Should the City Consider a Utility User Tax?

Utility User Tax

Utility User TaxBy Bob Fung

How would you feel about the city adding as much as a 5 percent charge to your monthly electrical or cable TV bill? How would you feel if the city promised to spend part of the money on fixing streets and roads? This and many related issues are discussed at Civenergy (www.civenergy.org) a new nonpartisan civic forum where you, the citizens of Davis, can weigh in with your comments.

Informal discussions about a utility tax have been going on for a couple of years and in July 2015, the City Council formally directed the City staff to study the issue and come back to the City Council with the study results. This is scheduled to take place later this month (December 2015). After reviewing the study results, the City Council has until February of 2016, to decide to drop the matter or to develop a specific proposal and to place that proposal on the ballot for June 2016. If the City Council does approve a utility tax ballot measure by February 2016, the voters of Davis would vote on the measure to approve or reject the measure.

Civenergy (www.civenergy.org) has facilitated a discussion on a possible utility tax in Davis. The participants of the discussion are: Dan Carson, John Munn, and Elaine Roberts-Musser, all of whom are active in Davis civic life. Dan Carson is a member of the Finance and Budget commission. John Munn is a former DJUSD school board member. Elaine Roberts-Musser chaired the City of Davis Water Advisory Committee and was named Davis citizen of the year in 2014. The discussion is still open so you can add your viewpoint to the discussion, or make comments on existing viewpoints. Go to (http://www.civenergy.org/discussions/utility-user-tax-in-davis) to see an introduction to the utility tax discussion. The discussion is a mix of text and video which you can view on your computer, tablet or smartphone. We think it’s a great way to get up-to-speed quickly on the utility tax.

The three discussion participants worked out seven issues they wanted to discuss as well as expressed their individual viewpoints on these issues. The issues they discuss are:

  1. What is the current financial health of the City of Davis? Opinions on the current financial health of the City of Davis, how the City reached this point and where the City’s finances look like they are going in the next few years.
  2. Does the city truly need funding from a new tax? Opinions on whether the City of Davis needs a UUT or whether there are better options that could achieve similar results.
  3. What funding mechanisms could add to the baseline revenue sources? Possible additional funding mechanisms that could be implemented instead of or in parallel to a utility tax include: a parcel tax, economic development, cost reductions, and state funding of infrastructure repairs.
  4. If a new tax is proposed, what should it be spent on? Possible areas that would benefit from a utility users tax include: road maintenance/repair, City building and facility maintenance, City park maintenance. Other possibilities include new capital facilities or a general revenue source.
  5. Should a UUT sunset, and if yes, after how long? A sunset is a length of time in years that the tax would be collected. The main options are a “short” time period (4-6 years) or a “long” time period (20-30 years).
  6. What specific types of utility services should be included in a UUT? Possible utilities to be taxed include water/sewer, electricity/gas, cable tv and telephone/internet. The typical tax is around 5% but could range from 2-10%.
  7. How can Davis ensure funding from a proposed UUT will be spent on what is intended? Alternatives for trying to ensure funding goes to its intended uses are: keeping the period of the tax short, passing a parallel nonbinding advisory measure, or giving the responsibility to a City commission.

Civenergy.org is non-partisan, we do not favor any particular political party or viewpoint. Our mission is to help Davis residents become more deeply engaged in the Davis community by providing discussions on important issues like the utility tax, discussions on elections and listings of community organizations and volunteer opportunities for residents. In addition, Civenergy aggregates news and events, to help keep residents up to date. All of these are crowd sourced, so if you have a discussion, volunteer opportunity, news item, or event you would like to add, go to Civenergy. It only takes a few minutes.

Civenergy will be partnering with other local community organizations in promoting civic engagement. Our first partnership is with the Davis Vanguard to host community forums on important civic issues. We held our first joint community forum on Davis Nightlife on October 14, 2015.

This is Civenergy’s first facilitated discussion in Davis. We would like to hear what you think about it. You can email us at info@civenergy.org or make comments directly on the discussion at http://www.civenergy.org/discussions/utility-user-tax-in-davis.

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42 comments

  1. How would you feel if the city promised to spend part of the money on fixing streets and roads?

    Been there, done that and found I can’t put trust in the city.

    1. BP, at the most recent Utility Users Tax Focus Group meeting on November 16th, we were asked four questions.  The third question was:

      Special Tax? General Tax? or General Tax with companion Advisory Measure?

      My personal answer was “Special Tax.”  Making any tax measure a Special Tax accomplishes a number of things. (1) It very specifically requires that the annual monies raised be only spent for their designated purposes, and (2) It requires a 2/3 majority vote for approval .  If we are going to increase the trust that Davis citizens/residents have for their local government, then proactive steps of accountability like (1) and consensus building like (2) are essential.

      However, I told my colleagues on the Focus Group that (1) and (2) are not enough … not only for me personally, but also for a substantial number of the members of the Finance and Budget Commission.  We believe that a step (0) needs to be completed before either (1) or (2) above.  Specifically that step (0) would look something like this:

      That the Finance & Budget Commission is recommending that the citizens of Davis not approve any new tax measures or utility rate increases until such time that:

      1. The staff provides a detailed scope of proposed and/or deferred capital infrastructure projects, as well as proposed ongoing services.
       
      — Said scope document shall include specific measurable success metrics for the proposed services and projects, along with an inventory of the specific costs that will be incurred to provide said proposed services or complete said projects.

      — Each deferred capital infrastructure project shall include its expected success metrics, as well as an anticipated budget.

      — The scope document will be updated each year as part of the Budget adoption process.
       
      2. The staff provides detailed report/s in conjunction with or as a part of the annual Budget adoption process documents submitted to City Council that reports the specific work done (accomplishments) the prior Fiscal Year on staff proposed services and project/s associated with item #1.
       
      3. The staff provides detailed report/s in conjunction with or as a part of the annual Budget adoption process documents submitted to City Council that defines where the revenues collected from any new tax/increased tax measure(s) spent on services and/or projects other than the services and/or projects associated with item #1.

      1. Matt, once again how is a utility tax fair when people of means can afford to already have purchased or purchase in the future solar electricity which will greatly reduce any UUT they might have when everyone else will be stuck paying a higher tax?  And the purchase sales tax they had to pay is a non-starter as far as being equitable to everyone.

        1. BP, remember that (1) the meeting was specifically focused on the Utility Users Tax possibilities. Other taxing methods/vehicles were not on the table. (2) the four questions were prepared in advance by City Staff. (3) My response was to those questions as posed. (4) The fairness or unfairness of the concept of a Utility Users Tax was not on the table.

          With the above said, I engaged your question the last time you asked it … and at the end of that back and forth between us it was clear that there aren’t any taxes that are fair. All taxes have “biases.” That makes a utility tax different in its “unfairness” from other taxes, but since I don’t support a utility users tax for Davis, for me its “fairness” or “unfairness” is a moot issue.

          Now with that said, your reply ignored the most important part of my comment, and your reply only nibbles on a tangential and somewhat significant issue. The real beef is in the part of my comment that I repost here in order to get your thoughts, and the thoughts of others.

          However, I told my colleagues on the Focus Group that (1) and (2) are not enough … not only for me personally, but also for a substantial number of the members of the Finance and Budget Commission. We believe that a step (0) needs to be completed before either (1) or (2) above. Specifically that step (0) would look something like this:

          Motion

          That the Finance & Budget Commission is recommending that the citizens of Davis not approve any new tax measures or utility rate increases until such time that:

          1. The staff provides a detailed scope of proposed and/or deferred capital infrastructure projects, as well as proposed ongoing services.
           
          — Said scope document shall include specific measurable success metrics for the proposed services and projects, along with an inventory of the specific costs that will be incurred to provide said proposed services or complete said projects.

          — Each deferred capital infrastructure project shall include its expected success metrics, as well as an anticipated budget.

          — The scope document will be updated each year as part of the Budget adoption process.
           
          2. The staff provides detailed report/s in conjunction with or as a part of the annual Budget adoption process documents submitted to City Council that reports the specific work done (accomplishments) the prior Fiscal Year on staff proposed services and project/s associated with item #1.
           
          3. The staff provides detailed report/s in conjunction with or as a part of the annual Budget adoption process documents submitted to City Council that defines where the revenues collected from any new tax/increased tax measure(s) spent on services and/or projects other than the services and/or projects associated with item #1.

    1. Was there a companion advisory measure on the sales tax increase where the fund were to be used on the roads and backlog of projects? Because just monitoring where that money was spent from here shows that it was spent on employee compensation.

      How does introducing a new tax for a limited term hold anyone to spending the money on designated projects? When the tax expires the city can just claim that the tax must be renewed or they will close all of our parks, our houses will burn and criminals will run the streets, oh and we need to increase the tax just a little bit for the roads and backlog of projects, just for a little while.

      How many times can the city go to that well before people say enough?

      1. How many times can the city go to that well before people say enough?

        So far it’s “worked”, never overestimate the “Davis 69,990”; that’s the rest of the people in Davis outside the Vanguard 10.

        1. I think you might be correct here AM.

          Davis is a government-class town.  Government-class people benefit from tax increases more than they are harmed by them.  Unfortunately though, they eventually run out of other people’s money.

    2. The “advisory” measure was deemed to not have any teeth in it as evidenced by it being scrapped with the sales tax increase but we were still led to believe that the money wouldn’t be used for employee pay increases.   Boy were we fooled.

      As far as temporary taxes we know how that story goes too.  Just as Sam states there’s no such thing as a temporary tax, once the city gets a taste it’s a tax that will never go away as evidenced by the 2004 temporary sales tax and temporary school parcel tax renewals.  Won’t be fooled by that either.

      1. I’m a Democrat and I happen to like taxes. I think they have a purpose. We are a democratic society and taxes can do good things for people.” — Helen Thomson

  2. I’m totally against any new tax that gives the CC unrestricted GF money they can use to give away to employee groups to enhance the political careers of Dan and Lucas.  There it is:  black and white.  We were duped in 2004 on that Measure S sales tax increase.  Then, just last week the employees and the CC did it again with the sneaky consent item.  Never again.

    1. I’m a Democrat and I happen to like taxes. I think they have a purpose. We are a democratic society and taxes can do good things for people.” — Helen Thomson

  3. Sam: “Was there a companion advisory measure on the sales tax increase where the fund were to be used on the roads and backlog of projects? Because just monitoring where that money was spent from here shows that it was spent on employee compensation.

    There was no advisory measure for the sales tax increase.  Secondly, please provide evidence the funding from the sales tax increase was specifically spent on employee compensation.

    1. “Secondly, please provide evidence the funding from the sales tax increase was specifically spent on employee compensation.”

      okay.  the city was running a deficit prior to the passage of the sales tax.  the city is now running a small surplus (on paper).  when the sales tax expires, the projection is we will go back into the “red”  – therefore it stands to reason that any surplus we have now is due to the sales tax and any expenditure of new month that utilizes the nominal surplus is utilizing the sales tax.  therefore, the employee compensation increase relies on the sales tax as its current revenue.

    2. Basically what DP said.

      Anon-Do you really think that the additional sales tax revenue has been spent on something else? Can you point to a budget item equal to the sales tax revenue that was added to the budget after the measure passed that can be removed once the tax expires? Or are you just saying that you are unable to determine where money put into the general fund is specifically spent?

      1. The sales tax revenue was spent on roads, street lights, just as promised.  The question that should be asked is: Where is the money going to come from to pay for the COLAs?  To some extent, Councilmember Swanson has answered that question according to her view: more economic development, increase in city fees, proposed new tax (parcel or UUT).  Another CC member is thinking about increasing the TOT (transit occupancy tax, i.e. hotel fees).  She did not say the sales tax increase funding would pay for the COLAs.  And secondly, it has yet to be determined if the sales tax set to be expired will be renewed or not.  So in my opinion it is an incorrect statement to say that the sales tax increase will be spent on the COLAs in light of all of the above info I just gave.

        Now, let’s go back to the mortgage analogy.  Do you own a home?  If yes, have you spent money for niceties like vacations, gifts to other people, etc. before you paid off the mortgage?  If the City Council took the position that it would never grant COLAs until the city paid off every debt, every repair/maintenance cost, the RPI index to be achieved must be 72, etc., COLAs would never be given out to city employees.  So where should the tipping point be for handing out COLAs to cooperative city employees who take fiscal hits in tough financial times, especially if we are losing good seasoned police officers/potential hires to other cities that are willing to pay more?

        1. So where should the tipping point be

          Still waiting for you to answer that question, and those that I posed to you three or four times before.
          Also, you keep repeating your analysis, but it simply doesn’t hold water.

          The question that should be asked is: Where is the money going to come from to pay for the COLAs?

          So far, the only source is the sales tax revenue.

          So in my opinion it is an incorrect statement to say that the sales tax increase will be spent on the COLAs

          Your opinion is factually incorrect.

          1. Hi. I’d like to take out a loan for a new car.
            –You don’t appear to have the income for that.
            But I’ll be making more money. I’m going to open another store!
            –Have you submitted the plans? Gotten approval? Started the process at all?
            No. We’re talking about it. Thinking about it. Pretty soon we might have some ideas for how to do that.
            –But you want to take out the loan now?
            Yes.
            –But you don’t have the income for that.
            But I will! We’re going to open a new store and make money!
            –Great. Get that store opened, show us the revenues and a reasonable estimate for how your sales are going to go, and we can consider your loan then.
            But I need the loan now!
            –Why?
            To open a new store! That’s the only way I can make enough money to pay back the loan!
            –I thought you wanted a car.
            I do! But to pay for the car, I need the money from a new store. So I’ll use some of the money for the car to open a new store. Then I can pay for the car. With the loan.
            –So you want to take out a loan for a new store?
            Well, the money isn’t really going to that. It’s going to the car.
            –But you said…
            It’s all the same pot of money! What does it matter?

        2. Anon:  “Now, let’s go back to the mortgage analogy.  Do you own a home?  If yes, have you spent money for niceties like vacations, gifts to other people, etc. before you paid off the mortgage?”

          The more accurate analogy is…would you spend the money you set aside for the mortgage payment on niceties like…

          The correct analysis here isn’t that the City spent money beyond the payments needed for the mortgage, but that they used the mortgate payment to buy something frivolous, and now the mortgage will go into default unless mummy and duddy bail them out with an increase in their allowance.

          It is completely reprehensible that the City Council would spend this money without knowing in advance how they will pay for it.  Revenue first, expenses second, not the other way around.

        3. Anon said … “The sales tax revenue was spent on roads, street lights, just as promised.”

          Anon, you need to come and attend some FBC meetings.  The money that needs to be spent on roads is not a one-year endeavor.  Staff has been very clear — explicitly clear — that the same amount NEEDS to be spent on roads each and every year that the sales tax is in effect.  In fact Staff was explicitly clear in their recent updated report to Council that the amount needed to be spent on roads is $9 million a year, which substantially exceeds the total amount of the sales tax proceeds.

    3. Anon, your “political calculation” is showing again. You KNOW that the way that any municipal entity handles its accounting prevents the kind of line item PROOF that you are SPECIFICALLY asking for. You also KNOW that what Don Shor said yesterday summed up the situation to a tee (see below). It isn’t clear what political agenda you are pursuing. Do you want to enlighten us as to what your bottom-line is?

      Don Shor said … Submitted on 2015/12/07 at 12:54 pm | In reply to Anon.

      Anon asked … And you know specifically that it is the Sales Tax money itself that is going to pay for the MOUs how?

      Don replied … Because those are the only new revenues that have been identified, and the MOU’s take effect shortly. No other sources of income can be brought into the discussion before the MOU’s take effect. Anything Rochelle is describing is hypothetical. And I hope all of those options get a good and rigorous hearing in public.

      They approved the increased payroll costs before they identified and implemented other revenue sources.

      1. My political calculation is always showing, because it is part and parcel of any decision made by a City Council and always will be.  You can have the best solution in the world, but if you can’t sell it politically, it is DOA.

      1. But money does seem to grow out of taxpayers pockets, it may start growing from soda if some people get their way, it has grown from gasoline, it grows from rain in MD…

    1. To Alan Miller: Fungible?  Interesting point.  There is an important principle here that needs to be discussed.  Would Vanguard readers prefer money to be siloed, or give the City Council more flexibility?  Siloing has its own set of problems, but so does giving City Council flexibility.  A parcel tax that puts money towards roads only is siloing the funding.  A UUT with no advisory measure or sunset is giving the City Council complete flexibility.  A UUT with an advisory measure and sunset gives the City Council some accountability/flexibility.

      1. That is an easy question to answer.  This City Council should not be given access to any more money at all, whether it is ‘siloed’ or not,  as they have proven that they do not fiscally responsible.

      2. Silo is as silo does, sir.

        Fact is, if City is paying part of fund A currently and gets a silo tax that covers fund A now, even if silo tax is dedicated, City now has equivalent of what it was paying to Fund A to do what it wants with now.

        So often, dedicated funding just leads to the lowering of the flexible funding that went to the fund now having a dedicated source.

        Those old enough to remember when you could go to a 7-11 and it really was a “convenience” store because you didn’t have to wait in line for a moron buying a lottery ticket in front of you:  every advertisement to vote for the State lottery ended with:  ” . . . and our schools win, too!”.  There was to be dedicated funding for California schools.

        Tell me folks, are our schools winning?

         

      3. A UUT with an advisory measure and sunset gives the City Council some accountability/flexibility.

        It gives the CC lots of flexibility, but no accountability that isn’t already there.  And with the recent MOU action, some of us aren’t looking very favorably upon the idea of granting them more flexibility.

  4. Frankly

    Unfortunately though, they eventually run out of other people’s money.”

    You also forget that many of these “government-class” ( as though that were an actual category somewhere outside your head) are paying these taxes themselves and thus are also spending their own money., Also, some of us do not begrudge paying for what we see as reasonable expenditures for the services we desire.

  5. I tire very rapidly of this “other people’s money” complaint  for several reasons.

    1. If the public officials who are proposing and/or approving the raises live in the same community, it is their money just as much as other people’s that they are voting to spend. Last I knew, Helen. Thompson was a Davis resident and thus is putting her money where her mouth is on taxes.

    2. If the employees who are benefitting from increased compensation live in the community, then it is their money that is helping to fund that increase so they are effectively paying for their own increase.

    3. If we benefit in any way from the use of that money ( say we are able to attract better public workers by an increased compensation package, or we get smoother roads) then we are spending our own as well as other people’s money on a desired benefit. I firmly believe in paying for what we use.

    4. All businesses depend on taking other people’s money. Some businesses do this by providing something that is actually beneficial to people. Some deal in illness and death producing products ( cigarettes) and we consider them upstanding, honorable businesses…..or at least some of you do.

    5. At least within the public sphere, we get to have some say about how we are taxed and how that money is spent in the form of our vote. We get no say on who runs or does not run a company whether or not we approve of their business practices. Now some will say that we vote with our dollars. But that is not always possible. Can you just opt out of PG&E ?

  6. 2. If the employees who are benefitting from increased compensation live in the community, then it is their money that is helping to fund that increase so they are effectively paying for their own increase.

    Let’s do a little math here.  If by voting for a $100/year tax you would end up getting a $2000/year raise most assuredly would vote for the tax?

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