League of Women Voters of California
Business Utility Tax
City of Irvine
Majority Approval Required
9,867 / 30.4% Yes votes ...... 22,575 / 69.6% No votes
Index of all Measures
|Results as of Nov 12 4:00pm, 100.0% of Precincts Reporting (123/123)|
|Information shown below: Fiscal Impact | Impartial Analysis | Arguments ||
Shall Measure GG, which would repeal the 1.5% business utility user's tax paid by businesses but not residents in Irvine, be enacted?
The Business Utility User's Tax (UUT) generates approximately $3,655,000, or about 3.7% of the City's $98.3 million General Fund budget. The repeal of the Business UUT would mean an immediate loss of approximately $3,655,000 annually and result in a corresponding reduction in City services, infrastructure maintenance and/or rehabilitation. This loss will also result in a long-term funding deficit for future services and rehabilitation of City infrastructure as the City grows and ages. Staff does not envision any opportunities in the foreseeable future to supplant the general-purpose revenue generated by the Business UUT.
FISCAL IMPACT ANALYSIS Background In 1987, the Irvine City Council enacted Ordinance 87-15 imposing a 1.5% UUT on business use of telephone, electricity and natural gas services. The UUT only applies to "for-profit" business utility use. It does not apply to residents or non-profit organizations. Insurance companies are exempted by constitutional law. The revenue generated by this tax helps ensure the business community pays its "fair share" for City services. Each weekday, Irvine's population doubles due to business activity, which generates wear and tear on the City infrastructure and increases the demand on City services. The Business UUT is considered a general-purpose revenue and is not restricted as to its use for providing services to the community, including public safety, street maintenance, and park and recreation services.
In the State of California, 148 cities and four counties have enacted a UUT. The average UUT rate across the State is 5.47%. In Orange County, 11 cities (including Irvine) have a UUT. Of the 11, the City of Irvine's 1.5% UUT rate is the lowest. UUT rates in the other Orange County municipalities range from a low of 3% on electricity and natural gas (no exemptions, no cap) to a high of 11% on telephone (all types and uses), electricity and natural gas (seniors exempted, no cap). The average UUT tax rate for the other 10 cities is 5.5%.
Currently there are about 7,400 commercially based business permits in Irvine, and the anticipated Business UUT revenue for FY 2002-2003 is approximately $3,655,000. The average Irvine business pays approximately $41 on a monthly basis, or $494 annually. Business Utility User's Tax - $5,000 Annual Cap The Business UUT is a one and one-half percent (1.5%) tax on a business's monthly charges for intrastate telephone (interstate and mobile telephone service is specifically excluded), electricity, and natural gas services, based upon the current rates that utility providers charge businesses for those services. However, the City's ordinance provides that no business subject to the Business UUT shall be required to pay in excess of $5,000 per year. Any commercial customer can choose to pay an annual lump sum alternative of $5,000 to be exempt from the utility tax for a period of 12 months. Historically, about 30 businesses opt to pay the $5,000 annual cap in advance to have the tax removed from their utility bills. Exemptions The Business UUT only applies to commercial utility accounts. The Ordinance specifically: • Excludes residential utility use • Excludes non-profit business utility use • Excludes insurance company's utility use • Excludes all mobile telephone use • Excludes all interstate phone calls The Initiative The initiative would repeal the City's Business UUT ninety (90) days after the date of its passage. This initiative would also change the procedure by which the City issues refunds by requiring the City to issue refunds to businesses, without the need for any request or claim for refund, in cases either where a business has overpaid the Business UUT, or where the City has collected or received a Business UUT payment that it should not have collected or received. The initiative further provides that no statute of limitations applies to the City's obligation to make these refunds. Fiscal Impact The Business UUT is expected to generate approximately $3,655,000 in General Fund Revenues during FY 2002-2003. The Business UUT provides the City with a revenue source that provides funding for all types of services to the community, including public safety, street maintenance, senior citizens, and park and recreation services. Here are some examples of the types and magnitude of City services that $3,655,000 funds:
•19% of the sworn officers on the Irvine Police force
• DARE anti-drug program ($460,000)and middle schools ($712,600)
• All school crossing guards ($320,000)($517,300)
• Senior citizens programs ($1,203,000)($514,800)
• Recreational, educational, special interestprograms, and after school programs ($1,607,800)
• Child, youth and family services ($1,217,200)($364,500)
• Multicultural programs ($150,000)
Total: $3,761,000or Enhancing traffic flow, roadway safety and the rehabilitation of City streets including:
• Traffic engineering and circulation ($2,629,500)or Maintaining streets, roadways, traffic safety, sidewalks and bike paths citywide including:
• Traffic safety ($871,000)
As the following table shows, over the last ten years, Business UUT revenue has been a consistent resource for providing municipal services to the community.
Ten Year History of Business UUT Resources to the Community
Fiscal Year UUT Revenue
As the above table indicates, as the City has grown, the Business UUT has played an important role in providing needed fiscal resources to help manage the City's growth and service demands. In fact, the Business UUT in its present form, with a $5,000 cap (not indexed to inflation), will become an incrementally less significant revenue source to the City.
The repeal of the Business UUT would mean an immediate loss of $3.7 million annually and result in a corresponding reduction in City services, infrastructure maintenance and or rehabilitation. This loss will also result in a long-term funding deficit for future services and rehabilitation of infrastructure as the City grows and ages.
Unless the City is able to obtain an alternate source of General Fund revenues to replace the Business UUT revenue that would be eliminated by this initiative, the City will be required to reduce or eliminate approximately $3.7 million of general municipal services to make up for the loss of revenues.
This initiative would repeal the City's business utility user's tax ninety (90) days after the date of its passage. This initiative would also require the City's Manager of Fiscal Services to calculate and issue refunds to businesses, without the need for any request or claim for refund, in cases either where a business has overpaid the utility user's tax, or where the City has collected or received a business utility user tax payment that it should not have collected or received. The initiative further provides that no statute of limitations applies to the City's obligation to make these refunds.
Business utility user's tax revenues are deposited into Irvine's general fund, and used for the normal operations and activities of the City, including public safety, street maintenance, and park and recreation services. The City projects that the business utility user's tax will generate $3,655,000 in general fund revenues during the current fiscal year (July 1, 2002 through June 30, 2003). If passed, the initiative would have the effect of eliminating the requirement that businesses in Irvine pay the 1.5% utility user's tax currently in effect; the repeal of the business utility user's tax would also have the effect of eliminating the general fund revenues generated by the business utility user's tax, which are estimated to be $3,655,000 this fiscal year. Unless Irvine obtains an alternate source of general fund revenues to replace the business utility user's tax revenue that would be eliminated by this initiative, the City will be required to reduce or eliminate municipal programs or services to make up for the loss of revenues that this initiative will cause. If the initiative is passed, the City could not impose a new utility user's tax without a vote of the Irvine electorate.
|Arguments For Measure GG||Arguments Against Measure GG|
|If you vote YES on the Utility Tax Repeal you will end a
hidden tax! A Tax Irvine Businesses pay and pass on to
you whenever you buy products or services.
Less than one of every three cities in California collect a Utility Tax. By collecting such a tax, Irvine makes itself less competitive in attracting businesses that have a choice on where to locate.
For those businesses that must locate in Irvine, the tax hurts their ability to compete with businesses in other cities. Lower sales mean lower sales tax revenues ( a much more important source of income for the City). It also means that Irvine businesses are less able to offer new jobs or improved wages for existing employees.
Small businesses hire most of the workforce in Irvine. Small businesses paying this tax are hit hardest because few can take advantage of the $5,000 cap for big businesses.
The City of Irvine has increased its revenue dramatically in the last two years. We now have a Landscape, Lighting, and parks Maintenance Assessment that collects more money than two years ago, as well as increased community services program fees and other fees.
One opponent on the City Council speaks of "draconian cuts" if this measure passes.
Don't believe it!
This tax brings in less than $4 Million per year. Take this money away and expenditures will still be much more than only two years ago.
In 1999, City general fund expenditures totaled $76 million. The budget this year for general fund expenditures exceeds $97 million. Rather than make government work better, the City tells families to turn over more of their income.
If you believe you are paying too many taxes, let's lead in a different direction.
Vote YES to repeal the Utility Tax.
The business utility users tax requires major corporations in the Irvine Business Complex and the Spectrum to pay their fair share for City services. This tax on business has provided nearly $30 million for City services since 1992. Residents don't pay this tax, but we do receive benefits from the police protection, sports and recreation programs, senior citizen services and other City programs that enhance our quality of life. Measure GG will cost us more than $40 million during the next 10 years. Measure GG proponents think we can lose those millions of dollars and not suffer the consequences. They're wrong.
Measure GG Means Businesses will Not Pay Their Fair Share For City Services.
Each work day Irvine's population doubles -- to nearly 300,000 people # due to business activity. The City must pay increased costs for police protection, road maintenance, traffic control, and other services for businesses and non-residents who come to Irvine. Measure GG will shift the cost of these increased services from businesses to residents. That's not fair.
Measure GG Will Hurt Irvine Businesses.
Irvine has the strongest and most prosperous business community in Orange County. Our outstanding quality of life makes it possible for businesses to attract the best employees and the best customers. Measure GG will degrade our quality of life, hurting businesses and residents alike.
Measure GG is Foolish and Dangerous. It Will Hurt Irvine Business and Residents. Please Vote NO.
|Vote No on Measure GG. It Won't Save Residents a
Measure GG repeals the City's 1.5% business utility users tax. This small tax is imposed only on business and represents business' fair share of the cost of city services. It is the lowest tax in Orange County and costs the average business only $41 per month. Residents do not pay this tax. Neither do charities, churches, or other non-profit organizations.
Measure GG Threatens Our Quality of Life and Property Values.
The City of Irvine has an outstanding police department, good schools, wonderful parks, and excellent programs for children, families, and seniors. Measure GG threatens the programs and services that protect our quality of life and our property values.
Measure GG Will Deprive Irvine Residents of $3.6 Million in Vital Services.
The business utility tax contributes $3,655,000 annually to provide the services that make Irvine the safest and most livable city in America. Before you vote on Measure GG, consider the essential services this $3,655,000 helps pay for:
"Won't save residents a dime?" "Residents do not pay this tax?"
YOU Ultimately pay whenever YOU buy products or services in Irvine.
And certainly many small business owners who are also Irvine residents pay this tax.
"The lowest tax in Orange County?" Sure, unless you count over 20 cities in Orange County that don't impose this tax.
They write of "good schools," when nearly all school funding comes from non-City sources. What's next? Good restaurants?
They list "vital" services, suggesting you'll be deprived by some -- perhaps all -- without this tax.
Wow! Makes you wonder how over 20 cities in Orange County provide "vital" services WITHOUT a Utility Users Tax. Perhaps they're more efficient.
Even Councilman Greg Smith Admits, "We're certainly not going to get rid of 19 percent of police."
This year the City plans to spend 28% more in general fund expenditures than in 1999.
Are there 28% more police officers? Are streets 28% better maintained?
Do you get 28% better service? Are you 28% more satisfied?
Where's the money going? Perhaps administrative overhead.
This year our City plans to spend $67,384,466 in salaries and benefits for 898 employees -- that's an average of $75,000 per employee! And many costs taxpayers over $100,000 per year!
Does each wage earner in your family make this much?
If City Hall believes it can't live with less than a $4 Million decrease in their INCREASED spending than perhaps we need new leadership at City Hall.