Utility Tax Proposed; Cost Would Average $43 a Year : Budget: The 4% levy would affect gas, electricity and telephone bills. Critics say it would discourage new businesses.

The average West Hollywood resident will pay $43 a year in new utility taxes under a proposed budget that goes before the City Council next month.

The budget calls for raising $1 million through a 4% levy on gas, electricity and telephone bills--the city’s first utility tax. The tax would close what remains of a $2-million projected shortfall in the $38.2-million budget proposal for fiscal 1994, a gap that local officials blame on an expected loss of property taxes allocated by the state.

The council received the budget without comment Monday. But the long-rumored tax proposal is certain to meet opposition from those who say such a levy would cost the city one of its best selling points in attracting new businesses. Tax opponents lined a hearing room with placards in March, just before the council sat down to make nearly $1 million in cuts.

Those reductions--plus a proposed increase in a special hotel levy--only covered about half of the anticipated shortfall.

“It’s real lean, but it doesn’t take care of the whole problem. We still have a $1-million shortfall,” said Finance Officer Paul Arevalo. “What’s left now are the policy debates.”

The proposed budget, $34.3 million in operating expenses and $3.9 million for capital projects, holds spending flat in almost every department. It even trims social services slightly, an area that has survived past budget cuts intact.

The 4% utility tax would be the lowest among Westside cities. Santa Monica’s 9.5% tax may soon be raised to 10%. Culver City charges 11%, Los Angeles 10% and Malibu 5%. Only Culver City’s tax applies to water bills, although the Santa Monica City Council is considering extending its utility tax to include water too. Beverly Hills has no utility tax.

Talk of a utility tax in West Hollywood has hovered over budget discussions for months, but it was not formally proposed before this week. Prospects for passage are good because four of the five council members have signaled grudging acceptance of a modest tax if cuts were made first. Mayor Sal Guarriello last week reaffirmed his opposition to a utility tax during a brief speech accepting the mayor’s post.

“I refuse to be a party to even one person losing their home and one business closing up shop,” he said.

Passage of the budget does not automatically create the tax. It would have to be approved separately following special hearings over the summer. The council could pass the budget, reject the tax and make up the $1 million somewhere else, although that is unlikely. The new fiscal year begins July 1.

The council is delaying the tax decision until it is known whether state lawmakers will shift money from cities to schools to help balance the state budget.

An average West Hollywood resident pays about $89 a month--or $1,068 a year--for telephone, electricity and gas, according to a city staff report on utility taxes. A 4% levy would cost that person about $43 a year. A 2,500-square-foot business would pay between $180 and $300 a year, the report said.

Overall, the tax would generate about $1.4 million a year. The $1 million estimate assumes that, if approved, the tax would not take effect until several months into the new fiscal year.

City Manager Paul Brotzman urged residents to submit written comments by May 21 to give finance officials time to answer questions at a scheduled City Council budget session June 7.