FULLERTON : City Admits Error on New Utility Tax

Thousands of residents were wrongly taxed when some utility companies began to collect the new 2% utility user’s tax too early, City Manager James L. Armstrong has acknowledged, adding that affected residents will get their money back.

“The language is ambiguous,” Armstrong said last Friday. “Some utility companies interpreted it one way and others interpreted it another. In the interest of being fair, we’re going to have to figure out a way to refund the money.”

The tax took effect Oct. 1 and was supposed to apply to billing periods that began after the first day of October. Some service during October would legally have to go untaxed, according to the ordinance.

But Pacific Bell and the city water service pro-rated the tax on days in October, even though the first day of many customers’ billing period was in September, Armstrong said.

Armstrong said Comcast Cablevision also may have applied the tax incorrectly.

Resident Tom O’Neill, who is suing the city over the City Council vote for the tax, demanded last month that the city refund the money.

O’Neill said he has considered filing a class-action suit.

“Ninety cents is no big deal to me,” said O’Neil, referring to the tax on his phone bill. “But this is happening all over the city, and to much bigger bills than mine.”

Southern California Edison Co. and Southern California Gas Co. bills did not apply the tax to any bills that included service days in September, Armstrong said.

The tax was passed in July by a 3-2 council vote. Hundreds of people spoke against the tax, which the council majority said was necessary to maintain police, fire and other city services.

Council members Don Bankhead, A.B. (Buck) Catlin and Molly McClanahan were targeted for recall for supporting the utility tax.

Thomas S. Babcock, chairman of the Fullerton Recalls Committee, said he was dismayed by the tax error.

He said he could understand how the private utility companies could misinterpret the new ordinance, but he bridled at the inaccurate city water bills.

“When the city makes the error themselves, who’s in control here?” Babcock asked. “I’ve had a ton of calls from people that have been concerned about it.”

Armstrong said the city will forfeit tens of thousands of dollars because of the correction but said there would be no significant impact on the city’s financial health. The tax is expected to raise $1.6 million during the 1993-94 fiscal year.

Armstrong said the city is talking to computer programmers at the utility companies to resolve the problem. The utility companies collect the tax for the city. Armstrong said that only the city water tax had actually been deposited in a city account.

O’Neill has already filed a lawsuit arguing that the city needed four council members to vote for the utility tax, not three.

Steven E. Lewis, the county auditor-controller, has asked for a judge’s opinion on whether the city’s new tax was passed by a proper majority vote. Lewis has said the county will have to withhold property taxes from the city if the tax is illegal.