LA PALMA : Tax: It’s Not Needed but Official Wants It

The City Council will hold a special meeting today to consider approving a tax on utilities that would be triggered only if city finances continue deteriorating.

The city does not yet have a need for the tax, City Manager Pamela Gibson said. But the opportunity exists now to adopt such a tax because the courts last year invalidated a 1986 state ballot measure that required two-thirds voter approval for nearly all new taxes.

The council now can adopt a utility tax without a vote, Gibson said.

And voters have shown that they are unwilling to vote for a new tax, she said. A 4% utility tax on the 1989 ballot failed by almost a 2-1 margin.

Although residents don’t seem to want new taxes, the council in the next few years might face the choice of raising taxes or cutting services, Gibson said.

The state Legislature and governor showed cities this year that they are willing to dip into local funding to balance the state budget, she said. If the state continues to raid city coffers, La Palma council members will be forced to make serious budget cuts or raise taxes, she said.

“I want the council to understand we’re living in a tenuous position here,” Gibson said. “We have to be real, real careful that we have some safeguards in place, some safety valves in case the state raids our funds some more.”

A change in the local economy also could damage La Palma’s delicate budget balance, Gibson said. Half of the city’s sales taxes come from the city warehouse business, she said. And because the city is so small, closure of a major business in La Palma will have a noticeable impact on the city, she said.

Gibson will raise the tax proposal to the council at a special 5:30 p.m. meeting at City Hall.

Her suggestion will be to set Jan. 1, 1995, as the start date for the tax and have the council decide now what percentage the tax should be. Orange County cities with utility taxes charge an average of about 5%, she said. If the tax turns out to be unneeded in 1995, the council could push the start date further into the future.

Gibson said she is not recommending the utility tax lightly. No one likes to talk about new taxes, she said.

“I can only recommend what I think is good business,” Gibson said. “If the council thinks it’s too painful to contemplate, I can understand that.”