Committee Recommends Utility Tax Increase

The Utility Users Tax (UUT) Oversight Committee presented their final report for the fiscal year before the City Council Tuesday night offering their recommendation that the council increase the rate from 10 percent to 12 percent.

Considering the city staff conclusion that the UUT revenue will be greater than base year revenue by $1,332,939 and public safety expenses are estimated to be greater than base year expenses by $2,192,299, the Committee voted 3-2 to recommend the rate be raised to 12 percent to cover rising expenses.

"The committee recommends that the city council take immediate action to determine how the city would manage its financial obligations if the increase in the UUT is allowed to sunset as currently prescribed in Measure U," UUT Oversight Committee Chair Kevin Brennan said.

Nevertheless, the rate presently sits at 10 percent, with the council having recently opted not to increase the tax for the coming fiscal year, something Mayor John Buchanan credited to a surplus in UUT revenue and cuts to the police department as part of the recently passed biennial budget.

“The 10 percent number reflects the fact that, even though costs will continue to rise over time, at least for the next two-year budget cycle, … [there is] not only a balanced budget but an increase again to general fund reserves,” Buchanan said.

According to the report, there were savings in the Police and Fire departments due to unfilled staffing positions as well as money that was budgeted for certain projects, but never spent. Thus, the UUT revenue for fiscal year 2010 exceeded the increase in expenditures for public safety by $400,000. This money was carried over to 2011 as part of the two-year budget.

But Buchanan did say that he predicted the tax would have to be increased at some point, even though such an increase may have to be put back before Sierra Madre voters for approval.

“I think it is, in my judgment anyway, the reality that we will have to--we do have to--go back to the voters here, perhaps at the next general municipal election,” Buchanan said.

Currently, the council's ability to raise the tax to as high as 12 percent expires on June 30, 2014, as prescribed in the measure's "Sunset Clause." At that point, and without action by the Council, the maximum allowed tax rate would be 10 percent, adjusting downward by 2 percent each year thereafter before settling at 6 percent in 2016.

The tax increase, which was approved by voters with the passage of Measure U in 2008, applies to all utilities used by residents within the city, including water and sewer, electric, communications, cable and trash collection.

According to Measure U, all revenues generated by this tax increase must be used for public safety services such as police salaries and paramedic programs.

"Seemingly there are only two solutions: Cut city services or find a new source of revenue," Brennan told the Council. "One of those could certainly include placing the UUT back before the voters for a rate increase extension."