Sacramento County Taxpayers League

Tuesday, November 27, 2001

(NOTE: All data cited in this presentation are derived from documents provided by the City of Sacramento to the Sacramento County Taxpayers League, or from public records on the issue. See attached documents which together provide citations for each of the referenced data points)

Mayor Fargo, Honorable City Council Members, City Manager Thomas, and Fellow Taxpayers:

My name is Richard Mersereau. I am a resident of Fair Oaks, and I am the elected President of the Sacramento County Taxpayers League. I join you tonight at the invitation of the Mayor to formally present to you the "Taxpayers League Plan" to reduce the Utility Users Tax (UUT) levied by the City of Sacramento. Consistent with our discussions, the following are my prepared remarks; after this presentation, I welcome any questions you may have.

Let me begin if I may with a few disclaimers. Like many of you who sit on this City Council, I am an employee of the California State government, specifically our state Legislature. Like you, tonight and on all occasions, I do not speak for any member of that body.

not any member of the Assembly Republican Caucus which I serve as Director of Policy, nor Dave Cox, the Assembly Republican Leader and my local Assemblymember. I come to you exclusively in my role as the President of our community's largest taxpayer organization, and the views I will express tonight are either mine alone, or those of the Sacramento County Taxpayers League.

I also note at the outset that I am NOT currently a resident of the City of Sacramento. But as I was born and raised within the city limits, am a former homeowner and landlord in the downtown area, commute daily to my job in the heart of the city, and am honored to serve as President of an organization comprised of literally hundreds of dues?paying individuals, families, business owners and employers, and associations all of which DO reside within the city of Sacramento, I take most seriously and care quite deeply about the level of city services afforded to the residents of the City by this body. I therefore reject categorically the assertion leveled in yesterday's Sacramento Bee by (Assistant City Manager Betty Masuoka) and other city officials that I ?? AND I QUOTE - "the taxpayers' league board members are mainly suburbanites who don't live in the city and who show little concern for how the city will pay for key services such as police and fire." Sadly, such statements seek only to inflame passions and obscure the facts surrounding a very real and substantive public policy discussion. They belittle an organization which for 40 years has contributed mightily to the betterment of the civic life and governance of this city. And they also conveniently ignore the fact that while the Sacramento County Taxpayers League does proudly and effectively represent taxpayers of this city, and well as those from every corner and community of this county, we also speak for the literally hundreds ?? indeed thousands ?? of employers and employees, business and property owners, and retail customers who, either directly or indirectly, pay the cost of this tax while not formally residing in the City of Sacramento, and who therefore are effectively voiceless, and have no vote or can sign no petition to redress the Utility Users Tax which they nonetheless must pay. Simply stated, Councilmembers, this debate, and the people whose lives it affects, deserve better from our discourse, and I urge you and city staff to join me and the League in seeing that they receive just such an elevated dialogue.

Lastly, and by way of introduction, let me make absolutely clear to all who are present tonight, all who will report on these proceedings, and all interested persons both in this audience and outside these chambers precisely what it is we are talking about. The Sacramento County Taxpayers League has forwarded to the Mayor, the City Manager, and each of the City Councilmembers a proposal ?? we call it the "Taxpayers League Plan" ?? that calls for a GRADUAL, PHASED?IN REDUCTION of the City Utility Users Tax commencing July 1, 2002 and only taking full effect on July 1, 2005.

Let me repeat that: a GRADUAL, PHASED?IN REDUCTION of the City Utility Users Tax ?? commencing July 1, 2002 with a reduction from the current 7.5% rate to 5.5% ?? then going to 4.5% on July 1, 2003, to 3.5% on July 1, 2004, and only taking full effect on July 1, 2005, when the rate would remain at 2.5%...a rate no lower but also no higher than anywhere else in Sacramento County.

Again, let me be clear: We are NOT calling for an abolition of the utility users tax. Nor are we calling for an immediate reduction of the tax to the 2.5% County rate. So the information, charts and graphs that many of you have been given that speak to massive cuts in police and fire protection services, cuts which will devastate the arts, shutter libraries and parks, and eviscerate the discretionary spending of the City General Fund simply do not apply to our plan.

Sadly however, no effort has been made to address the merits of our plan as presented to the Council several months ago. Instead, every effort has been made to rally sentiment against ANY cut in the utility users tax, ignoring entirely the imposition of a regressive tax upon the very necessities of modern life ?? every light switch that is turned on, every Btu of heat, every local telephone call ?? at a rate three times higher than anywhere else in the County.

And every opportunity has instead been taken to address the League's regrettable but altogether necessary assertion that if the City Council itself refuses to reduce this tax, our organization both can and will take the issue to the voters in the form of an initiative measure which will qualify for the November 2002 ballot.

Let us focus our attention where it belongs: on a tax that began as a temporary levy to address a one?time city budget deficit...but which today comprises 29% of all discretionary City General Fund revenues. A tax that this City Council committed to reduce to 5%, but all?too?typically found a way to retain at 7.5% despite the promises made to the taxpayers of Sacramento. A tax which has seen its proceeds grow from less than $36 million in fiscal year 1994?1995 to $55 million in the current budget year...a 53% increase in revenue while the city's population has grown at one?fifth that pace (a mere 10.6%). And a tax which even city staff agrees will INCREASE its revenues again in FY 2002?2003, by anywhere from 5% to 7% or more, even if one or both of the SMUD surcharges (one?year hydro and Rate Stabilization Fund, respectively) end earlier than anticipated.

This is the tax at issue, Councilmembers...a regressive tax on necessities of daily life levied at a rate three times higher than anywhere else in our community, and amassing greater tax proceeds each year both BEFORE the recent SMUD price hikes, BEFORE the increase in natural gas prices, and doing so without end into the future...irrespective of market and economic changes. At the level of first impression, therefore, the question posed by the Sacramento County Taxpayers League is a simple one: If you will not reduce this tax when revenues are at record levels and growing, when will you ever do so?

Yet the issue grows far more complex, and it is precisely for this reason that the Sacramento County Taxpayers League chose, after months of review and deliberations, to bring this issue before the city's elected officials rather than go directly to the voters with an initiative. Let me assure you that it would have been far easier for me personally, and for the organization I serve, to simply file a petition with the City Attorney last spring, pay the $200 filing fee, and use the beautiful Sacramento summer to gather the 5,504 valid signatures needed to put either an outright utility tax repeal or an immediate tax reduction on the March 2002 ballot. Furthermore, I am enough of a political sophisticate to know that if such a measure were to have appeared before the city's voters in a low turnout primary election rather than a gubernatorial general election, it would stand a far better chance of passage. Every impulse, therefore, and every political advantage, suggested we ignore this body and go directly to the voters. Yet we have engaged in months of earnest dialogue, and appeal to you again this evening, to reduce this excessive and regressive tax upon the necessities of modern life. That begs the simple question: WHY?!?

As I indicated to each of you in my letter of September 24th, the League is uniquely blessed with the services of any number of talented members of our Board and general membership, who together have literally decades of public budgeting experience, including many who currently serve in elected local office. We understand the difficult decisions and inevitable compromises which comprise the budgetary process. And we further recognize the personal passions and heartfelt beliefs which animate those who would rather retain or even increase a marginal dollar of government spending rather than return that marginal dollar to the family, the worker or business that earned it. We may disagree, but we understand. And it is for these reasons that we have come to you seeking your action and support, rather than exercise our right to directly address the voters and taxpayers of the city.

Sadly, however, in recent weeks I and the League have been afforded every opportunity to second?guess this decision. What we genuinely ?? if perhaps naively ?? believed would be an earnest and good?faith dialogue has instead become a monologue against any reduction in the utility user tax, or at best, if I am to believe every word I read in yesterday's Sacramento Bee, a newfound interest in a rebate program that remained unchanged by this council during the entirety of last year's budget negotiations...even as 19% average electricity increases were certain, natural gas prices skyrocketed, and the needs of this city's very poorest of families were left entirely unprotected and unaddressed by a city council which now claims such a recommendation as its own.

In the interest of time, let me be pointed, pithy and precise:

On November 1st, Mayor Fargo, you and City Manager Bob Thomas told me and League officials that you oppose an immediate reduction of the UUT from 7.5% to 2.5%. It therefore logically follows that both of you would also oppose the outright elimination of the tax, or a phased elimination of the UUT, and would recommend the same to the members of the Council. At that same meeting, you told us ?? and Mr. Thomas agreed ?? that you would oppose our "Taxpayer League Plan" ?? either urging a "NO" vote against it in chambers or opposing it if the League proceeded to the ballot in that form.

Again on November 1st, both you and Mr. Thomas stated that you would oppose a simple 2% reduction in the UUT ?? from 7.5% to a permanent rate of 5.5% ?? even though a prior city council had promised to reduce the tax to 5%, and in just 4 years, the total amount of revenues received by the city from the lower tax rate would actually meet or exceed the current year revenue levels.

Obviously not willing to take "NO" ?? or more correctly, a handful of "NOES" ?? for an answer, League officials and I have nonetheless spent the last month working with city staff to identify any potential "areas of agreement" in a last?gasp effort to see this council provide SOME modicum of relief to the taxpayers of the city. Yet all we have to show for these efforts are unconfirmed newspaper reports of an increase in the utility tax rebate program...which last year provided a mere 6,000+ refunds out of a total city population of 425,000. And which while budgeted to rebate some $700,000 somehow only provided taxpayers with less than $430,000 in actual rebates...a mere 62% of budgeted funds.

If that same 62% success rate were the free throw percentage of a Sacramento King, members, there can be no doubt that the player in question would be cut from the squad for failure to perform.

Yet even if what I read is true, such a small expansion in the rebate program ?? while long overdue and certainly necessary ?? would not address the essential goal of the League for across?the?board rate relief for EVERY Sacramento taxpayer. The single mother making $2,200 a month while barely making ends meet would get NOTHING. The young married couple making $30,000 a year while incurring the same amount of annual debt to finish graduate school would get NOTHING. The two?income couple making $2,000 a month each ?? hardly the income of modern?day plutocrats ?? would get NOTHING. And of course, every business taxpayer or middle? and upper?income wage earner would get the same: NOTHING. In light of the failure to see these taxpayers realize any relief, I and the League take little comfort in knowing that without our efforts of the last several months, this Council would be proposing the same to even the poorest members of the community: as in last year's budget, and during the height of the energy price spikes, NOTHING.

While I could go on for literally hours detailing the extraordinary efforts of the Sacramento County Taxpayers League in first studying this issue and subsequently forwarding its proposal for your consideration, let me address one final set of statistics and move to my closing comments. At every meeting I have attended with city staff, I have been presented with the same spreadsheet. As I noted earlier, this is the one which purports to show $13.8 million cuts in police, $7.6 million in fire, and anywhere from 17?24 percent across?the?board cuts in all other services as a result of our plan.

Let me be unambiguous and unequivocal: Both before the tragic events of September 11th, but particularly in their aftermath, to even consider any reduction in essential police, fire or other protective services is nothing less than unconscionable. The Sacramento County Taxpayers League opposes any such cuts in these services as entirely unnecessary, unwise, and I daresay the voters and taxpayers of the City of Sacramento will join us in telling you they are unwanted. In fact, it is my belief that the League would actually support the council in making any such increases in funding to these vital programs as our law enforcement experts deem vital to the public safety during these uncertain times from existing reserves. Period. Paragraph. End of story.

Furthermore, a full and fair review of our plan-- with its gradual, phased-in reduction in the UUT rather than an immediate reduction to the 2.5% rate as you insist on incorrectly portraying it -- clearly puts the lie to the need for any such kind of Draconian cuts in these vital programs. And this, I might add, is before the city makes a single dollar change to any of its other existing spending priorities, let alone considers using even a small percentage of its reserve funds (currently between $13 and $19 million) to address the short?term impact of an increase in police and fire services.

Furthermore, a simple six-month extension in the effective date of the Taxpayer League Proposal -- from July 1, 2002 to January 1, 2003 -- would yield several million dollars in additional revenues for the FY 2002-03 budget year...all of which could be used to augment public safety services in the crucial year ahead. Yet when there is absolutely NO intent to seek real, substantive, permanent across-the-board tax reduction, it should come as no surprise when no options or alternatives are offered.

Given the time constraints of tonight's meeting I must sadly but necessarily be incomplete in a review of these and other salient facts and figures, so let me quickly conclude with two final points, both of them personal in nature. First, on behalf of the Sacramento County Taxpayers League, I am pleased to commit our considerable public policy expertise and resources to being a constructive part of any dialogue to address the city's finance picture...in this budget year and beyond. As I stated earlier, the tone of this debate should match the seriousness of the issue...and it is my sincere belief that in the aftermath of September 11th, the public will demand a far more civil tone to its civic discourse, as well as condemn any effort to use the profound tragedy that struck our nation to aid a particular political cause.

Finally, as I urge you to approve our Taxpayer League Plan to bring real relief to all who pay the city utility user tax, let me indulge my personal passion for tax relief for those of least financial means, and provide you with a very tangible and real-life example lest we forget just what -- and more importantly, who -- this debate truly is about.

Earlier today, I went to the Safeway supermarket on Alhambra Boulevard in the heart of the city, armed only with a budget equal to the same $68.59 that city staff states is equal to the average rebate for the existing tax rebate plan, not the $132 to $220 that the average residential family would save upon full implementation if you were to approve the Taxpayers League Plan.

While city staff, many of those assembled in this audience, and indeed many on this council will advocate for no tax relief at all, and argue that an annual tax reduction of $68 is a pittance compared to the cumulative use of those same dollars in the provision of government services, I ask you to examine the contents of these grocery bags. Reflect upon what this means to that single mother...to that senior on a fixed income...to the two students balancing work and study, or to that dual?income family with children in daycare, let alone the single working parent with the full?time parent at home. Ask yourself ?? or better yet, ask them ?? if taking this food off their table is the right thing to do.

If an appeal to across?the?board rate relief is unavailing -- let alone a tax cut for the businesses which provide the jobs and serve as the economic engine of our community -- think of these poorest residents of the City of Sacramento, and know that whatever action you may or may not take this evening or on this issue, the Sacramento County Taxpayers League stands with those taxpayers and all taxpayers of the City and throughout the County of Sacramento, and stands ready to take this issue directly to the voters for their approval if necessary.

I thank you for the opportunity to express our views, and strongly urge your support and adoption of the Taxpayers League Plan. I welcome the opportunity to answer any questions you might have.

Officers