Monday, April 4, 2016

Argument against extending the Utility User Tax

NOTE: The following is my principle argument against Measure D. An abridged version will appear in the voter guide that is circulated around the end of April. 

In 2009, the City Council declared a fiscal emergency to justify a Utility User Tax (UUT). The purpose of this temporary, 10-year tax was to weather the effects of the recession (ie. the collapse of property values, home sales, and indiscriminate spendingor, more accurately, the municipal revenue derived from property tax assessments, the tax on real property transfers, and sales tax).

The 2009 city staff report on the subject predicted that "...it will take a number of years for valuations to return to current levels, in what could be a 7-10 year recovery for real estate values."

Now, 7-years later, property values have indeed recovered, and there are hundreds of residential units currently in the city's planning process. It might actually be said that the economy is doing rather well.

So from now until 2019, when the UUT is set to expire, the city should reap a windfall. It currently has restored revenue levels, the supplemental revenue of the UUT, and, of course, the added bonus of having new revenue from our elevated sales tax, which is now at 10%the highest in the state.

The bottomline is that an extension of the utility user tax should no longer be necessary. To suggest otherwise is an admission that the City is budgetarily inept, and that we’re perpetually stuck in a state of emergency.

Speaking of emergencies, instead of incessantly threatening to cut emergency services if we don't pass every tax measure it conceives, the City ought to be reining in the highest compensation levels of its emergency service personnel. Visit TransparentCalifornia.com and count the number of Hayward firefighters receiving total annual compensation amounts of over $300,000. You’ll be shocked.

Regarding the UUT itself, most have no idea what they’re being taxed on or the specific amount they pay each year… Do you?

Some utilities are taxed; some aren’t. Electricity is taxed; water isn’t. Gas is taxed; sewer isn’t. Xfinity TV is taxed; Dish TV isn’t. Landline phone service is taxed; free VoIP phone service can't be. Cell phone service billed to a Hayward address is taxed; service invoiced elsewhere (such as a prepaid/no-contact account or a friends and family/employer plan) can't effectively be taxed either.

The tax is ridiculously confusing. The ordinance that defines it is 26-pages long. It's so complex that immediately following its passage the City hired a consultant to help manage it. Not long after, it was discovered that the City was in receipt of UUT money collected for providing Internet access. This is prohibited by the Federal Internet Tax Freedom Act. Subsequent refund requests were denied, and a costly lawsuit ensued (Sipple v. City of Hayward). In its decision, the appellate court stated the shamefully obvious: keeping the improper tax would leave the city "unjustly enriched at the expense of [the service provider's] customers."

But that wouldn't be the only injustice here. That's because there’s no logical correlation between this confusingly applied tax and an individual’s burden on city services. Individual neighbors requiring the same level of city services can be taxed significantly different amounts based on the manner of their utility consumption.

An individual having Dish TV, free VoIP home phone service, a no-contract mobile phone, and a solar array that can generate all needed power might not pay anything toward city services via this tax1. While someone who has Xfinity TV, a traditional landline phone, a cell phone billed to their Hayward address, and all PG&E provided power may be paying hundreds annually.

This is plainly unfair, and it shouldn't continue.

But that isn't the only reason.

The UUT, in conjunction with all of the other wonderful taxes, fees, and assessments that have been enacted lately, is killing the golden goose—our crucial business sector.

Despite a booming economy, our city is struggling to attract and retain good businesses. Consider Hayward’s largest for-profit employer, bus manufacturer Gillig. This celebrated company has given up on Hayward and is moving to Livermore—our nearby neighbor that has no utility tax, no emergency facilities tax, and a lower sales tax rate.

Do you think Tesla would remain in Fremont if that city were to impose taxes on the utilities upon which its highly automated factory depends—adding another 5.5% or so to production costs? Not likely.

These taxes have a huge impact on a business's bottomline. Neighboring Dublin understands this. It attracts new businesses, like IKEA, by trumpeting the fact that it doesn't have any utility taxes.

In conclusion, the UUT's purpose has been fulfilled. Extending it until 2039 simply relieves the city from budgetary constraints that demand efficient operations and tough decision making. Don't extend an unnecessary tax that is plainly unfair and bad for business.

Vote No on Measure D.

More...
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1It should be said that the UUT ordinance does attempt to tax just about every utility under the sun, including solar energy. The City expects those who generate their own off-grid electricity to measure, calculate, self-report and remit a proper tax amount. Similarly, if you use propane tanks for your barbeque grill, you'll also need to send in your tax if it wasn't already collected at the filling station. If you subscribe to Netflix, then yes you too need to remit your tax on video services to City Hall. Do I even need to suggest how ridiculously impractical and unrealistic all of this is? Just this year another new law took effect that requires the collection of the UUT by retailers at the point-of-sale for prepaid cell phone minutes. This means that purchasing prepaid cards at Southland Mall will cost you 5.5% more than if you buy them at Stoneridge Mall, since neighboring Pleasanton doesn't have a UUT.

6 comments:

  1. http://transparentcalifornia.com/salaries/hayward/ we have greedy claiming needy who duped us and looped us.

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  2. Pretty good post. I just stumbled upon your blog and wanted to Say That I Have really enjoyed reading your blog posts!

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  3. Thank you for the compliment, Practice One.

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  4. I just discovered your blog. I am extremely surprised at the salaries of our city. Unfortunately I am an immigrant and I cannot vote.

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  5. Thank you for the note. It's ironic that those who are born with the privilege of voting rights do not appreciate it or avail themselves of it; while non US-citizens better appreciate and desire the opportunity. Best wishes to you if you're pursuing this goal.

    ReplyDelete