Firms Ask for Tax Hike in Place of Levy on Payrolls

El Segundo business leaders have appealed to City Council members to raise two existing taxes now levied on them rather than create a new payroll tax.

Representatives from local companies and the city’s 500-member Chamber of Commerce testified at a public hearing Wednesday night that they favor boosting the square footage and employee taxes to solve the city’s financial problems.

Several companies, including Hughes Aircraft Co., the city’s largest employer with about 27,000 workers, urged that the consumer price index be used to determine future increases or decreases in the two taxes.

No Decision Yet

The hearing was called by the council to allow local businesses to respond to the city’s proposal to adopt a payroll tax. The tax, which would be levied as a percentage of the money a company spends on wages and salaries, would generate the revenue the city needs to avoid a $1.6-million deficit this year and provide future financial stability, city officials say.

Council members did not comment at the hearing. Instead, they extended the hearing to next Tuesday, when they will debate and possibly vote on the matter.

However, Councilman Scot Dannen said in an interview Thursday that he is still leaning toward supporting a payroll tax. The councilman contended that the square footage tax already discourages retail development in the city, thereby depriving the city of sales tax revenues. Raising the tax would make the problem worse, he said.

“Our current tax structure is providing a disincentive for retail (businesses),” Dannen said.

If a payroll tax is adopted, city officials say the $60-per-employee tax now imposed on business would probably be abolished. The city presently collects about $3.9 million annually from the employee tax, and another $960,000 from the square footage tax.

$14 Million Possible

If El Segundo were to charge the same payroll tax as the city of Los Angeles--0.75%--it could raise more than $14 million annually, according to city estimates.

Hughes asserts that a payroll tax would unfairly penalize companies like it that employ large numbers of well-paid professionals. The company and others said a payroll tax would give them additional administrative chores.

Before the hearing, George Wiley, director of human resources for Rockwell International, asserted that the payroll tax would not be a stable source of revenue because the number of workers employed by local aerospace companies can fluctuate greatly.

Rockwell’s local work force has dwindled to about 4,200 employees from 8,400 in 1985 at the peak of the company’s B-1 bomber program, while Hughes’ work force has dropped by about 3,000 workers during the past several years.

“The council is looking for stability, and I don’t believe the payroll tax offers that because of the ups and downs in our business,” Wiley said.

Councilman Alan West has countered that a payroll tax is a logical solution because as the work forces at companies such as Rockwell and Hughes decrease, so does the cost of providing city services for them.