Businesses in Pomona Try to Block Payroll Tax

A lobbying campaign by the Chamber of Commerce and local businesses may have stymied a plan to shift the tax burden currently borne by utility customers to those who work in the city.

Councilman Mark A. T. Nymeyer had proposed a 1% payroll tax in September as a source of revenue that would permit the city to reduce its 11% utility tax. Councilwoman Nell Soto favored the idea, but Mayor Donna Smith and Councilman E. J. (Jay) Gaulding opposed it because the tax would discourage businesses from locating in the city.

When C. L. (Clay) Bryant, an enthusiastic proponent of the payroll tax, was elected to the council Nov. 3, it appeared the deadlock was broken. But in light of opposition to the tax from Pomona’s business community, Nymeyer now is wavering in his support for the idea.

‘Negative Input’

“I’ve gotten a large amount of negative input from the business owners,” Nymeyer said. “I’ve received in excess of 25 letters from people who seem quite concerned about it.”

Nymeyer, who stressed that he merely suggested the payroll tax as one option the city could consider, said he was not ready to join Bryant and Soto in supporting the tax.

At a recent council meeting, Soto blasted the Chamber of Commerce for backing the letter-writing campaign. Soto said the chamber was fomenting panic among the business community and attempting to usurp the council’s governing authority.

But Al Correia, the chamber’s executive vice president, said the businesses themselves initiated the lobbying effort.

“We’ve had a number of businesses call us to say their employees are very, very concerned,” Correia said.

Bryant said that on one day during his campaign for the council he received more than 200 letters asking him to oppose the tax. He said the letters, ostensibly from individual employees, were all mailed the same day and stamped with the same postal meter.

Chamber ‘Politicking’

“Without a doubt, it was part of the Chamber of Commerce’s politicking,” Bryant said. “If they spent more time doing what they’re supposed to instead of inciting scare talk, I think we’d all prosper.”

Bryant said he is not prepared to push for the payroll tax immediately. Instead, he said he would like to see the utility tax cut in half by Feb. 1. If the city can still balance its budget with that loss of revenue--which he estimated at $5 million--a payroll tax would be unnecessary.

Otherwise, Bryant said the 1% tax should be assessed on the gross pay received by everyone who works in the city. He said the workers could deduct the amount they paid in city payroll tax from their state income tax.

Most Pomona employers contacted this week said they were against the tax and had contacted council members to express their opposition. They said the tax would represent a hardship for their workers and would hamper efforts to recruit new employees.

“A city payroll tax will seriously affect our ability to attract new contracts and employees,” said Eric Solander, spokesman for General Dynamics’ Pomona division, which, with a work force of 8,700, is the city’s largest private employer. “Our (general manager) sent letters to each of the council members expressing our opposition and asking them not to propose a tax like this.”

Richard Donoghue, assistant superintendent of business services for the Pomona Unified School District, said withholding the city tax from paychecks would create a bookkeeping nightmare for the district, which employs about 2,350 teachers and staff members.

“We’re not sure our payroll system can do it,” Donoghue said. “We have our checks printed at the (Los Angeles County Department of Education) office. Their payroll system is not set up for it. If we had to do that manually, it would be an impossible situation.”

Art Vallejo, personnel manager of Pioneer Electronic Technologies Inc., which opened its plant in Pomona last year and now employs 490 workers, said the firm would have thought twice about locating in the city if a payroll tax had been in effect.

Bryant said the city staff has given him four different projections of the potential benefits of a payroll tax, which vary considerably. The most optimistic forecast, based on information from a private consultant, estimated annual revenues of $17 million, Bryant said. However, information from the Southern California Assn. of Governments indicated that the tax would bring in only about $8.5 million a year, he said.

Nymeyer said the city staff informed him that the tax would bring in no more than $10 million a year, after he had estimated revenues of up to $15 million. The utility tax currently generates $10 million a year.

Acting City Administrator Marshall Julian would not confirm any figures because the staff’s report is not complete. Julian said the information would be made public when he presents a progress report to the council Dec. 14.

The impetus behind the payroll tax proposal is the utility tax, which began in 1969 as a 3% assessment but has been increased regularly by the council to cover budget shortfalls.

Bryant said the idea of replacing the utility tax with a payroll tax enjoys strong support among residents. He said that if necessary he would propose that a referendum on the matter be placed on the June ballot.

Smith said that despite her objections to a payroll tax, she would reluctantly agree to a ballot measure.

“I feel the voters should have the ultimate say, so I guess I would support putting it on the ballot if it comes to that,” Smith said.