Posted 11/9/11 – The City Council asked to have staff bring back a resolution for consideration that would place an extension of the UUT on the April 10th, 2012 ballot. The current UUT, enacted in 2008, increased the rate from a base of 6% to a maximum of 12% before sunsetting and returning to 6% in 2016, unless there is a vote of the people to extend it. The rate was to be increased in 2% increments, in 2008, 2009, and 2010. The sunset clause required that in 2014, the rate be reduced to 10% in 2014, 8% in 2015, and back to 6% in 2016. Measure U also required a committee to review the revenue and expenses generated by the tax, and report to the Council, and if it deemed necessary, to recommend to the Council whether or not to raise the tax based on their findings. The most recent UUT Committee recommended to the Council that they increase the rate to 12%, however, the Council decided to hold steady at 10%.
Despite stirrings in the community that the Council was seeking to eliminate the sunset clause, that was never considered. All of the Council members had expressed their desire to see the sunset clause extended at the last meeting, and they were unanimous in their action Tuesday. The sunset clause will remain, it will just be pushed further out.
The largest point of discussion was the cap. Chris Koerber spoke up during public comment and suggested a limit of 10%, noting that our elder residents will be getting their first Soc. Security increase in 3 years and it hardly seems fair to turn around and hit them with this increase. Council member MacGillivray also suggested the cap be limited to 10%, stating that when the cap was initially instituted at 6% in the 90s, the intent was for it to go away, and it has now become the base. She expressed concern that 12% could become the base.
Other Council members all expressed concern that 10% would not be enough to allow the City to run without major cuts in services. Mayor Buchanan flirted with the 10% figure, noting that he felt that might be an easier sell to the voters. In his mind, 12% was the better policy, whereas 10% was better politics.
Mayor pro tem Moran said in response to Mr. Koerber’s concern regarding seniors on fixed income, that there is a low-income exemption that could be applied for. He expressed a desire to allow the current 12% cap remain in place, noting that future councils can do as this one and keep the rate at 10%, but that capping it at 10% limited the flexibility of future councils to deal with conditions that might arise that require increased revenue.
Council Member MacGillivray suggested that with a cap at 10%, future councils could exercise flexibility by trying to find new sources of revenue or by finding new ways to make more cuts.
Departing Council member Mosca concurred with Moran, noting that this isn’t Sacramento or Washington, with fat to trim in the budgets, that this is a local community that’s already been cut to the bone.
In response to concerns that our UUT is one of the highest in the state, Mosca and Buchanan pointed out that other cities with lower rates have higher fees in other areas. For instance San Marino has a parcel tax to pay for public safety, Monrovia has an assessment to pay for retirement plans for public employees. They pointed out that Sierra Madre has chosen to raise revenues via UUT, and other cities use different revenue mechanisms, so comparing rates straight across is comparing apples and oranges.
One factor added to Tuesday’s discussion was a new report by staff regarding the per household cost of the UUT. Because there are businesses and institutions that have higher water needs and uses, staff felt it unfair to take the revenue raised and divide it by the number of households to determine an average, so they dug a little deeper and the report states that on average, Sierra Madre households pay $440/month for utilities, with a 10% UUT representing a $43.22 payment to the City. Were the tax at the 6% originally levied, the same household would be paying approximately $26.34, a difference of $16.88 per month.
Ultimately, Mayor Buchanan decided that he was going to move to enact the best policy over the best political solution, which will allow the voters to determine if they can accept the UUT at the same 12% cap rate they originally voted for in 2008. So the Council consensus (MacGillivray dissenting) was to have the initiative written using the current terms and rates for an extension that the voters will consider. Should they say no, the Council will still have the option of placing a second measure on the 2014 ballot for their consideration.