Mayor seeks to put phone tax on ballot

Times Staff Writer

Worried that an upcoming court ruling could wreak havoc on the city budget, Los Angeles Mayor Antonio Villaraigosa recommended Monday that the City Council declare the city will face an “emergency” if a court rules against the city and invalidates a $270-million telephone users utility tax.

The declaration would pave the way for the mayor and the council to put a replacement tax on the ballot as soon as Feb. 5 and -- perhaps more significantly -- lower the threshold needed to win passage of such a measure from two-thirds to a simple majority, lawyers for the city said.

Villaraigosa met Monday with Councilman Bernard C. Parks, the head of the council’s budget committee, to discuss the ballot proposal, which would not generate new revenue but instead preserve existing funds that are being targeted in three separate lawsuits.

“Without question, the potential loss of $270 million to the city’s general fund would present a significant damage to the health and safety of the city,” said Villaraigosa spokesman Matt Szabo.


Proposition 218, a 1996 statewide initiative that governs municipal tax hikes, stipulates that cities can put general tax measures on the ballot only during regular municipal elections, when such measures need only a simple majority to pass.

But in an eight-page report issued Monday, the city’s top financial analyst warned that the city could lose the lawsuits -- and the $270 million -- if it waits until the next such election, in 2009, to send the measure to voters.

Villaraigosa and the City Council have been discussing whether to put the tax on the ballot during the presidential primary election, when turnout is expected to be particularly high.

Last week, Villaraigosa’s pollster, Washington, D.C.-based Feldman Group, concluded that the tax would perform slightly better in the presidential primary than in the June election.

City Atty. Rocky Delgadillo’s office said a declaration of an emergency would provide another benefit: lowering the threshold needed for the measure to pass. Any telephone tax measure sent to the voters before 2009 would normally be considered a “special tax” and therefore need two-thirds approval, said Delgadillo spokesman Nick Velasquez.

The telephone users tax can go on the ballot right away and pass with only majority approval, however, as long as the council states unanimously that there is an emergency.

One taxpayer watchdog group voiced dismay at machinations behind the tax measure, saying the financial report is being driven by political considerations.

“As usual, they’re not so much looking at doing what’s right, but doing what they can get away with,” said Kris Vosburgh, executive director of the Howard Jarvis Taxpayer Assn.


Villaraigosa aides disagreed, saying an adverse court ruling could wipe out the telephone utility users tax, taking with it 6% of the revenue that funds city programs.

The loss, which translates to $270 million, would greatly complicate Villaraigosa’s effort to expand the LAPD by 1,000 officers and would carve into other programs.

“It’s a Prop. 218 emergency,” said City Administrative Officer Karen Sisson. “I also think it will be a city services emergency.”

Parks said the council will discuss the ballot measure Wednesday, the deadline for the council to request ballot language for the Feb. 5 election. The council must vote by Oct. 17 to put a measure on the ballot.


The behind-the-scenes tax discussions come less than two weeks after the council asked Delgadillo to draft language for a February ballot measure hiking property taxes by $30 million to fund anti-gang programs

Meanwhile, Villaraigosa’s appointees at the Department of Water and Power are scheduled to meet today to discuss a trio of electrical rate hikes -- 2.9% on Jan. 1, another 2.9% on July 1 and 2.7% on July 1, 2009. The Board of Water and Power is also reviewing two proposed water rate hikes -- 3.1% on July 1 and another 3.1% on July 1, 2009.

Villaraigosa met privately with council members Wendy Greuel and Eric Garcetti last week to discuss the telephone tax measure. His pollster asked 750 residents to weigh in on the tax concept during a survey conducted Sept. 17-20.

Feldman Group also tried to determine whether voters would be more likely to support the telephone tax if it were lowered from 10% to 9%. That concept, pitched as a reduction in taxes, won support from 60% of respondents.


The mayor’s pollsters also concluded that voters want a greater return on their tax money.

“Opponents of the [tax] have a strong case to make -- particularly that the city has little to show for its current budget,” the poll results state.

The city’s 10% tax on cellular and land line calls is currently the subject of three lawsuits -- one by AT&T; Wireless, a second by a Florida company that issues telephone calling cards and a third by an individual taxpayer, Estuarado Ardon.

Ardon’s lawsuit contends that the city can no longer levy its phone tax because the law it was based on was phased out by the IRS last year.


The council re-approved the telephone tax in January, reworking it to account for the change at the federal level. Foes of the tax say that under Proposition 218, such a reworking should have gone before voters.

Jon Tostrud, a lawyer for Ardon, said the recent effort to come up with a ballot measure only vindicates his client’s case. “This should have happened in the first place,” he said.

Meanwhile, taxpayer watchdogs say they may recommend that voters oppose the proposed tax. “We are just perpetuating this incompetent management of the city if we give them more money,” Vosburgh said.