Sarah Henry, public information officer for the City of Alameda told Action Alameda News that discussion of modernizing the utility tax was underway before Zachary Ginsburg, of Alameda, filed suit against the City of Alameda last year, alleging that the transfer of surpluses from the city-owned utility to the general fund amount to an illegal special tax.
Henry said that the funds transfer started in 1914, has been consistently at the same rate, and is grandfathered in. “Our legal team believes the city will ultimately prevail in the lawsuit,” she said.
Nonetheless, city officials seem to be looking for a belt to go with their suspenders on the lawsuit – voter approval in November would give them cover to argue that voters indeed approved what Ginsburg is calling an illegal tax.
The utility’s website reports that, “since 1887, [Alameda Municipal Power] AMP has contributed more than $75 million to the City of Alameda’s general fund.”
AMP transfers $2.8 million annually directly to city coffers, and provides roughly $900,000 in electricity and maintenance for street lights, for a total of $3.7 million.
Ending the transfer would create a significant hole in the city’s general fund budget; having to repay past transfer to the electrical utility could be a financial disaster.
On Monday, the public utilities board, which oversees Alameda Municipal Power, approved a $64 million budget for the fiscal year ending June 30th, 2017. Draft budget documents include the annual $2.8 million transfer to the city’s general fund.
The utility users tax is paid by residents on certain bills such as electricity, gas, cable TV and telecommunications. However, the letter of the enabling ordinance hasn’t kept pace with new technologies like Voice-over-IP telephone service.
Additionally, Henry said, not all utility vendors apply the tax consistently. The upshot is the city is losing out on about $1.5 million in tax revenue per year.
Henry said revenue from the tax has steadily been declining. The combined ballot measure in November is intended to return tax revenue to 2007 levels.
The revenue increase would come not from an increase in the rate, which would remain at 7.5 percent, as set in 1998, but from broadening the tax base.
Within Alameda County, Henry said, only the cities of Piedmont and Alameda haven’t modernized their utility users tax.
A recent full color glossy mailer sent to Alameda residents to educate them about the Utility Modernization Act, the measure that combines the funds transfer and utility tax updates, cost the city about $17,600 and arrived in Alameda mailboxes on the same day a similar glossy mailer from the school district, prepping voters for an early renewal of a seven-year school parcel tax approved in 2011, arrived. (Henry: “I know! I recently started with the city and if I had started earlier I would have co-ordinated with the school district so both our mailers didn’t arrive at the same time!”)
The city mailer included a comment card for residents to complete, asking residents about services other than public safety, street maintenance, libraries and parks they thought officials should prioritize; the mailer also urged residents to respond as city council was about to take action.
Henry conceded that, because both the utility users tax and AMP transfer funds go into the city’s general fund, there is no way to earmark or otherwise designate a use for the funds. “The intent of the mailer was to introduce the idea of the measure. The poll [comment card] was to get general feedback,” she said.
City council is expected to review the ordinance and ballot measure on July 5th.
Ginsburgs legal complaint and the city’s response are reproduced below.