Phone tax plan moves forward
Hoping to avoid huge budget cuts and the slashing of city services, the Los Angeles City Council on Wednesday took the first step toward asking voters to continue paying a telephone utility users tax that might be struck down by the courts.
On an 11-2 vote, the council authorized ballot language to be drawn up for a measure that would be placed before voters Feb. 5, the same day as the California presidential primary.
The council set Oct. 17 as a deadline to declare an “emergency,” enabling the tax to go on the ballot.
The council is considering a plan to cut the tax from 10% to 9% on cellular and land-line calls -- a savings officials hope will make preserving the tax more palatable to voters.
Lowering the tax rate probably would cost the city $27 million in annual revenue. But proponents of the ballot gambit say that would be a lot better than the $270 million a year the city would lose if the courts strike down the tax altogether. There are three pending lawsuits seeking to overturn it.
The city’s top bureaucrats warned the council that losing the money would trigger across-the-board cuts to streets, parks and libraries.
“It would be something our residents would definitely feel,” said Chief Administrative Officer Karen Sisson.
Sisson also said it would be difficult to continue the police-hiring plan that has become a major initiative of Mayor Antonio Villaraigosa’s administration. The mayor, who has been pushing for the ballot measure, quickly left an unrelated morning news conference on skid row to rush back to City Hall to round up council support for the tax measure.
Councilmen Greig Smith and Dennis Zine, both of whom represent the west San Fernando Valley, voted against drafting the ballot language. That could put the tax plan in jeopardy later this month, when the council must declare -- unanimously -- that an emergency exists to get the measure on the Feb. 5 ballot.
Smith said the mayor committed a “tragic mistake” by trying to rush the tax measure onto the ballot and called for neighborhood councils to review the proposal during their annual budget briefing Oct. 13.
The councilmen indicated they may yet vote to declare an emergency, which would put the tax on the ballot while complying with Proposition 218, a 1996 state initiative that governs municipal tax increases. That measure prohibits the city from taking a tax to voters before a regularly scheduled municipal election unless it declares an emergency. For Los Angeles, the next regular election will not come until 2009.
The rules dictated by Proposition 218 have been debated at City Hall since Villaraigosa requested a report on the proposed city ballot measure.
The city attorney’s office said Monday that an emergency declaration would lower the threshold for the tax to pass from two-thirds to a simple majority.
Representatives of the Howard Jarvis Taxpayers Assn., the group that drafted Proposition 218, disagreed, saying an emergency designation governs only the timing of a tax election -- and that the voter support needed would be a simple majority regardless of when the election was held.
In fact, the very word “emergency” has forced city officials to perform a delicate verbal dance. As they push the tax, council members have deliberately avoided the phrase “financial emergency” to keep from damaging the city’s bond rating on Wall Street, which determines the interest the city must pay on its debt.
Instead, council members said they intended to invoke a “218 emergency.” Proposition 218 does not define an emergency, saying only that such a designation requires a unanimous vote. Zine and Councilwoman Janice Hahn questioned whether the city could persuade voters that city government faced an emergency. Hahn said she had not seen any belt-tightening by the city and pointed out that the city had just negotiated a package of salary increases for half of its employees.
“What can we prove to the voters that we are definitely in a fiscal emergency?” Hahn asked city policy analysts. “Because it doesn’t feel like that to me.”
A lawyer for the taxpayers association suggested the “emergency” designation should apply to a fire or an earthquake or a terror attack but not to bad budgeting by city officials.
“I’m sure the city is going to say that if they lost a major revenue source that funds health and public safety, then that’s an emergency,” said Timothy Bittle, director of legal affairs for the Jarvis group. “But you have to ask the question, is it essentially an emergency, or is it a ploy?”
Villaraigosa’s telephone measure could appear on the same ballot as another tax request, an anti-gang proposal being pursued by Hahn. But Councilman Tony Cardenas, who chairs the council’s anti-gang committee, said Wednesday he didn’t want to push an anti-gang tax until the city had a better handle on its current programs to combat gangs.