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Tax Fax : July 2004

STATE BUDGET IN LIMBO Governor Schwarzenegger’s exploited verbal approach to how he was going to plan and negotiate a state budget departs remarkably from what is actually happening. As reported in The Bee’s June 30th editorial “A Gray Davis Budget” the Governor uses almost the same smoke and mirrors to conceal and reflect the borrow, defer, and back away from hard choices manner to form and negotiate a budget, the same manner that ultimately resulted in former Governor Gary Davis being fired. GOVERNOR HAS PROBLEM PROTECTING LOCAL GOVERNMENTS FINANCES The state budget is jammed by Democrat Legislators who refuse to agree to a deal made by Governor Schwarzenegger with the California State Association of Counties, the League of California Cities, and the Special Districts Association to help with California’s budget crisis. The agreement amounts to a short-term financial impact on local governments in exchange for a promise of long-term financial stability. The agreements permit the state to use $1.3 billion of local government funds in 2004-05 and 2005-06 (total $2.6 billion) for a promise to make the current car tax cut permanent; to provide revenue stability for local governments by protecting their property tax income; and to protect local governments from unfunded state mandates. The Governor is campaigning to have the Legislature put these protections in place with a Constitutional amendment in November. However, a Coalition calling itself “Leave Our Community Assets Local (LOCAL)” has submitted enough signatures to qualify Proposition 65 for the November ballot, which provides nearly the same protections. If the Legislators do not follow the Governor’s lead, the voters can accomplish the same thing by approving the LOCAL Initiative 65 on the November ballot. GAMBLING PROPOSALS Two gambling Initiatives will be on November’s ballot. One, by the Indians of Palm Springs, removes limits on the games Indian Casinos can offer; removes limits on the number of slot machines and Casinos on tribal land; and extends the current 20 year contracts with the state to 99 years. In return they would pay the state 8.84% of net profit received, matching the present corporate tax rate. Presently Indian Casinos pay no taxes, and nothing into the state’s General Fund. The second Initiative, by racetrack and card room owners, would require Indian Casinos to pay 25% of their net profit to a special state fund. The tribes would have 90 days to agree. If any tribe refused to pay, there would be 16 non-Indian Casinos authorized, 5 at racetracks and 11 at card rooms with a total of 30,000 slot machines. The Initiative proposes that 33% of the gambling revenues from non-Indian Casinos go to a special state fund, allegedly over $1 billion annually, and would be used primarily for additional fire fighters, police and child protective services. As the Initiative requires a set percentage of money to go to police and fire services, Sacramento Sheriff Lou Blanas and Los Angeles Sheriff Lee Baca have become front men for the Initiative. Governor Schwarzenegger, on his part, has renegotiated gambling contracts with five tribes which would provide the state $1 billion up front in the form of a bond to be paid off by the tribes over 18 years. The state would also collect fees on new slot machines of about $150 million a year. In return, the tribes would be free of the present 2000 machines per tribe limit. In addition the Governor has committed to oppose the two gambling Initiatives on November’s ballot. SCORE ONE FOR THE METRO CHAMBER OF COMMERCE AND THE TAXPAYERS ASSOCIATION To avoid having to put a Measure on the November ballot, authorized by law, for voter acceptance or rejection of recommendations made by an arbitration panel working a dispute on a new contract between Sacramento County and the Sheriff’s Union, the two sides sat down and worked out a compromise. The original arbitration decision would have required the County to pay deputies an additional $4.4 million in salaries and benefits on top of what had already been agreed to, give them a 2.2 percent cost of living adjustment, and double the County’s 4.5 percent yearly retirement payment for deputies to 9 percent, relieving deputies from having to pay anything to the retirement account. That would be another 4.5 percent salary increase on top of the total $12.4 million increase already identified. When binding arbitration was originally approved for the deputies, the Taxpayers League and the Metropolitan Chamber of Commerce convinced the Board of Supervisors to place a protective Measure on the ballot that enables the County to ask for voter approval of any agreement reached by arbitration involving the Sheriff’s Union and the County Supervisors. Avoiding the vote on the arbitration recommendations will cost the County another $400,000 in exchange for the additional 4.5 percent increase in yearly County payments to the retirement account recommended by the arbitration panel. The saved money, over $4 million, can reduce the impact of the state budget cuts aimed at the County. CITY OF SACRAMENTO RAISES SOLID WASTE COLLECTION RATES The City of Sacramento raised monthly rates on Garbage and Recycling Collection Service. During the Council meeting Director Carl Burton voiced the League’s objection to the rate increase, and the hidden 11% utility tax built into the increase. Single and two family residents get a 3% increase for cost of operations and maintenance (O&M), and debt payments. Rates for Lawn and Garden Refuse Collection and Street Sweeping Service for single and two family residents get two different rates, one for the collection charge, and the other for street sweeping. The collection charge increased 17.51%. The sweeping charge is not increased. The overall increase is 15.22% for O&M and debt payments. Street Sweeping for Multifamily and Nonresidential Parcels increased $1.19 (66%). Carl and others complaints about the hidden 11% Enterprise Fund Tax (EFT), not disclosed on the City’s utility service bill, had some effect as the Council directed that the tax appear on the bill when the billing system is upgraded. It will be interesting to see whether the federal and state governments react when they discover they are paying taxes to the City. MAYOR FARGO’S DOWNTOWN ARENA, CHAPTER TWO The Mayor and the City Council are back with Chapter 2 of the downtown arena saga. Chapter one aimed at locating the arena at the Union Pacific railway yard, and was abandoned last October. Now, to stagger the imagination, the Mayor wants to tear down about half of the of the downtown east end of the K Street Mall, and plunk the Arena in the shopping area. The Mayor’s arena task force made its presentation at a City Council meeting on June 22nd. Other than presenting an interesting visual of what the arena and its appended commercial enterprises could look like, the effort was woefully short of financial detail. It did not presented related costs of tearing up the K Street Mall, reimbursing displaced businesses income and relocation costs, construction costs, nor where the money would come from. All these issues were raised by questions asked by Council members and public speakers during the meeting. And the crowning glory was the “survey” results presented. The findings came unglued by the questions asked. It was described by David Holwerk’s Editorial notebook in the Bee on June 14th, titled “Arena poll: Pushing to uncertainty” as a “Push poll”, aimed at determining what pushes for or against the downtown arena, rather than asking for a direct yes or no answer as to whether the arena should be built. During the meeting a number of speakers, Council members, and general public attendees insisted that the question of a downtown arena be put to a vote of City residents in November. A June 22nd Sacramento Bee editorial, titled: “On the Ballot? Whoa!” covered the proposal that was made, and opposed putting the vote on the November ballot. The editorial ended with: “It’s understandable that council members are tired of wasting their time on this issue. But that’s no reason to waste voters’ time on it come November.” Notwithstanding the lack of financial information, on the 29th the Council asked City Manager Thomas to create a financial comparison for two new arenas, one downtown and one in Natomas before July 23rd. The information will be reviewed by the Council, and if considered sufficient will be used to put Measures on the November ballot. From the League’s standpoint, if the Measures propose use of public financing, the League will join, or form a Coalition in opposition, and will help explain to the public precisely why the proposals should be defeated. A VOTE ON A STATEWIDE TAX ON 911 EMERGENCY TELEPHONE SERVICE For-profit hospitals and emergency doctors in California, having trouble funding their emergency rooms, want to subsidize emergency room costs by increasing the 911 tax on land-line telephone service. The original 911 tax was created to cover the cost of establishing and operating 911 communications services throughout the State. The hospitals want to raise the State’s 911 tax for communications by 3%, which would bring in about $540 million each year. However, it would leave less than one-percent of the increase in the 911 services account. The Proposition has qualified as the “911 Emergency Care Initiative” for the November ballot. Of interest is that the major supporters of the Initiative, i.e., the California Healthcare Association, that formed the Coalition to Preserve Emergency Care, which launched the Initiative, has withdrawn their support. The Associationtook a position in opposition to the Initiative at the June 17th Board meeting, reasoning that the Initiative funding hospital services is unrelated to a tax created to provide for an emergency communication system. CITY AND COUNTY PROPOSING LOCAL FEE ON 911 EMERGENCY TELEPHONE SERVICE In an attempt to raise revenue to improve the 911 local emergency telephone system, the City and County of Sacramento are preparing Ordinances that propose to set fees on the 911 charge on land-line telephone bills. The charges will provide about $16.5 million and $25.8 million to the City and County respectively to pay for personnel, training, software, and upgrades to the telephone system only. In the County businesses could be charged $20 and local land-line telephones about $2.70 per month. In the City businesses could be charged about $27, and land-line telephones $3.60 per month. The proposed fees would not apply to hospital phones , non-profit organizations, schools, and state and federal agencies, among others, which make up 22 percent of County phones and 45% of City phones. Mobile phones are also exempt, as they are answered by the California Highway Patrol, and routed to local fire, police, and sheriff agencies. Notwithstanding the need for the system upgrades, there are major questions that must be answered. Among those are whether the “fees” are actually taxes, being imposed without a vote of the public. The “fee” approach is being attempted by a number of Cities and Counties, and is being challenged in court. The challenge is that the 911 fee is an illegally imposed tax as Proposition 218 requires voter approval for application of a surcharge on customers who do not derive any direct benefit or use from the 911 system. In simple terms, the 911 communication system is simply a link alerting a “provider” that a “client” needs service. And the “provider’s service is funded in the traditional ways that police and fire fighters are funded now, i.e., by the General Fund of the municipality “owning” the service. Further, it is obvious that services other than “emergency” would benefit from the “fee” income. This was graphically demonstrated in a July 2nd article, “Cops may lose some horsepower” in The Sacramento Bee wherein it related that the City may lose its mounted police force due to a budget shortfall. The City’s budget manager related that the mounted unit could be saved if the proposed 911 telephone tax takes effect by stating: “It frees up other money in the police budget to allow permanent restoration of those positions.” The City Manager, and the County Sheriff, have asked to meet with the Taxpayer Association's’ Board, before the Board makes a decision on the position to be taken on the fee/tax issue. The Associationagreed to do so, if possible. MEMBERSHIP RECRUITMENT Our Members constitute the League’s strength, and traditionally new Members are recruited by our present Members to enlarge our Membership base. Taxpayers are to be assaulted as never before for additional money from every level of government 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. Over our 43 years, we have successfully defeated many attempts to raise taxes, rates, fees, and assessments in the County of Sacramento. Such battles are expensive. And those we are engaged in now, and new attacks to be faced, are frightful. Members must remember 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 more Members working to strengthen the League by recruiting friends and associates as League Members. 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 number is (916) 921-5991. Our fax number is (916) 567-1279. And our address is: Sacramento Taxpayers Association 1804 Tribute Road, Suite 207 Sacramento, CA 95815. CONTINUATION OF ONE-HALF PERCENT SALES TAX FOR TRANSPORTATION On June 10 the Sacramento Transportation Authority approved an Ordinance providing for the continuation of the current one-half of one percent of retail transactions, and a new user tax for local transportation purposes (Measure A) that is due to expire at the end of 2008. During the next few weeks, the County and cities will act on the Expenditure Plan component of the Ordinance and may place it on the November 2 ballot for voter approval. In 1988 the Sacramento Taxpayers Association was the chief sponsor of Measure A. We asked the voters in the June primary to pass Measure A and it went down to defeat because of lack of support from elected officials. But in November of that year our elected officials put it back on the ballot, and with our support, Measure A passed. The major differences between this-years Measure A and the one in 1988 are: The new Measure A continues for 30 years from 2009 upon approval by the voters vs. 20 years in the one voters approved in 1988. The new Measure A requires a fee of $1,000.00 per new single family unit; $750.00 for a multi-family unit; $2.50 per square foot for new retail building space; $2.00 per square foot for office building space; and $.50 per square foot for industrial or warehousing space. 3. Bonding Authority is now given to the Sacramento Transportation Authority to sell or issue bonds, or other evidence of indebtedness before the collection of taxes. The way the tax money is divided between interests wanting a share of the money, with some money going to preserve open space in the County, and less money going to roads. For the first time an independent taxpayer oversight committee is appointed by the Authority in order to make sure the money is spent appropriately. This draft Ordinance is now under consideration by the County and Cities and they have an opportunity to make changes. Sacramento County and its Cities by early August must approve the ordinance to have it appear on the November 2004 ballot. The Sacramento County Taxpayer’s League will wait until we see the final version of the new Measure A to make our recommendation to support or not to support the ballot Measure. To view or print a copy of the Ordinance go to: http://sta.sacramento.ca.us Carl Burton, Director

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