2% Utility Tax Is Passed in Anaheim After Heated Debate : Shortfall: City Council action cuts the budget deficit by $5 million. Opponents say the levy may break the backs of some already-burdened businesses.

The City Council voted Tuesday to impose a temporary 2% utility tax, reducing the city’s budget deficit by $5 million and bringing an end to a monthlong dispute over the issue.

But the council’s 3-2 vote left no one satisfied, with city officials upset that more revenue is still needed to balance the budget and residents complaining that their taxes are already too high.

“This is not over,” warned Curtis Stricker, a leader of Anaheim Homeowners for Maintaining a Better Environment, which opposed the tax. “We are going to be pounding on them every council meeting.”

The council last month approved a 4% utility tax but then rescinded it when Councilman William D. Ehrle switched his vote against the tax. Without the revenue from a new tax, city officials warned that they would have to close some senior citizen centers and even ground the city’s police helicopters.

Despite Tuesday’s action, the city still faces a $1-million shortfall in its $544-million budget, and the head of the city employees union said she fears that 150 of the city’s 2,200 employees will lose their jobs.

City officials have not yet decided where the other $1 million in cuts will be made.

Last week, the council voted to cut $8 million from what was then a $14-million deficit by laying off 51 full-time employees and eliminating programs such as the Pearson Park summer plays and the Corporate Challenge, an Olympics-style competition for employees of city businesses. Those cuts were not rescinded Tuesday, and the city will begin the process of laying off the employees next week.

The utility tax will be added to gas, water, electric and telephone bills starting Oct. 1. According to the ordinance, the tax will be eliminated in two years, and it caps the amount businesses pay at $50,000 per year per utility meter. Households earning less than $20,000 a year will be exempt from the new tax.

City officials say the tax will cost the average resident about $3 a month.

Mayor Fred Hunter and Councilmen Bob D. Simpson and Irv Pickler voted in favor of the 2% tax, while Ehrle and Councilman Tom Daly opposed the measure. About 300 people packed the council chambers Tuesday, and another 100 sat in folding chairs outside the meeting room.

Before adopting the tax, Pickler, Ehrle and Daly rejected a 2.75% levy.

“(The 2% tax) will give us time to look at programs and not eliminate some of these programs that I think the city needs,” Pickler said. “If we are going to cut out the fat, and I think we need to cut out the fat, I think we need to make wise decisions and not just chop-chop everything.”

Hunter said he was disappointed that the tax was only 2%, saying he still favors a 4% tax. He said the 2% tax will not allow the city to expand its police force and will likely lead to cuts in senior and recreation programs.

Ehrle refused to vote for a tax of 2% or more, while Daly opposed any levy, saying the city should cut costs by privatizing some services and eliminating others.

Most of the people who spoke at a public hearing on the tax opposed it, saying the charge would unfairly burden the city’s businesses and residents.

Dennis Hardin, president of the Anaheim Chamber of Commerce and the owner of an automobile dealership, said the tax would hit business owners hard.

“The auto industry is going through tough economic times,” he said. “We’ve already had a couple of auto dealerships go out of business in the city in the last six months, which is a loss of tax revenue to the city. The 2% tax will cost me $5,000 a year, and with many of us already operating close to the edge, it could cause some of us to go under.”

Although the Anaheim Municipal Employees Assn. had pushed the council to adopt the levy to save the jobs of city workers, union president Sharon Ericson, said she was very disappointed by the council’s compromise.

“It’s a sad day in Anaheim for the employees,” Ericson said. “The council changes its mind day-to-day. They just make me sick.”

Michael Valenti, a spokesman for Anaheim Citizens Against Taxation, was also dismayed by the decision. Valenti said Pickler was apparently swayed by “emotional pleas” from the audience to vote for the 2% tax.

“Irv’s a nice guy. He’s got a lot of compassion, but I think that kind of stuff throws a smoke screen over what this discussion is all about,” Valenti said.