Prop. 136 Fear Ignites Flurry of Tax Activity : Finances: Local governments scramble to pass new levies in case ‘poison pill’ chokes off revenue sources.

Like shoppers rushing to a going-out-of-business sale, local officials in several Southland communities are scrambling to levy new taxes in anticipation that a proposed constitutional amendment will pass in Tuesday’s election and wipe out their power to raise revenues without first getting voter approval.

Lynwood acted so quickly last week to adopt an emergency 10% utility tax that officials there said they did not have time to figure out the cost to the average consumer.

Downey adopted a 3% utility tax at a special council meeting Tuesday and the San Diego County Board of Supervisors last week voted to enact a first-ever license tax for businesses in unincorporated areas.

Other communities, including San Fernando, Compton and West Hollywood, have scheduled meetings for Monday to vote on tax levies before the controversial initiative, Proposition 136, takes the matter out of their hands.

The reason for the rush is that Proposition 136 will take effect at midnight Tuesday if it is approved by voters.

The measure is the brainchild of those allied with the Jarvis-Gann anti-tax crusaders. It would prohibit a city or county from enacting a new general-purpose tax or increasing an existing one unless a majority of voters approved. A new or increased special-purpose tax, such as a levy to pay for increased police protection, could not be enacted unless two-thirds of the voters approved.

The measure, bankrolled largely by the liquor industry, contains some exemptions for tax hikes needed in emergencies.

It is known as the “poison pill” initiative because it could also wipe out key funding elements of at least three other propositions on Tuesday’s ballot. In one instance, it would block a new tax on alcohol unless two-thirds of the voters approve.

“This is far more reaching than most people realize,” said Iola Williams, former president of the League of California Cities, which strongly opposes 136.

Said Compton Councilman Maxcy D. Filer: “Any time you cannot tax or raise funds, I don’t know how you can run a government, because you’re at the mercy of someone else.”

Williams said that without direct taxing power, city and county governments run the risk of becoming even more dependent on the state for financial support.

There appears to be no likelihood of a last-minute tax push by the Los Angeles City Council, and the Los Angeles County Board of Supervisors has already signaled its lack of interest. In some other cities, tax increases were considered but not enacted.

In San Jose, where Williams is a councilwoman, officials worked for weeks to come up with a list of possible new revenues sources. But on Tuesday, they abandoned the effort, fearing voter resentment. .

San Bernardino Mayor Bob Holcomb has been trying for a month to persuade his City Council to raise the utility tax from 8% to 9%. But even with a promise not to implement the tax if Proposition 136 fails, Holcomb has been unable to get enough votes for it.

“I think it’s doing what logic dictates,” the mayor said of the attempted tax hike. He said he plans to make one last try at the City Council meeting on Monday.

Backers of Proposition 136 are chortling over the beat-the-clock tax measures, saying they will boost voter support for the initiative.

“It absolutely helps us enormously,” said Ray McNally, a Sacramento public relations strategist helping to orchestrate the 136 campaign. “These guys slink around and underscore the voters’ suspicions that they can’t trust politicians and that’s a big selling point on Proposition 136.”

Meanwhile, opponents of 136 winced at news of the election eve tax push.

“If cities all rush to do this, it makes it bad for us,” said Lenny Goldberg, director of the “No on 136” campaign.

But for some city officials concerned over shrinking revenue to pay for municipal services, the political pitfalls were worth risking.

West Hollywood Councilwoman Babette Lang was loudly booed by the audience when she left her sickbed this week--where she is recuperating from a broken hip--to break a monthlong deadlock over a proposed business license tax. She cast the third and deciding vote for the tax, which comes back for final approval on Monday.

The measure, designed to raise $1 million a year, would impose a $270 annual tax on a business with annual sales of $565,000.

“This is something that is really needed and we have to do it now,” Lang said. “Besides, the tax is minimal. I don’t believe it will really hurt the business community.”

San Fernando Mayor James B. Hansen proposed an ordinance empowering the city to levy taxes on basic utilities and cable television service. The measure, he said, would give the city a quick method of raising revenue “if financial disaster hits.” .

The City Council will meet Monday to consider the tax.

“I think it’s a good business decision to do it,” Hansen said. However, he said he would withdraw his support if residents voice overwhelming opposition to the proposal. .

In Compton, where more than 100 city employees have been laid off over the past two years because of budget problems, the City Council will vote Monday on raising its utility tax from 5% to 7%.

“Nobody likes to impose fees but we had no choice,” said Lynwood City Councilman Paul H. Richards, referring to Proposition 136.

Times staff writers Stephanie Chavez, John L. Mitchell, Douglas Shuit, Jane Fritsch, Richard Simon, Lee Harris, Franki Ransom, Mike Ward, Jenifer Warren and Berkley Hudson contributed to this story.