City Prepares Utility Tax to Make Up $1-Million Shortfall

Bracing for more hits on the local cash box, the West Hollywood City Council this week prepared to pass a municipal budget that includes a new utility tax--the city’s first. The 4% tax on gas, electricity and telephone bills will garner $1 million next year.

Officials said they will seek the utility tax only if state lawmakers follow through with a plan to reallocate up to $1.2 million in West Hollywood property taxes to help balance the state budget. State legislators may decide that issue before the council votes June 21 on the $38.3-million budget proposal for fiscal 1994.

The city will not need a utility tax if the state does not redirect the local allotment, said city Finance Director Paul Arevalo. “It’s hard to tell what the state’s going to do, so we have to prepare for the worst,” he said.

The utility tax, which would cost residents an average of $43 a year, would require public hearings and a separate vote this summer.

“I think that’s what we’re going to have to do,” Councilman John Heilman said of the levy. “It’s not politically fun to do.”

The council already plans to raise the city’s hotel bed tax by 0.5% to generate $200,000 more for the city’s general fund. One percent of the current 12% hotel levy, or $400,000 a year, is earmarked for city marketing efforts.

Even with the utility tax, the proposed budget--nudged up to $34.4 million in operating expenses, plus $3.9 million for capital projects--received little resident comment as the council mulled it for the first time on Monday.

A handful of persistent critics charged that city officials have not tried hard enough to trim spending.

“West Hollywood believes in taxation without hesitation,” said Bruce Traub. “You’re not willing to cut back at City Hall.”

Council members steered blame to the state capital, saying they had balanced the budget, except for the feared state take-aways. Earlier spending cuts erased about half of a projected $2-million deficit. The remaining $1-million gap is based on Gov. Pete Wilson’s proposed state budget, which would redirect some property taxes away from municipalities.

The 4% utility levy would generate about $1.4 million a year. The $1-million figure assumes that if the tax is approved, it would not take effect until months into the new fiscal year.