Long Beach Council Seeks Smaller Utility Tax Cut

Attempting to derail a popular ballot initiative that could halve utility taxes, the Long Beach City Council on Tuesday night approved a competing measure that offers the public less tax relief.

The city’s alternative measure is designed to thwart a grass-roots initiative aimed at reducing the city’s utility tax from 10% to 5% over the next five years. The tax, which is added to gas, water, electricity and phone bills, costs the average resident $200 a year.

Long Beach, the state’s fifth largest city, has one of the highest utility taxes in the county and collects about $58 million a year from the assessment--about 19% of the municipal budget.

Passage of the initiative in November could set the stage for similar challenges in other cities, including Los Angeles, which has utility taxes of 10% to 12.5%, depending on the service.

The competing council measure, which was approved 6 to 3, calls for a 25% reduction over the next five years, lower than the 30% cut initially supported by several council members. The change was the result of a last-minute compromise.

“I think they made a big mistake,” said Norm Ryan, an investment banker who pushing the initiative to cut the utility tax to 5%. “They are moving closer to us, but the city is only offering half of a good thing.”

Supporters of the residents’ initiative say the larger tax cut is necessary to improve the economic efficiency of local government and create a more business-friendly atmosphere. They estimate that the largest commercial and industrial users pay more than $1 million in utility taxes a year.

Ryan contends that the council is only trying to protect city revenue by offering a less attractive measure that could deflect votes from the larger tax cut.

Council members who supported the city proposal say their alternative is a good compromise that would cause less strain on municipal services while offering utility users some tax relief.

“I think we have a winner,” said Councilwoman Jackie Kell.

But Councilman Jerry Shultz, who voted against the city measure, noted the light attendance at Tuesday night’s council session and questioned whether there was widespread support for any reduction in the utility tax.

“Where are the average citizens who stand to benefit the most?” he asked. “It leads me to think possibly there isn’t a public outcry.”

Supporters of cutting the tax to 5% say the petition drive obtained signatures from 27,000 people, far surpassing the 17,890 registered voters necessary to qualify for the November ballot.

“What is the point Mr. Shultz is trying to make? We are already on the ballot. We don’t need anything out of the council,” Ryan said. “Let me ask Mr. Shultz this: Where were all those people who are against cutting the utility tax? I didn’t see them at the council meeting.”

If Ryan’s measure is approved in November, the city’s utility tax rate will be reduced by 1 percentage point every year for five years, returning it to the rate it was 10 years ago, before the city sought additional tax revenue because of the recession.

The city’s alternative measure would reduce the tax by half a percentage point every year for the same time period. Council members are scheduled to approve the final wording of their proposal next Tuesday. They have until Aug. 11 to officially place the issue on the ballot.

Studies show that eight other cities in Los Angeles County have utility taxes equal to or greater than that in Long Beach: Santa Monica, Inglewood, Los Angeles, Bell, Compton, Lynwood, Palos Verdes Estates and Compton, which, at 11%, has the highest overall rates for phone, water, electricity and water.

In Los Angeles, a group is mounting a challenge to the city’s utility tax, but it is too late to qualify for the November ballot. At 12.5%, Los Angeles has the highest tax rate in the county for electricity. Water is not taxed, however.

“Our effort is just in its infancy,” said Ed Cross, an organizer who lives in the Mar Vista section of the city. “I think this idea is going to spread. No matter what happens in Long Beach, it isn’t going to die.”