PLACENTIA : Utility Tax Hike Request Reduced

City Administrator Robert D’Amato has reduced the amount of a controversial utility tax hike he is asking the City Council to approve Tuesday in response to the city’s better-than-expected financial situation.

D’Amato had asked the council to increase the utility tax levied on gas, electric, telephone and cable use, from 3% to 5% to help pay for an estimated $1.3-million deficit. The increase was expected to raise about $866,000 additional revenue, without which D’Amato warned the city would have to lay off 15 to 25 full-time employees.

But on Friday, D’Amato and city financial director Howard Longballa drafted a new report requesting a hike to 4%, reflecting a deficit of $766,000.

Longballa attributed the reduced deficit to several factors, which included that the city had expected the state would withhold $715,000 in property tax revenue, but the actual amount was $138,000. Also, the deficit reflected a scheduled police pay increase of $56,000, which the officers voted to forgo.

If voters approve an extension of the half-cent sales tax increase, the deficit would be reduced even further.

The proposed increase received grudging support among residents and council members when the preliminary estimate of the state withholding was announced. But that support seemed to disintegrate when the final figures were released.

“Your budget was based on preliminary estimate of state siphoning $700,000” from the city, one resident angrily told the council at a recent public hearing. “That has been reduced, but you’re still moving forward with the tax increase.”

Mayor Maria Moreno and Councilman John O. Tynes have said they would reserve judgment on the tax until they saw the full extent of the state’s action. Moreno said she approved the budget, which reflected the 2% increase and higher state cut, with the hopes that the state would take less money than expected.

“I knew that we were not locked into this budget,” Moreno said.

Ironically, if not for a procedural error on D’Amato’s part, the council would have voted for the original tax hike in June when it passed the 1993-94 budget. Legislation passed earlier this year requires cities to give 45 days notice of at least two public hearings before voting on a tax increase.

D’Amato said he was not aware of the law when he proposed the hike to the city in May and did not leave enough time to properly notice property owners. Because the city charter requires a balanced budget be adopted by June 30, the city was forced to break up the process and vote for the budget without first approving the tax increase it contained.

According to Longballa, if approved, the new tax hike will raise about $433,000 annually.

The final public hearing and council vote will take place during Tuesday’s council meeting, which begins at 7:30 p.m.