Two ballot measures aimed at bailing El Segundo out of its fiscal crisis by increasing taxes for all property and business owners will go before the city’s voters Tuesday.
“The city is broke, basically,” Mayor Carl Jacobson said in an interview this week. “It’s either we get new tax revenues or we cut services drastically.”
The first, Measure E, would affect only business owners. It would double the utility-user tax to 4% and raise an estimated $3.5 million a year in new revenues, city officials say.
The other, Measure F, would impose an excise tax on property and cost each homeowner about $60 a year. Businesses would also pay the tax under a formula based on the size of the buildings they occupy. The measure would bring in more than $2.5 million a year, according to city officials.
Both measures require a simple majority to pass.
Council members voted last November to hold a spring election specifically to deal with the city’s financial troubles. For the past six years, the city has been forced to draw from a dwindling reserve fund to balance its budget, which this year is about $20 million.
Much of the controversy over the election has centered on Southern California Edison Co.'s efforts to pass on the cost of the tax it would pay under Measure E to El Segundo residents by adding a surcharge to their electric bills.
The El Segundo Chamber of Commerce, which has a political action committee and has taken stands in previous city elections, has not taken a public position on either measure, a chamber official said. Nevertheless, some if its members would see their tax bills increase significantly if both measures pass.
For instance, under Measure F, Rockwell International would be taxed $45,672 a year on its 346,000-square-foot building on Douglas Street. Hughes Aircraft would pay $131,769 a year on its 2-million-square-foot building on El Segundo Boulevard. No figures were available for the impact of Measure E on these two firms.
Would Lose Exemption
Edison has campaigned against Measure E because it would lose its longtime exemption from the local utility-user tax. Darcy Skaggs, Edison’s area manager, said municipalities usually grant such an exemption to utility companies.
“If this measure passes, this will be the first time in the state that a utility company would not be exempt from a user’s tax,” Skaggs said.
However, Kenneth Chew, a financial analyst with the state Public Utilities Commission in San Francisco, said it is “very common” for companies such as Edison to be subjected to utility-user taxes. Usually, the PUC grants the utility permission to raise rates to recover the cost of the tax, he said.
“It’s all part of the operating costs,” Chew said.
Skaggs said Edison has already applied to the PUC for permission to levy the surcharge, which would cost the average El Segundo homeowner $10 to $15 a year.
If Measure E passes and Edison fails in its bid before the PUC, the utility will try to pass the added cost on to all its customers, Skaggs said.
May Be Restored
Edison’s action has prompted Mayor Jacobson and Councilman Jim Clutter to say they will make sure that residents are not stuck with higher electric bills. If the utility prevails before the commission, they said, they will restore Edison’s exemption.
Because Measure E’s intent is not to impose an extra fee or tax on residents, the council is within its legal right to take such corrective action, Jacobson said.
El Segundo officials trace the city’s money problems back to 1982, when the local Chevron refinery lost a major fuel oil contract as Edison switched to natural gas, and millions of dollars in sales tax revenues stopped flowing to the city. For example, El Segundo earned nearly $13 million in sales taxes in 1980, at least $10 million of which came from Chevron, city figures show.
Sales tax revenues plummeted to about $2.3 million in 1982 after Chevron lost the contract and are expected to total about $3.5 million for the 1988-89 fiscal year.
The city has about $3 million in reserves, enough to cover an expected general operating budget deficit of $1.6 million in fiscal 1989-90, officials said. But if capital improvement projects planned for the same year are included, they said, the deficit jumps to $8.2 million.
Council members have conceded that efforts to solve the city’s financial troubles have been stymied by their own philosophical differences.
Councilmen Alan West and Bob Anderson have generally taken the unpopular stance that residents should be asked to pay higher fees or taxes, while Jacobson, Clutter and Councilman Scot Dannen have insisted that businesses should be required to contribute more to the city’s treasury.
Indeed, the decision to put two measures on the ballot was reached only after weeks of haggling among council members. In the end, the council decided to compromise and put measures on the ballot that affect the pocketbooks of both residents and businesses.
Of the five council members, only Anderson supports both measures. West, who also favored both at first, now opposes them. Jacobson and Clutter support Measure E, the utility-user tax measure, but refuse to take a stand on Measure F, the excise tax on property. Dannen supports Measure E but opposes Measure F.
West, in an interview, said he flip-flopped and finally chose to oppose the measures because the council has not determined exactly how much new revenue is needed and for what purposes. Asking voters to approve either measure is like asking them to sign a blank check, he said.
“My sincere hope,” West said, “is that this council will stop the personal bickering and hatchet jobs towards each other and realistically look at our needs.”