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Measure G

Would Reduce Existing Tax, Preempt Litigation


Of all the ballot initiatives confronting voters this November, Measure G enjoys the dubious distinction of being the most obscure. In fact, the Measure G campaign is only just now coming together. That’s not to say there’s not a lot at stake: Measure G was launched by the City of Santa Barbara to protect a 38-year-old municipal telephone tax that generates about $4 million annually.

Traditionally, that money has been split evenly between road repairs and the general fund. Of the latter, the biggest beneficiaries have been the police and fire departments. Should those funds evaporate, the budget for city street repairs and maintenance would lose nearly 15 percent of its revenues and the city’s $100 million general fund would sustain a 2 percent hit. “That may not sound like much,” cautioned the city’s Finance Director Rob Pierson, “but when you consider we just adjusted our budget this year by $4 million, having to find another $2 million would hurt.” Adding to City Hall’s urgency, the phone tax had proven to be an exceptionally stable source of revenues-somewhat impervious to market shifts.

Threatening the city’s phone tax-part of the city’s overall Utility User Tax-is a wave litigation launched by the cell phone industry. The first target was the federal excise tax on telephone services, which was initiated in 1898 to help defray the costs associated with the Spanish-American War. The cell industry successfully knocked off the federal tax in court in 2006 on grounds that a taxation on “time and distance” of phone service no longer applied because companies no longer based phone rates on the distance the phone signals travel. Because Santa Barbara’s phone tax specifically references the federal language, it too is vulnerable to challenges by the cell industry.

Santa Barbara has yet to be sued, but much larger cities-Los Angeles, for example-have been. Thus, many cities are now opting to change this language, which, under state law, requires a vote of the people.

Last December, the City Council first turned its attention to the issue in earnest. The decision was made to give the voters some benefit in the form of a tax reduction-from the 6 percent it’s been since 1979 to 5.75 percent. This will be offset by the fact that Measure G expands the city’s ability to tax new services such as telephone services provided by Internet companies and TV services provided by phone companies.

Fortunately for its supporters, no one aside from Santa Barbara News-Press editorial writer Travis Armstrong is campaigning against Measure G. The California Taxpayers Association is opposed in name only. Group spokesperson Joe Armendariz explained that his organization will not campaign against Measure G. Himself a member of the Carpinteria City Council, Armendariz said he sympathizes with Santa Barbara’s effort to protect its tax base. He would have been more comfortable, he explained, if City Hall had required a two-thirds majority for passage rather than the simple majority of 50 percent plus one. Under state law, taxes for specific purposes require a two-thirds majority, while general fund taxes require only a simply majority. In this context, Measure G can be regarded as the functional equivalent of a fiscal hermaphrodite; half the money goes to the general fund while the other half is specifically sequestered for road repairs.

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