Sebastopol tax measure spurs debate about city spending

Two years after they raised the local sales tax to what was then Sonoma County’s highest rate, Sebastopol voters are being asked to pay still more for city services, this time through an expanded utility tax on phone service, garbage and cable television.

Measure R would both replace an expiring utility user tax and extend it, raising more than a half million dollars a year toward basic city services like police and fire protection, street improvements, parks and other expenses the city otherwise won’t be able to afford, officials say.

Supporters, including a unanimous City Council, say the tax is critical to funding basic services and continuing the city’s recovery from the recession, which sharply reduced spending and forced the city to exhaust reserves.

A budget deficit of more than $360,000 is forecast for the next fiscal year, with annual deficits projected above $400,000 after that without the new tax.

“If the measure doesn’t pass, we will be forced to make decisions on what we have to cut,” Mayor Robert Jacob said, “and the things that will have to be cut are things like public safety and road maintenance and bike lane development and park funding. That’s where the city will have to begin digging deep and cutting.”

The current utility tax, passed in 2008 and expiring Jan. 1, charges residents and business owners 4 percent on natural gas and electric service, generating about $330,000 a year.

Measure R would roll the tax back to 3.75 percent but apply it to telecommunications - both cell phones and landlines - cable TV service and garbage, in addition to energy, raising an estimated $586,000 annually.

Those who qualify for the state’s low-income electricity rates program would be exempt from paying the tax on electrical and natural gas use.

The measure needs a simple majority to pass. It would expire after 10 years.

Elected officials said they hoped local voters would be as supportive of the city’s efforts to raise revenue this time as they have in the past. Voters in 2012 passed a half-cent sales tax that raised the local sales tax to 9 percent.

Measure R’s failure would put at risk the city’s ability to sustain current service levels and defer expenditures on long-term needs like a new fire engine and street maintenance, officials said.

“People want higher quality streets,” Vice Mayor Patrick Slayter said. “High quality streets require money. How do you get money? You ask for it.”

It’s unclear where most voters stand on the issue. In contrast to a well-financed campaign in Santa Rosa opposing a proposed expansion of that city’s utility tax to cellphone service, in Sebastopol there it not even an official ballot argument opposing Measure R.

But there are opponents, including City Council candidate Jonathan Greenberg, who says the council hasn’t made its case for the tax, especially after setting aside $1.2 million in reserves in 2013 - a move made possible by one-time funds tied to the state’s dismantling of the city redevelopment agency, the sale of a city building and other sources, City Manager Larry McLaughlin said.

Greenberg and others object to the use of the term “modernization” to describe extending the tax to newer technologies like cellphones, and to the absence of a restrictions on how the revenue would be spent, as long as it goes toward general fund expenditures.

“Modernizing is an insulting term for anybody who pays taxes and knows what’s going on at all,” said Ken Foley, a former two-term councilman and mayor.

Greenberg also has taken issue with a recurring error indicating the expiring utility tax will reduce general fund revenues by 15 percent, when the current tax actually supplies about 6 percent of the general fund and the new one, if passed, would account for 10.8 percent.

The incorrect figure - copied from a city document prepared by a tax consultant - appears in the printed ballot argument and was contained in the initial round of fliers distributed by council members and other supporters before the error was pointed out.

Foley, in an online letter addressed to “friends and neighbors,” said he objects to the measure because the city already collects franchise fees from refuse, cable and power providers that are reflected in the prices charged to consumers.

“I understand that government needs money to run and provide services for citizens,” Foley said, “but when it goes to them and they suggest things are going to be ‘bleak,’ which is their word, they at least ought to tell the community about the money that’s already there.”

The city budget for the 2013-14 year accounts for an estimated $307,500 in revenue from utility franchise fees paid by providers to mitigate utilization, wear and tear on public infrastructure, just as they do in other communities, McLaughlin said.

A utility tax functions differently and is critical enough, McLaughlin said, that he made a personal donation of $1,000 to jump-start the Yes on R campaign in September. Other contributions include $1,000 from The Barlow LLC, the company behind the Sebastopol commercial complex; $500 from Peace in Medicine, the medicinal marijuana dispensary run by the mayor; and $200 from Councilman John Eder.

EDITOR’S NOTE: An earlier version of this story incorrectly said a low-income exemption would extend to all applications of the proposed utility user tax. If Measure R is passed, qualified consumers would only be exempt from paying additional tax on gas and electricity service.