Utility tax passed in '06 up for renewal - The Explorer: Pima Pinal

Utility tax passed in '06 up for renewal

2-percent tax caused stir when passed; set to expire in April

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Posted: Wednesday, February 25, 2009 12:00 am | Updated: 1:25 pm, Mon Apr 18, 2011.

An acrimonious series of votes that divided the Oro Valley Town Council, the community and prompted threats of a referendum and lawsuits, preceded the adoption of a utility sales tax in 2006.

Now, with the tax set to expire April 1, some council members have begun to stake out their turf on the levy — a $1.5-million source of income for the town, which faces a projected $5 million budget shortfall in fiscal 2010.

The council could vote to renew the tax on Wednesday, March 4.

“I still don’t support it,” Councilman Bill Garner said.

This isn’t the first time Garner has come out against the utility tax.

At a recent council meeting, during which budget issues were discussed, he also spoke out against the 2-percent tax residents pay monthly on water, gas and electric service.

“I’m not going to support any new taxes,” Garner said, adding, “I’m going to support the sun-setting of the utility tax.”

Two previous attempts to adopt a utility tax had failed.

When the tax finally passed in 2006, Garner, then a private citizen, opposed the fee and even helped spearhead a failed drive to have the matter put on the ballot.

Garner said that he and other opponents of the tax later considered suing the town because they believed that council members changed the wording of the tax provision after holding an initial public hearing.

That would have required the council to hold an additional hearing before voting on the tax, Garner contends.

When passed in 2006, part of the rationale for the utilities tax was the need to fund 18 new town jobs. Most of those were in the police department.

“There wasn’t a true need for those positions,” Garner said last Friday.

Even if there had been a need for the new jobs, Garner said the previous council should not have tied their funding to a tax with a built-in expiration date.

“The utility tax should not be used for recurring expenses,” Garner said. 

Moreover, he said the previous council did not take into consideration the cost increases of annual pay raises for the additional employees.

“I can’t help it that previous town councils put this on and didn’t think of the unintended consequences,” Garner said.

When the council approved the tax in 2006, one of the justifications for including an expiration date was that new retailers in town would make up the difference in sales taxes.

Sales tax revenue has increased since fiscal 2007, when the utility tax was adopted, but not to the extent town financial officials had hoped.

Sales taxes brought in $17.3 million in fiscal 2007 and more than $18 million in fiscal 2008.

When the fiscal 2009 spending plan was adopted, town leaders estimated sales tax receipts of nearly $19 million. A revised budget analysis from January, however, showed the town expects sales taxes to collect $12.6 million by June 30.

If that estimate holds, sales tax revenue will have fallen to below fiscal 2006 levels, when the town collected $12.8 million.

For several years, sales taxes have been the largest local source of town revenue.

At least two council members who had voted to institute the utilities tax don’t want Oro Valley to willingly sacrifice that revenue, especially when faced with a recession.

“If we don’t renew the utility tax, there could be a lot more people (who work for the town) subject to layoff,” Councilman Al Kunisch said.

Kunisch voted for the tax in 2006.

Without the tax, Oro Valley likely would have to eliminate jobs and services, Kunisch warned.

The tax costs residents an estimated $8 a month, or $96 annually.

“I haven’t heard one person come to me and say it’s a burden on them,” Kunisch said.

Mayor Paul Loomis, who also supported the tax in 2006, shared Kunisch’s concerns.

“It’s very important,” Loomis said, noting that the tax’s revenue pays for roughly 18 employees.

Other council members had yet to make up their minds about the tax when asked about the matter last week.

Councilman Barry Gillaspie, who voted against the tax in 2006, recognized the shortfall not renewing the tax would create, but he’s unsure of how he’ll vote.

“I’m going to take a hard look at it,” Gillaspie said.

Councilman K.C. Carter, who also voted against the tax in 2006, likely will oppose its continuation this time around.

“When you make an arrangement with people, you have to live up to that arrangement,” Carter said of the tax’s sunset provision.

Councilwoman Salette Latas also said she remained undecided, but was willing to explore any options to help improve the town’s financial standing.

“My feeling now is that everything is on the table,” Latas said.

Councilwoman Paula Abbott, who opposed the tax in 2006, did not return a phone call requesting an interview.

The Oro Valley Town Council will meet at 6 p.m. Wednesday, March 4, at town hall, 11000 N. La Cañada Drive. For more information, call 229-4700.

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