The Case to Repeal Glendale’s Utility Users Tax

The Utility User Tax (UUT) may be imposed by a city on the consumption of certain utility services, including (but not limited to) electricity, gas, water, sewer, telephone (including cell phone and long distance), sanitation and cable television. The rate of the tax and the use of its revenues are determined by the local agency. (1)

In the City of Glendale:

A UUT may be imposed as a special tax, earmarked for a specific purpose, or a general tax to be used for a variety of municipal service needs at the discretion of the city council.  (1)

UUT revenues most commonly fund police, fire, parks, library, and long-range land use

planning services – and related support services (e.g. accounting, payroll, personnel,

information systems, etc.).  In Glendale’s case, it funds basic services such as police, fire, emergency medical services, parks, recreation, libraries, and other General Services.

The UUT was initially adopted prior to 1996 through a vote of the city council. However, after the passage of Prop 218, in 1996, any further amendments to the UUT requires a ballot referendum, where voters who pay the tax had to approve it directly through a ballot measure.  (2) To repeal the UUT, requires only a simple majority.

From June 2002 through June 2008, 83 utility user tax measures were placed before the voters by cities and counties.   (2)

• 30 proposals were for new or increased UUTs. Only six of these proposals were approved.
• 19 of the 30 were for an increase in the UUT tax rate. Only two of those passed.

In April 2009, the Glendale CC put on the ballot, Measure UUT, Utility User Tax ratification and Update.  This Measure was to ratify and update the City’s existing Utilities Users Tax,  so that it can be applied equally to both older telephone technology and to newer telecommunications technology, while reducing the tax rate from 7% to 6.5%. City officials were concern cell phone usage is becoming more common, even replacing landline use, especially for younger people, cities feared loss of UUT revenues.   The measure passed by 66.6%.

·         Although the measure said, that it would apply to existing landlines, including long distance, wireless and other phone technology, the majority of the voters only focus on the ½% rate cut.  The measure did not fully disclose, and apparently residents were unaware, that they were now going to have pay a 6.5% UUT on their cell phone usage, whereas prior to the measure, the City of Glendale was unable to charge a UUT on it.  Voters were  duped by our elected representatives.

The following is an example of what the City typically collects in UUTs’ from a single family homeowner.

The City purports that the UUT is about “Fairness”, to help pay for essential services and quality of life in Glendale. However, there was no evidence to indicate or suggest that once the money was transferred to the General Fund, it was restricted, encumbered, or earmarked for any essential services, other than for the majority of police and fire services, including EMS. The fact remains that funds raised via the UUT, represents a general tax, disguised as a hidden tax.  Once the funds are transferred to the General Fund,  , it loses its identity, and  can be spent on any city expense, including non-essential services that the CC approves. 

The City Council last week raise Electric Utility rates over five years 29.1% compounded and last year raised water rates. The CC had said that they had no alternative. Yet, it’s ironic, that GWP which provides essential critical services,  from which 7% of UUT is assessed on water and electric charges. that none of the UUT was designated for GWP infrastructure.

UUT Revenues 

Note – The recession began in December 2007 and was full blown in 2009, that impacted all Utility Usage with cut backs in services from FYE 2010-2012. It’s apparent the economy has not recovered.

The truth of the matter is that the UUT is used to support bloated City salaries, pensions and benefits, including “Overtime Abuse” at (time and half) and salary perks to sustain and enrich management and rank and file’s “lifestyle” at taxpayers’ expense.  I.e.

The preceding represents a sample of the 595 Glendale City employees who earned $100,000 or greater for FYE 2012.  It’s incomprehensible for management, i.e. (Deputy Fire Chief, Fire Captains), to be earning $70,000 or greater just in Overtime, at time and a half, and other salary perks, when they already earn a base salary of $123,000 or greater.  Well paid City Workers should not be entitled to “Paid Overtime”.  FYI, there was only six (6) structure fires last year.   Over 82% of the department’s incidents are medical in nature. Nationally, Full-time firefighters earned an average $47,720 per year, as of May 2011, according to the Bureau of Labor Statistics. (5)  To put things in perspective, there was eleven fire captains that averaged $203,787 in Gross Salaries FY 2012, not including benefits.   Public Sector Employees typically work about 1824 hours per year, less vacations, sick leave, and 12 holidays.  If each Fire Captain averaged 20 hours of overtime per week in 2012, for 48 weeks, their total hours worked for 2012 was 2,784 hours.  With an average gross salary of $203,787, they would have averaged $73.19 per hour.  The mass population would die for to make this type earnings.

More than a decade ago, the GFD con the City Council to terminate its private contracted ambulance service for a bloated bureaucracy. They did a big presentation how they were going to generate millions of dollars annually in billings.  The City swapped a private ambulance service, costing less than $500,000 a year, for a City run EMS costing several millions in its first year of operation.

To make matters worse, the GFD later reassigned all of its paramedics to its fire engines/trucks, and downgraded ambulance drivers to Basic Life Support (BLS) technicians, that necessitated the fire trucks to accompany the ambulances to the hospital, when Advance Life Support (ALF) was required, tying up an fire truck/engine and four firefighters, plus two BLT technicians for several hours, that resulted in unused wasted manpower and even more overtime.  Along the way, Chief Scoggins implemented more salary perks for EMS certification, training, education as well as other benefits to boost personnel’s pay.  The following is the City’s “Salaries and Benefits” cost for Police and fire from 2001-2012.

Is it any wonder why Glendale’s Citywide Budget went from $438 million in 2000-01 to $700.9 million in 2012-2013, while in the same period, Glendale’s population decreased from  203,734  to  194,973. 

There was no justification for Glendale’s Police and Firefighter salaries and benefits increasing 96.7% ($26.6 million) and 85.3% ($15.1 million), respectively, from FYE 2001 to 2012 when the population dropped by 8,761 residents over the same period. That’s a total increase of $41.7 million, of Police and Fire salaries and benefits over the last twelve years.

·         There appears to be a direct correlation between the City’s need to raise Water and Electrical rates and the increase in Salary and Benefits. During the recession, revenues substantially dipped, while salary and benefits expenditures continued to go higher even with layoffs, furloughs, salary freezes, etc….  The City was desperate to raise revenue to enable it to continue to pay these unsustainable salaries and benefits.

·         The $41.7 million salary and benefit increase, from 2001- 2012, would have covered  the majority elimination of both the $26.6 million UUT and the $21 million transfer from GWP receipts to the General Fund, and would have significantly reduced the need for any Electrical rate increase.

Under no circumstances should public sector management employees be entitled to “paid” overtime. These are most often well-paid individuals with great benefits. At best, rank and file state employees may be eligible for straight time, as CTO (Compensating Time-Off)   The Fair Labor Standards Act of 1938 (FLSA), as amended, does not cover federal, state, and local government agencies.California exempt employees are public sector workers who meet California’s strict requirements for exempt employees, which means that they are not eligible for overtime pay under either the Federal Fair Labor Standards Act (FLSA) or under California legislation. (3)

 This appears to be indicative of the power and influence of the Labor unions over the Glendale CC.  Just in the last election alone, the unions collectively gave over $32,000 to Narjarian and Friedman, in order to buy their vote, after 2013, when collective bargaining negotiations resume. It should not come to any surprise if the CC will approves salary increases for both the GPD and the GFD, even though our economy is in the doldrums, and the majority of new jobs is for part-time work.  Although GPD and GFD had previously forego pay raises during the recession, they made up for it with step increases, qualifying for new salary perks, and overtime abuse.

 With respect to the “Electrical Rate Increase”, it should be noted that City Staff did not make one recommendation how to reduce “City costs” by streamlining operations, downsizing, and eliminating fraud, waste and abuse.  It’s apparent that the City is top heavy in management positions in all departments.     

 There was $26.5 million In UUT in 2012.  Yet, City Representatives didn’t even consider Glendale Water & Power (GWP) as a provider of “ESSENTIAL SERVICES”.  City Officials should have designated monies collected from residents, for GWP usage tax, to be earmarked for GWP capital improvement and repairs, that would have reduced a portion of the 29.1% Electric Rate Increase.

 One of the primary reasons why the City needed to raise the Electricity rates, 29.1% over five years compounded, as proposed by city staff, was due to the City poor bond rating with Fitch and  Moody’s,  due to multiple deficits, decreased revenues, a fixed overhead, and a higher of salary expenditures.  The City needed to show sufficient GWP revenue. Otherwise, they would have been unable to issue a $60 million bond.  Also, the City wanted to boost the GWP reserves back up to $114 million from $47.8 million, based on a 2006 CC vote. There should have been a current independent study on the level of reserves necessary to maintain operations before raising rates.

 The UUT provides an additional source of revenue to the City’s coffers.  As long as City can continue to find new sources of revenue, i.e. “rate increases”, to support its spending habit, it will continue to put rate payer’s in harm’s way with more rate increases and salary raises to overpaid city employees.  By streamlining operations, decreasing expenditures substantially,  it can lessen the amount of illegal transfers of GWP receipts to the general fund and the need for a UUT. 

 Given the fact that voters were denied a say whether or not they supported a Utility Users Tax (UUT), when it was first approved prior to 1996, before the passage of State Proposition 218, “Right to Vote on Taxes Act”, requiring voter approval on all future taxes, provides the emphasis for a future Repeal.  By doing so, it gives the community an opportunity to revisit this issue, and to finally have a say, whether or not they wish to continue to be taxed on their utility usage to support overly generous bloated salaries and benefits, especially given to safety officers, notably the GPD and GFD.   

It’s very likely that a repeal initiative will make it onto the 2014 election ballot. You can expect a repeat performance by Ochoa, with his scare tactics, that preceded the Electrical rate increase vote, i.e. that GWP will be insolvent by 2017, we’ll have to sell the utility, etc.. 

A repeal of the UUT would finally force this CC to earn their keep and to begin addressing reductions in expenditures in all departments.  This would include downsizing top management, eliminating overtime for well paid employees, reducing salary perks, hiring part workers, outsourcing when feasible, as an alternative to, when unions are unwilling to make concessions and give backs.  By doing so, this to force the CC to become more fiscally prudent and responsible with taxpayers’ dollars, to live within it means just like the rest of us have to do.  This would also help lessen the sting of the City’s ill conceived water penalty tier system, and the  29.1% Electric rate increase over the next five years.   

The city of Chico is pursuing options to “contract out services” and operations with fewer staff and smaller budget, utilizing public-private partnerships” as a way to reduce expenses while preserving services.” (4)  Glendale can be doing the same. Outsourcing can be a viable solution alternative, “by releasing the city from its costly employee salaries, benefits and pensions obligations”. Also, equipment savings, by reducing the need to maintain and replace some of the city’s sizable vehicle fleet, Helicopters, etc… Some specialized businesses often can do tasks more efficiently at lower costs, said Administrative Services Director Chris Constantin. (4)

There will soon be a petition, to put on the 2014 ballot, a measure to repeal the UUT. Anyone interested in collecting signatures for the ballot initiative can contact me at kennethlandon@sbcglobal.net

Kenneth Landon

Source Reference:

(1)   californiacityfinance.com/UUTfacts13.pdf‎

(2)   http://ballotpedia.org/wiki/index.php/California_Utility_User_Taxes

(3)   http://www.overtime-flsa.com/california-exempt-employees

(4)   http://www.chicoer.com/ci_23683531/city-may-start-contracting-out-essential-services

 http://work.chron.com/much-average-fulltime-firefighter-make-8730.html