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Tax Fax : July 2003

CATO INSTITUTE’S NEWS RELEASE ON PROPOSITION 13 On June 19th CATO Institute, a non-profit public policy research foundation based in Washington, D.C. issued a news release titled, “25 years of Proposition 13: It didn’t go far enough”. The study by Michael J. New, of Harvard-MIT Data Center, examines the successes and failures of California’s watershed state spending referendum, which bears directly on budget problems in California. The release, in part, states: “This month marks the 25th anniversary of Proposition 13, California’s landmark 1978 tax limitation measure that created the largest state and local tax cuts in the nation. Although Proposition 13 is noteworthy for prompting similar spending limit rules in other states and providing the momentum for President Reagan’s 1981 tax cut, according to a new study it was not broad enough to properly constrain government spending. Proposition 13 nearly halved California’s property tax from $11 billion in 1978 to $6 billion in 1979, and the measure remains in effect today. The tax cuts also helped the state’s economy grow at a pace faster than the national average and reduced unemployment, according to New. However, TELS (tax and exemption limitations) passed in the 1990s in Washington and Colorado have been much more effective because they limit spending growth to population growth plus inflation. Colorado’s Taxpayer Bill of Rights (TABOR) is described by New as “the most successful TEL” because it limits spending growth, calls for surplus refunds, and is constitutional, so that it cannot be revoked by legislation. Thanks to TABOR, Colorado reduced taxes by $3.2 billion from 1997 to 2001.” “A well designed TEL, such as Colorado’s TABOR, can restrain spending growth and provide tax relief,” writes New. But it should also include ways to eliminate or privatize unnecessary government programs as a means to reducing spending. New recommends sunset commissions, like the one in Texas that constantly looks at state programs for waste and duplication. He concludes, “While TELS focus on aggregate state budgets figures, sunset mechanisms are a great complement to cut unneeded programs and provide the lean efficient state governments that American taxpayer’s deserve.” CITY OF SACRAMENTO UTILITY RATE INCREASES On June 3rd the City of Sacramento approved raises in City operated utility rates by roughly 10% for the next two years. The rate increases cover increased costs of operations and other costs associated with garbage collection, lawn and garden refuse collection, sewers, and water service. The increases are supported by the Taxpayers League. The repairs and upgrades to the sewer system, now over 100-years old, are essential and expensive. Increased water treatment cost, additional facilities, and replacement of rapidly deteriorating pipelines, coupled to increasing costs for handling of green waste must also be covered. However, piggybacking on the rate increases is an 11% windfall Enterprise Fund Tax (EFT), tied to sum total of the rate revenue currently raised, which will be diverted to the city’s General Fund. This windfall tax was challenged by the League, both during the hearing and by letter to the City Council. In 1999-2000 the tax brought in $10,916,000, in 2000-2001 it brought in $11,320,000, and in 2001-2002 it raised $12,059,00. It was budgeted at $12,360,000 for 2002-2003 and at $13,263,000 for 2003-2004. The increases, due solely to rate increases over the last four years, could add an additional $1,943,000 to the General Fund. Our argument is that this additional money has no relation to the City’s cost of service for providing the utilities services. The City was advised the League Directors decided the 11% EFT provides the same kind of regressive windfall tax for City provided service as does the 7.5% Utility User Tax on electricity, natural gas, telephone and cable television, and voted to begin a program aimed at elevating public awareness of both these regressive taxes, and to once again try to reduce both by negotiation with the City if possible, or by direct action if necessary. SACRAMENTO CITY MOVES TO USE PUBLIC MONEY FOR CITY ELECTIONS In 1998 the City of Sacramento established a Campaign Finance Advisory Committee to develop recommendations as to future campaign financing limits for the City. A number of recommendations were made, but the limits recommended, use of public financing of campaigns, and a recommendation not to submit the plan to a public vote remained unresolved. In August 1999, the League sent the City a letter opposing partial public financing of City elections and opposing the recommendation not to submit the use of public money to a vote. In December 1999 the City put off any decision on the recommendations. It turned to its staff to write a campaign fund limits law, and a discussion of public financing, among other requests. The Associationagain protested public financing of elections without a vote of City residents. In May 2000 the City staff took a first cut at the problem of financing City elections and recommended against public financing. The Associationwrote the City, expressing pleasure that the staff did not recommend public financing, and for the third time advised we would oppose any recommendation made that would involve City taxpayers’ partial financing political campaigns without a vote of the City residents. In November 2000, the City approved an Ordinance limiting campaign contributions to City Council and Mayoral candidates. During the hearing California Common Cause and the League of Women Voters advocated partial public financing, along with the former chair of the Citizens Advisory Committee. However there was no resolution, and the hearing ended with the question of public financing still unsettled. The Associationregistered its opposition to public financing without a vote for a fourth time, and in the December 2000 Tax Fax put the issue in its TAXES TO WATCH box. It has been there ever since. In April 2002 the Committee presented a plan covering the issue of public financing to the City Council. The Bee wrote it, “would allow candidates to receive a dollar-for-dollar match, up to $320 of public money for each private campaign contribution they obtain.” And the recommendation set limits for campaign expenditures. This time the Committee recommended it be put to vote on the November ballot, and that the money, about $200,000, come from a source other than the General Fund. The Council directed staff to bring back the public financing item after the November election in order to assess the City’s financial situation when considering the issue. In addition, the Council instructed that staff propose a mechanism that would trigger public financing of campaigns. This delay instruction was predicated on the success or failure of the Taxpayers League’s Measure T, which would reduce the 7.5% Utility Users Tax to 2.5% over a five year period. As a result of the Council’s instruction, the vote on public funding did not appear on the November Ballot. However, the City Council did put a pay raise for themselves and the Mayor on the ballot, and included making the Mayor’s position full-time. It passed, and unfortunately for the City residents, Measure T failed. On June 5th of this year, the Staff presented its recommendation for The Public Financing-Financing Component as a portion of budget hearings. The proposal for triggering funding to support public financing of campaigns, and placing the funds in a separate account for this purpose, involves three things (1). Achieving a 10% General Fund reserve, (2). Growth in cost of providing existing services and programs does not exceed tax revenue growth. (3). Unallocated funding is available. If the triggers are met, the Council would consider appropriating funding to the public financing fund as part of their budget deliberations. The total amount of City matching funds for each primary and general election is estimated at $237,000. As well as we can determine, the City has negated its plan to put public financing to the vote. Instructions are for staff to begin preparing for the election of Council Members in March of 2004, and to plan on having available about $300,000 in public money to partially fund City elections. There is to be a review of progress sometime in September. CITY SIDEWALKS ARE TROUBLESOME TO MORE THAN JUST THE HANDICAPPED A Member has called our attention to a 1978 City of Sacramento Code (12.32) covering sidewalks that holds a property owner responsible for repair and upkeep of sidewalks that front their property. The unusual feature in the requirement is that in our Member’s case the City actually owns and holds title to the land under the sidewalk, yet passes all responsibilities concerning it to the adjacent land owner. In the existing arguments and agreements between the City and the disabled about sidewalk conditions some interesting “findings” reported by The Bee have evolved that might make an argument that sidewalks are a city responsibility when they own the underling property. For example, in the disabled dispute aimed at the Supreme Court, the Solicitor General’s brief stated, “Laying and maintaining a network of walkways, or sidewalks, for pedestrians to move about is one of the first and most elementary functions of a municipality.” Also in the game is a 9th U.S. Circuit Court of Appeals opinion extending the law’s reach to existing sidewalks. “(The) prohibition of discrimination in the provision of public services applies to the maintenance of public sidewalks, which is a normal function of a municipal entity.” Another statement in a Bee editorial, wherein the City argued it has no obligation to make the sidewalks between the curbs passable, drew the comment that, “It’s an absurd argument.” It would make an interesting argument in law whether the City, by fiat, can hand off one of its responsibilities so easily. Even more interesting would be if it actually had the sidewalk built, and then refused to maintain it. A COMMENDATION FOR COUNTY PUBLIC WORKS DIRECTOR WARREN HARADA Sacramento County has provided a Notice of Proposed Rate Increases to residents of the unincorporated area, the Cities of Citrus Heights, Elk Grove, Rancho Cordova, and portions of the Cities of Sacramento and Folsom. Proposed monthly increases are $3.50 for flat-rate water customers, and $1.80 for local sewer service. The County’s need for additional money is to upgrade its sewer system’s maintenance, and to comply with increasingly more stringent federal and state regulatory requirements. The water rate increase is needed for operating and maintenance costs, mirroring some of the same needs as the City of Sacramento. No rate changes are listed for regional sewer service, refuse (garbage) service or drainage management. However, of interest to the League is knowledge that the County has a utility tax on the regional and local sewer systems, similar to the City of Sacramento’s Enterprise Fund tax. There are two major differences. First, it is a 2.5% tax rather than an 11% tax, and second, it appears as a utility tax on ratepayer’s bills, rather than being hidden in the budget as “other revenue.” The Taxpayers League has carefully followed the County’s Department of Public Works activities with respect to refuse rates, based on a promise made by Public Works Director Harada to the Board of Supervisors on September 5th of 2001. At the time Public Works was asking for a refuse monthly rate increase of $2.40. Then League Executive Director Sullivan had been fighting refuse rate increases for 3 years, asking for return of $13.5 million illegally transferred from the Waste Management Enterprise Fund to the General Fund after passage of Proposition 218. He had recommended in August 2001, for the third time, that a makeup funds transfer could be made from Tobacco Litigation Settlement Funds to the Waste Management Enterprise Fund, which could offset the need for rate increases for 3 years. The Supervisors asked Public Works to look at its funding requirements again. Director Harada reported in the September 2001 Board meeting that after reviewing financial options, Waste Management found the rate increase would not be necessary, nor would there be a need for increases in the next 2 to 3 years. Tobacco money transfer was part of the consideration. September 2003 marks the second year that Director Harada has kept his promise. And, as there is no request for a refuse rate increase this next year, and as rates do not become an issue again until September of 2004, the rate should remain constant for three years. The Associationcommends Director Warren Harada. He keeps his word. BUDGET ACCOUNTABILITY ACT INITIATIVE Californians Against Higher Taxes is raising a Coalition to fight the deceptive “Budget Accountability Act” which sounds as though it will penalize legislators for failing to pass a timely budget. But what the Initiative will really do is to also lower the threshold for approving a budget to a 55% vote of the legislature, rather than the two-thirds vote required by the State Constitution. It simply makes it easier for the Legislature to pass a budget, and to create new taxes. It’s a “sounds right” Initiative that contains a poison pill to kill taxpayers. Those forming the Coalition call this new effort to provide an easier means of creating taxes, the “Blank Check Initiative.” There is no doubt it is a major attack on the State’s economic engine. There are over 100 bills in the Legislature right now that would raise about $65 billion in new taxes and fees. If the “Blank Check Initiative” succeeds, the tax and spenders will pass every one. One such bill alone aims at expanding sales taxes to the Service Industry, the infamous “Hair-Cut Tax” of old, which was passed over by the Legislature with a laugh many years ago. Now its back, and it isn’t funny. It could take away as much as $30 billion a year in surcharges from all those using any type of service in the state, if the “Blank Check Initiative” is successful. The Taxpayers League will consider joining the Coalition at its July 19th Board Meeting. A FUNNY THING HAPPENED AT McDONALD’S! During the Measure T campaign last year, then President Richard Mersereau, and then Executive Director Joe Sullivan, working independently putting up signs advising voters: “For a FAIR Utility Tax, YES on T” found they both used McDonald’s as a watering hole. That in itself is not unusual, but both were struck with an oddity on the receipts they received for what they ordered. As a result, both kept their receipts to show to the other guy. Richard had ordered a coke, and drank it at a table at McDonald’s. His bill was $1.82 including an “Eat in Tax” of 13 cents. Joe, at a different McDonald’s, ordered a chocolate (is there any other kind?) shake, and took it with him as he drove around posting signs. His bill was $2.10 including a “Take-Out Tax of 15 cents.” So it doesn’t matter whether you eat in or take out, McDonald’s is going to tax you anyway. However the Eat in Tax is 7.7% whereas the Take-Out Tax is 7.5%. So if you want to save tax money, leave McDonald’s, because if you don’t, they will hit you with a higher tax. Looks like something State Senator Ortiz would dream up to nail wide-eyed sugar drinkers. NOTHING HAS CHANGED “The world is too big for us. Too much going on. Too many crimes. Too much violence and excitement. Try as you will, you get behind in the race. It’s an incessant strain to keep pace and still you lose ground. Science empties discoveries on you so fast that you stagger beneath them in hopeless bewilderment. Everything is high pressure. Human nature cannot endure much more.” Atlantic Journal editorial, May 16, 1833 MEMBERSHIP RECRUITMENT Our Members constitute the League’s strength, and we need our Members to recruit others to enlarge our base. Taxpayers are being assailed as never before, and every level of government is seeking more money in the form of fees, assessments, rates, and taxes. Locally, the Taxpayers League is the only recognized and organized defender of the County and its Cities taxpayers capable of putting up a viable defense. Tax and rate based agencies are after taxpayer’s dollars now on a grand scale. Over our 42 years, we have successfully defeated many attempts to raise taxes, rates and fees in the County of Sacramento. Such battles are expensive, and those we are engaged in now are frightful. Members are reminded that the League is composed of dedicated volunteers who battle not only on Member’s behalf, but also on behalf of people who virtually cannot help themselves forestall the onslaught. To be successful we need present Members to strengthen the League by recruiting friends and associates to help, and to donate money to the General or Defense Fund if possible. We’re in a war, and we need new tax fighting warriors and money. LETTERS TO THE ASSOCIATION We seek “Letters to the League” from Members concerning projects and issues on which we are working, along with recommendations on those we should look at. Letters may be edited and republished in any format, primarily in the interest of available space. Send letters, faxes, or e-mail to the Sacramento Taxpayers Association. Our e-mail is info@sactax.org; our telephone and fax number is (916) 921-5991; and our address is: Sacramento Taxpayers Association 1832 Tribute Road, Suite 210 Sacramento, CA 95815 Auburn Dam The Sacramento Bee June 24th Editorial “Seize the moment” alluded to the possibility that Congressman John Doolittle may decide to join Congressman Robert Matsui in agreeing half-a-loaf is better than no bread at all, when considering flood control improvements for Sacramento, and water supply for Placer and El Dorado Counties. In the past, and through today, both Congressmen will tell you the Auburn Dam is the correct solution for flood protection of the Sacramento Valley. After two failed attempts by all our local Congressmen to get Congress to authorize money for a flood control dam at Auburn that could be expanded to hold water, provide electric power and enhance recreation, Congressman Matsui opted for an alternate solution offered in Corps of Engineers studies. He now seeks to raise Folsom dam seven feet, along with strengthening the valley’s levees, to get the 200-year storm minimum flood protection local elected officials seek. His explanation is that’s about all we can hope to get from Congress in the form of money for additional flood protection. With respect to Congressman Doolittle, The Bee Editorial quotes him as saying, “Since it [an Auburn Dam] does not seem capable of being built prior to some catastrophe, despite my best efforts, I will simply look for interim measures until that day finally happens.” From this, comes the implication he will join with Congressman Matsui. The Taxpayers League is a long time supporter of the Auburn Dam, and we fear, as does Doolittle that a flood, greater than the 200-year occurrence will hit us, inundate the Valley and City of Sacramento, causing extensive damage and possible loss of life. And when this occurs, the locals will say, “Why didn’t we listen to John Doolittle?” Congressman Doolittle’s web site issues section warns that 400,000 people live in the area which would be flooded, and that the Corps has determined that a flood could leave the area under water for as long as 60 days. Damages — not including costs for local and statewide business disruption — could be over $16 billion for a 400-year flood. For the League’s complete history of the Auburn Dam, Click Here. Carl Burton

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