SEAL BEACH : City Utility Tax Could Be Doubled

Officials could be forced to double the city’s utility-users tax as they struggle to close what is shaping up to be a more than $1-million budget shortfall.

Though no formal tax hike is yet proposed, some officials see the increase as one way of making up for expected losses in state funding.

Right now, the city charges a 5% tax on all telephone, gas and electric bills. That tax rate might rise as high as 9% or 10% if the City Council can’t find a better way to balance the fiscal 1993-94 budget.

City spending has declined in recent years, as have revenues. In the 1990-91 fiscal year, the city spent $13 million. This year, it was expected to spend about $10.6 million.

City Manager Jerry L. Bankston said the city has already absorbed previous budget shortfalls by reducing costs and personnel. Making more cuts would be difficult, he said. Over the last two years, the city staff has been reduced by 22% and operating expenses have seen similar cuts.

Council members admitted Monday that a utility tax hike is an extreme measure but said it might well be the only way for the city to stay afloat.

“I’d hate to see it increased that much. But at this point, we have to do what we have to do,” said Councilman William J. Doane.

Talk of Seal Beach’s first across-the-board tax hike in more than two years comes as state officials debate whether to reduce the portion of property tax revenues that cities receive. If the changes are approved, cities will be forced to share the tax revenues with local school districts, cutting the sum each municipality receives.

Seal Beach stands to lose between $700,000 and $1.1 million under such a modification, Bankston said.

The city might also be forced to pay as much as $380,000 in back sales tax revenues to local aerospace companies under a recently issued state court ruling.

The court held that cities cannot collect sales taxes on items that aerospace firms use in work the companies do for the federal government.

Together, the expected state cuts and possible sales tax refunds could leave the city with as much as a $1.5-million shortfall.