Officials Warn of Utility Tax Repeal’s Negative Impact on City Services, Infrastructure
By Joe Taglieri
A ballot initiative that recently qualified for Arcadia’s upcoming election seeks to repeal the city’s utility tax, which officials say if approved will significantly downgrade services and infrastructure improvements. Proponents contend the city is overtaxing residents to cover needlessly high employee salaries and inflated program costs.
Currently the tax, which both residential and commercial utility customers pay each month, adds 7 percent to bills for water, electricity and natural gas and 5 percent for telecommunications.
In a presentation at the city council meeting on Oct. 6, City Manager Dominic Lazzaretto cautioned that repealing the tax would eliminate 12.5 percent of Arcadia’s budget. This would lead to staff reductions and cancel infrastructure improvement projects.
“Collectively, [utility taxes] are the third largest revenue source for the City, generating $7 million dollars … each year, paying for many important services that the City provides to its businesses and residents on a daily basis,” Lazzaretto wrote in a report to the council.
Lawrence Papp, an Arcadia resident for more than 50 years, leads the tax repeal effort.
“There’s too much fat in the city budget,” Papp said in an interview. “There’s too much imprudent spending.”
In addition to what he observed were bloated city employee salaries compared with neighboring San Gabriel Valley communities, Papp, 86, also noted his and other ballot measure supporters’ opposition to what he described as Arcadia’s overly abundant taxpayer-funded civic and social programs.
“We believe that those who benefit should pay for what they receive,” Papp said.
“Taxes are too high … [and] too numerous,” Arcadia resident Domenico Tallerico told council members.
“There’s a tremendous burden on all taxpayers, and even those that don’t pay taxes ultimately will suffer from that burden,” he added.
Noting the Arcadia Police Department’s status as the city’s largest budget expenditure – nearly $20 million for the current fiscal year – resident Yamay Christle suggested the council consider outsourcing law enforcement services to the Los Angeles County Sheriff’s Department.
An average Arcadian pays a combined total of less than $10 a month in utility taxes, according to Lazzaretto’s report.
Citing feedback from residents, Papp said the average Arcadian family pays between $200 and $1,500 in utility taxes annually.
“This is serious, it couldn’t be more serious,” Mayor Pro Tem Roger Chandler said. “The effect of this measure taking away $7 million is significant.”
In his presentation to the council, Lazzaretto presented two scenarios to account for the 12.5 percent revenue loss if the tax repeal wins voter approval this spring.
Lazzaretto’s first suggestion for dealing with the budget shortfall was to reduce each city department by 12.5 percent. This would result in the loss of 129 employees, including 29 police jobs and 24 positions from the Arcadia Fire Department, in addition to reducing emergency response times and hindering a wide range of public services the city provides through other departments.
As an alternative to slashing the budgets of all departments, the city manager proposed prioritized reductions.
“Based on what is generally accepted as the community’s highest priority – public safety – and the fact that several functions are legally mandated (City Clerk, Treasurer, and Building Official, for instance), it is possible to illustrate how significant the impacts would be on those departments that fall outside of this group,” Lazzaretto’s report explains.
As an “extreme example,” Lazzaretto posited the idea of completely eliminating the library and recreation departments. This would still leave an additional $520,000 in cuts for remaining departments to absorb.
The city manager also warned against eliminating or reducing revenue-generating activities that may result if voters repeal the utility tax.
“Any program or service cuts would need to be cognizant of the potential additional revenue losses that could occur,” his report states. “The same would be true for grants and other non-General Fund revenues that could be impacted if staffing and service levels did not meet minimum requirements.”
Papp contended that repealing the utility tax would attract businesses to the city, thereby increasing sales tax and other revenue streams.
Council members authorized $10,000 for a citywide mail campaign aimed at educating voters on the consequences of repealing the utility tax.
Mayor Gary Kovacic described the forthcoming mailer as “informative, nonpartisan … and factual.”
Levies on utility usage in Arcadia date back to 1970, when the council established a 5 percent surcharge on all four services.
The council adjusted the rate at several points throughout the two ensuing decades.
In 1996, “California voters passed Proposition 218, requiring voter approval for the introduction or increase of taxes, assessments, and certain property-related fees,” Lazzaretto’s report states.
Arcadia voters overwhelmingly approved a measure in 2009 establishing the current utility tax rates amid an intensifying nationwide recession. The ballot initiative “authorized the City Council to adjust the rate as part of the annual budgeting process without voter approval, provided the rate does not exceed the voter-approved maximums,” according to the report.
In 2013 the council reinstated the 7 percent rate for water, gas and electricity as well as the 5 percent tax on telecommunications.
Based on Proposition 218 rules, Papp needed at least 460 signatures of local registered voters to qualify his initiative for the upcoming election. According to the city manager’s report, Papp submitted a petition in August that totaled 558 signatures.
The initiative calling for repeal of the utility tax will appear on Arcadia’s April 12 election ballot.