Menlo council backs election on two-tier utility tax

The Menlo Park City Council voted unanimously July 25 to ask voters to approve a utility tax measure to help balance the city’s budget.

The council agreed on a two-tiered measure on the November ballot that would authorize the city to tax water, gas and electric bills up to 3.5 percent; and telephone, cell phone and cable bills up to 2.5 percent.

City staff estimates the tax would produce about $2.5 million a year for the city.

The 5-0 council vote is the first step in the process to put the measure on the ballot. Final action by the council is set for August 1. Two-thirds of the council — or four of the five council members — must approve the measure to put it on the ballot.

For the tax to become law, at least a simple majority of voters — 50 percent plus one — must support it.

The council settled on a two-tiered scheme after Councilwoman Kelly Fergusson proposed that electricity, gas and water bills be taxed at a higher rate because they are “consumptive utilities,” and the city should encourage residents and businesses to conserve natural resources.

Annual cap

The tax would expire in 10 years and have an annual cap of $12,000 for any single user — business or residential — of electricity, gas and water.

If the tax is approved, the city could start collecting it in March 2007, said City Attorney Bill McClure. The council could set the actual tax rate lower than that authorized by voters.

The tax money is needed, the council decided, because projected city revenues are not expected to keep up with spending in this and future years. In the current fiscal year, the city plans to draw $1.85 million from reserves to cover anticipated spending.

In a 10-year projection, city staff estimates that revenues would fall short of spending by an average of $2.2 million a year.

The tax would be reviewed every two years, when four council members would have to vote in favor of the tax to keep it active.

Although the council was unanimous in support of the tax measure, Councilman Andy Cohen said the $12,000 cap made it a “regressive tax,” as businesses were spared from paying a proportionally equal share of the tax. He said an unfair percentage of tax revenues would come from residents.

Council members Mickie Winkler and Lee Duboc said the cap is necessary to avoid a business-backed campaign against the tax measure.

INFORMATION

The August 1 council meeting starts at 7 p.m. in the council chambers at the Civic Center. Check AlmanacNews.com for a news update.