West Covina Utility Tax Urged to Fund $34 Million in Repairs
Faced with $34 million worth of critical capital repairs and no way to pay for them, this city is considering a utility tax as one means of footing the bill.
At a special meeting Tuesday, the City Council received a report from a blue-ribbon citizens committee concluding that the tax would be the most feasible way of paying for the backlog in public improvements.
The 25-member committee recommended levying a 3.25% utility tax on the $97 million in sales of electricity, natural gas, telephone service and cable TV subscriptions generated each year in the city.
At that rate, the tax would raise $3.17 million a year from businesses and residents over its proposed 15-year life. Thereafter, the tax would be reduced to less than 1% if other funds could not be found to cover $650,000 a year in preventive maintenance and other needs.
Kind of Property Tax
As an alternative, the committee recommended an assessment district, which would levy a type of property tax that would cover most of the needs identified by the Citizens’ Committee on Public Services and Facilities.
In both instances, the committee recommended that the council put any funding option before the voters in a special election. Mayor Nancy Manners promised a quick response to the report but said the council may not be able to study it until November.
Committee Chairman Stuart York, who presented the group’s findings, said the committee realized that neither of the recommendations would be popular in the community but urged the council to move quickly.
“We can spend all this time bringing it to (the council) but the ultimate decision is theirs,” he said in an interview. “To do nothing would be destructive.”
But committee member Pete Kochis, although a supporter of the utility tax recommendation, said the council should be leery of passing something that would become permanent.
“A utility tax is like trying to sell a condo or getting rid of your mother-in-law,” he said. “Once there, you’re going to have it for a long time.”
The committee, a cross-section of the community, was picked by the City Council and asked to assess the city’s more urgent needs and suggest ways to pay for improvements after the city staff reported in June, 1986, that West Covina needed more than $50 million in repairs to public facilities and roads that could not be met within the budget.
The committee cited three reasons for the city’s lack of capital repair funds. Because West Covina is a Baby Boom-era city, with most of its development occurring in the 1950s, much of the infrastructure built 30 years ago is wearing out at the same time.
Moreover, the committee reported, many of the city’s streets and buildings were constructed below standards or according to specifications that are no longer acceptable.
Finally, the decline in state and federal revenues and the effects of tax-cutting propositions have depleted the city’s normal funding sources for improvements, the committee said. In 1978, Proposition 13 cut $2.1 million in annual property tax revenue from the city budget. Federal revenue sharing, which was phased out by the Reagan Administration, has gone from a high of $1.2 million a year to nothing.
York said committee members believed that it was important for voters to know that any tax would not necessarily be permanent and that only the most critical needs would be addressed first.
“We would like to limit the time the people would have to pay an additional tax,” he said.
The most critical needs, according to the committee, are $14.2 million for street repairs, $2.6 million for traffic signals and $17.6 million for storm drains. Another $650,000 is needed for preventive street maintenance, a proposed hazardous-waste disposal program and park improvements.
In making its recommendations, the committee rejected raising local taxes, expanding the city’s redevelopment areas or issuing bonds. Those proposals were considered inadequate because of limits on the amount of revenue that could be raised or legal restrictions on use of the funds.
The committee narrowly concluded that the utility tax was the easiest and most flexible alternative. Such a tax, which has no limitations on its use, has been levied by other San Gabriel Valley cities, including Arcadia, Baldwin Park, Pomona, Irwindale and Pasadena, according to the committee.
The statewide average utility tax rate is 5%, but Pomona charges 11%, according to the report.
Under 1986’s Proposition 64, a general-purpose tax such as a utility tax must be approved by a simple majority. That is a distinct advantage over a special district, which would fall under a requirement of Proposition 13 calling for two-thirds approval from voters. More than 90 cities in California have utility taxes, York said.
Committee members omitted taxing water service in their proposal because eight water companies serve the city and it would be too complicated, York said.
The group’s second recommendation is a community facilities district, a funding mechanism enacted by the Legislature in 1982. Such a district--basically a property tax levied on each parcel--is similar to a normal assessment district. The assessment, which has not been determined, would raise about the same amount of money as a utility tax.
Such a district could not fund the preventive maintenance and other continuing needs noted by the committee, but it could be used for the backlog in capital repairs. There are 35 such districts statewide, according to the League of California Cities.
York said the utility tax was favored because of its greater flexibility in paying for various needs and its less burdensome vote requirement.
Councilman William Tarozzi asked York whether the committee had looked at the city budget to see if any fat could be cut to fund the improvements.
York and member Oliver Riggins said the committee had worked under the assumption that the budget was properly administered and that city staff was correct in saying that the $3 million needed annually for repairs could not be funded.
“We didn’t want to second-guess other city councils over the years,” Riggins said.
Katherine Castucci, a committee member who resigned in protest six months ago, said the city and its employees should shoulder more of the burden of paying for capital repairs. Her suggestions included a hiring freeze, a wage freeze and elimination of bonuses.
“I don’t feel the burden should be solely on the residents,” she said. “Can you justifiably ask the (citizens) to bite the bullet?”
Mayor Manners, while not committing herself to any proposal, said the committee’s suggestions, while unpalatable, appear to be the only options available.
“I think we have two alternatives, period,” she said. “If we could do it any way else, it would be eminently desirable.
“But they’ve looked at everything . . . and I don’t think we’ll come up with anything new.”