in 1992 without a vote of the people. The tax raises $4 million a year. The court held that an illegal tax could be challenged as long as it was still being collected.

On the March 5 ballot, La Habra sought to continue its non-voted utility user tax of 4.5 percent for electricity and 6 percent for all other utility services. The measure led by only five votes with an unknown number of absentee ballots from La Habra to be counted from among more than 35,000 left to be counted in Orange County. Merciline La Porte, a leader of the campaign against the tax, told the Orange County Register (March 7) that she might ask for a recount. A final certified result may not be known for days.

La Palma. Sixty-five percent of voters approved La Palma’s proposal to continue non-voter-approved utility user tax of 5 percent.

Cupertino. In Santa Clara County, a 15-year extension of Cupertino’s 2.4 percent utility user tax was approved by 60.1 percent.

Meanwhile, future ballots around the state will include UUT questions. These are recent developments on upcoming elections:

Sacramento County’s Board of Supervisors were asked by County Executive Terry Schutten to place the 2.5 percent utility user tax and a 2 percent portion of its 12 percent hotel occupancy tax before voters in November. The ballot measure would ask voters to ratify taxes that were imposed without voter approval.

Mr. Schutten said he will ask the board to approve a settlement of a four-year legal battle with the Howard Jarvis Taxpayers Association (HJTA) and the Sacramento County Taxpayers League, which had threatened to mount an initiative campaign against the taxes.

The settlement also is a result of a Superior Court ruling in December that the 2.5 percent UUT and the 2 percent increase in the hotel tax violated a 1986 initiative, Proposition 62, that requires for voter approval of general taxes. Proposition 218 in 1996 restated the voter-approval requirement for local taxes. Both initiatives were sponsored by the HJTA to restore elements of Proposition 13 (of 1978) that had been weakened or made questionable by court decisions.

The Sacramento Bee reported (March 12) that the settlement allows the taxes to be collected until the election, when the fates of the two taxes would be decided separately. Each would require majority-vote approval as general taxes. Rejection of both taxes would cost the county $9 million in revenues through June 2003, and $17.1 million over a full year, The Bee reported. It quoted Mr. Schutten as saying loss of the taxes would “have a devastating effect. It would significantly impact the level of services.”

Tim Bittle, HJTA legal director, told The Bee that his organization will not take a position on either ballot question. “Our fight was just for the right of voters to get to vote on it. Whether it passes or fails is not of that much importance to us.”

Meanwhile, the Sacramento County Taxpayers League has an initiative effort under way, hoping to qualify for the November ballot. It would reduce the city of Sacramento’s UUT from 7.5 percent to 2.5 percent.

In Los Angeles County, a 9 percent UUT in the city of Pomona would be phased out over five years if voters approve an initiative set for a special June ballot. The City Council on March 4 voted 6-0 to place John Mendoza’s initiative before voters about five months earlier than this November, the date the council had set in September 2000, reported the Inland Valley Daily Bulletin (March 5).

The city depends on the UUT for about $15 million in annual revenue – about 25 percent of the general fund.

The council decided to change the election date so it would have more time to adjust if the initiative succeeds, the newspaper reported. An initiative author, Milo Rodich, told the council he would be happy to educate the public on consequences of life without the UUT, as council members generally said the losing the tax would hurt the city. “Without the utility tax available, you have a chaotic situation,” said Council Member Marco Robles. “We would be severely limited.”

As for the council’s reasoning that they need more time after the election to develop a plan, Mr. Rodich said, “They’ve had 17 months to develop a plan.”

Meanwhile, in Santa Cruz, critics of the city’s 7 percent levy said they plan to push a November ballot measure to create the “Yes! Tax Me More!” Fund. Steve Hartman and Steve Heninger plan to circulate petitions that would allow Santa Cruzans to put money back in the budget if the utility tax is repealed in November, according to the Santa Cruz Sentinel (March 4).

Misters Hartman and Heninger say the city’s UUT hurts the poor and elderly, and there are those who cannot give as much as the tax is taking. Anyone who gives $500 in one-time or continuing contributions through their bi-monthly utility bills shall be recognized by the city “for their compassion and generosity,” said Mr. Hartman.