Burbank surprised with tax bill, six years after receiving state grant

Roughly six years after Burbank accepted a $1.4 million state grant for a hydrogen-hybrid fuel cell transit bus program, the city has been caught off guard by a $155,457 tax bill -- more than its funding match that secured the grant in the first place.

The tax — a result of a state audit reviewing a random sampling of contracts and purchases over a three-year period — is more than the city’s original contribution to the project, which was a $139,000 in-kind match, earmarked to cover the driver, fuel, administrative oversight and maintenance costs.

“It’s pretty clear that Sacramento and the state is looking for every source of revenue, so now they’re actually taxing their own grants that they gave us,” Mayor Dave Golonski said Tuesday.

But because a product was purchased, the state determined that the city had to pay a use tax, regardless of whether the project was grant-funded, officials said.

“The deal of the purchase is not necessarily the deal of the grant,” said Dave Clegern, a spokesman for the California Air Resource Board, which provided the grant. “I don’t know why they would necessarily be let out of paying taxes.”

The city will tap the Proposition C Transportation Fund — which pays for projects that support the BurbankBus — to cover the tax. So while the city won’t take a hit to its fragile General Fund, which pays for most public services, it’s still considered by officials to be a diversion from an important program.

“The impact to us is that it diverts Prop. C [funds] from other projects or programs that we would like to undertake,” Councilwoman Emily Gabel-Luddy said.

The tax will drain roughly 9% of the Prop. C budget this fiscal year, which will likely be a blow to the city’s cash-strapped transit programs. In recent months, officials have considered cutting transportation services to alleviate an ongoing structural deficit, all while brainstorming how to generate extra revenue.

The city argued with the state on paying the tax, but was unsuccessful, according to City Atty. Amy Albano.

“Basically [the state’s] decision rules,” she said.

Refusing to pay up could have left the city on the hook for the entire $1.37 million grant, officials said.

“On a go-forward basis, we’ll make sure that on the grant requests, there’s a line item for the tax that has to be paid for the state,” Golonski said. “It’s kind of crazy, but that’s the way it is."

-- Alene Tchekmedyian, Times Community News

Follow Alene Tchekmedyian on Google+ and on Twitter: @atchek.

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