A subcommittee of Santa Rosa councilmemebers analyzing the city's financial future recommended Monday that additional revenue be raised by taxing cellphones.
On a 2-1 vote, the Long-Term Financial Policy Subcommittee recommended the City Council place the issue on the November ballot. The council is scheduled to vote on the change Tuesday.
The proposal would increase utility-tax revenues by about $1.6 million a year, a jump of 17 percent.
Mayor Scott Bartley and Councilman Jake Ours supported the recommendation, citing the need to "modernize" the city's Utility Users Tax to account for changes in technology and pending litigation.
Councilman Gary Wysocky voted against it, saying he was concerned the committee was focusing on a tax increase instead of tackling the underlying spending problem inherent in Measure O, the quarter-percent sales tax for public safety that includes an ever-increasing baseline.
The city's existing 5-percent tax on electricity, gas, cable TV and land-line 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 because consumers are rapidly migrating to cellular technology the $1.6 million the city receives annually from land lines is slowly eroding. It may disappear entirely if pending litigation blocks it from being collected or telephone companies make good on plans to move all their telecommunications traffic to the Internet, according to city staff.
To guard against that loss, the city is proposing to expand the tax to include cellphones and users who make calls over the Internet, a process known as Voice Over Internet Protocol.
In addition to expanding the reach of the tax, the rate would be reduced slightly.
The committee considered lowering the rate to 4.5 percent, which would result in an estimated revenue of $11.9 million, a 24-percent increase.
A lower figure of 4 percent was estimated to increase the tax to $10.6 million, a 10-percent increase.
City Manager Kathy Millison said because of uncertainty in the estimates the 4 percent rate should be considered a "break-even" figure. So the committee split the difference and settled on a rate of 4.25 percent. That could be expected to raise $11.2 million per year, or 17 percent more than the current revenue.
The city has limited options for increasing its revenue streams, and so should consider "shoring up" existing ones and take advantage of any opportunities for "some modest increase" where it can, Millison said.
"This is one small piece of multiple solutions that this council should consider going forward," Millison said.
Mayor Scott Bartley echoed that sentiment and noted that many communities in the state have higher rates than 4.5 percent, which he said he preferred.
"There isn't only one solution that's going to give us long-term financial stability," Bartley said.
But Wysocky said the committee, which has been meeting for about a year, has failed to tackle the Measure O problem and instead has chosen without complete information to back what amounts to a tax increase.
"Santa Rosa deserves better than copying and pasting from other jurisdictions. We just do," Wysocky said after the meeting.
(You can reach Staff Writer Kevin McCallum at 521-5207 or email@example.com. On Twitter @citybeater.)