Santa Rosa may seek new tax on cellphones

Santa Rosa may ask voters in November to tax their cellphones to help fund general city services.

A subcommittee exploring the city's financial options is recommending that the City Council put a measure on the ballot to "modernize" the city's Utility Users Tax to include cellphones.

The city's existing 5-percent tax on electricity, gas, cable TV and landline telephones was instituted in 1970. It is capped at $1,000 per utility. Last year the tax raised $9.6 million for the city's general fund.

But in recent years the city has seen an erosion of the tax as more people cancel their landlines and rely solely on cellphones. The total tax is down about $200,000 from its high in 2009, and further declines are expected. In addition, the ordinance contains dated language and definitions that make it difficult to administer.

"Your current ordinance is a dinosaur," said Donald Maynor, an Atherton attorney who advised the committee on the tax. "You need to either update it or lose the revenue to either litigation or technology."

The goal would be to lower the current rate of 5 percent, perhaps to 4 percent or 4.5 percent, for some or all utility categories, while broadening its reach to include all cellphones billed to city residents.

Landlines would continue to be taxed under the proposal, albeit at a lower rate, meaning some city residents would pay a phone tax on two bills.

The current tax isn't fair because it effectively "exempts an entire class of phone user," said Mayor Scott Bartley, who serves on the committee with council members Jake Ours and Councilman Gary Wysocky.

He stressed that while cellphone users would be taxed locally for the first time, residents without cellphones, who are often lower income, would see their utility taxes on electricity, gas, cable and landline bills go down.

How many cellphone users would be affected and how much revenue could be raised is not clear. One city estimate, assuming a switch to a 4.5 percent rate on all utilities, predicted $2.8 million in additional revenue could be raised from cellphones users.

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