This information is provided to answer questions that have been asked about the City’s Utility Users Tax (UUT) measure on the April 12, 2016 municipal ballot. There is a significant amount of information on this page, but if your question isn’t answered please contact the City’s Administrative Services Department at City Hall (626) 355-7135. This fact page will be updated as necessary.
Topics:
The Basics
What is “Measure UUT”?
Measure UUT was placed before the voters on the April 12, 2016 municipal ballot, by unanimous Council action. If Measure UUT is approved by the voters, utility customers will pay a 10% tax on certain utility bills. Revenues received from the UUT will provide funding to keep City services at the current level.
What is a Utility User Tax or UUT?
A Utility Users Tax (UUT) is a tax on certain utility bills. A UUT may be imposed by a city or county on the consumption of utility services.
Sierra Madre has had a UUT since 1993. Today, Sierra Madre residents and businesses pay an 8% UUT on electricity, gas, telephone (including cell phone and long distance), trash (sanitation/solid waste), cable television, water and sewer.
What is the current Utility User Tax rate?
The current voter approved law allows the UUT rate to be set at no greater than 8% for the period of July 1, 2015 to June 30, 2016. The tax is currently collected at an 8% rate.
What does the proposed Measure UUT provide?
If approved by the voters, Measure UUT will provide for a 10% UUT rate on all utilities. Like the existing ordinance, Measure UUT permits the City Council to impose a lesser UUT rate. The Council may adopt a lower rate than 10%, but could not impose a UUT rate of greater than 10%.
If approved, Measure UUT provides an exemption for households qualifying as “very low income”. The Measure also eliminates the UUT Oversight Committee, because the Committee has served its purpose in insuring that additional UUT revenues were used to fund public safety services, including Police and Fire. Additionally, there is no “sunset clause” in Measure UUT.
How will a “yes” vote on Measure UUT affect Sierra Madre’s Utility User Tax?
- The revenue from the approval of Measure UUT will allow for City services to remain at the current level.
- The taxes imposed by Measure UUT will impose a 10% UUT rate on all utilities.
- The City Council may set a lesser rate by Council action.
- If Measure UUT passes, the maximum collection rate for all utilities is 10%. The rate can only be increased by a future measure approved by the voters. There is no “sunset” in Measure UUT.
How will a “no” vote on Measure UUT affect the current Utility User Tax?
If Measure UUT is not approved, the current, voter approved maximum collection rate of 8% will remain in place through June 30, 2016. On July 1, 2016, the current voter approved maximum collection rate of 6% will be effective (reference: Ordinance Section 3.36.180). Each 2% reduction is approximately equal to $500,000, which results in a total loss of approximately $1 million over two years. After July 1, 2016, the UUT rate would remain at 6% unless modified by voter approval. The loss of $1 million in UUT revenue will have significant impacts on the City’s ability to meet its expenditures and will result in service reductions, in order to maintain a balanced budget.
What does Measure UUT mean to a
typical consumer of utilities?
How much does the UUT cost the average household?
The amount actually paid by each household will vary depending upon the utilities used by the household. Based upon the sample residential utility usage shown below, a typical household will pay an average of $9.78 more per month, or .33 cents more each day, for each 2%.
The chart below provides a quick summary.
Are Non-Profit and Religious Organizations exempt from paying the UUT?
No, they are required to pay the Utility User Tax on the taxed utility services they use.
Are “very low-income households” exempt from the UUT? How do I apply for the exemption?
Measure UUT provides an exemption from paying the UUT, for households that qualify as “Very Low Income.”
Measure UUT provides households that qualify as “Very-Low-Income” and “Extremely-Low-Income” (using HUD income guidelines) an exemption from paying the Utility Users Tax (UUT). Residents can submit an application for an annual exemption for Very-Low-Income and Extremely-Low-Income households at any time during the year. The City requires supporting documentation including proof of income to qualify households for the exemption.
What is the income limit to qualify for the Measure UUT tax exemption?
The City will use the income limits as established for state and federal programs, Department of Housing and Urban Development - Section 8 Housing Income Limits. The income limits vary depending upon the size of the household. For example a single person household is considered Very-Low-Income if the person’s income does not exceed $29,050, while the Very-Low-Income limit for a family of four is $41,500 (2015-Income Guidelines; Los Angeles County Community Development Commission).
City Budget and the UUT
What does each percentage of the UUT amount to in dollars?
Each 1% UUT rate is equal to approximately $250,000, so a 4% reduction (10% down to 6%) equals approximately $1 million dollars in reduced funding to the City. If Measure UUT is not approved by the voters, the current 8% UUT sunsets to 6% on July 1, 2016. This reduction, combined with the 2% reduction that occurred on July 1, 2015, results in a loss of approximately $1 million.
Reducing General Fund expenditures by a $1 million will result in further reductions to City services, or changes to City services, such as contracting for police and paramedic services, or eliminating other General Fund services such as recreation and library services - the entire General Fund budget for the library and recreation combined is less than $1 million. (The General Fund budget for the library is $757,632, and the General Fund budget for recreation is $142,343.)
What percentage of the UUT is paid to the City?
100% of the Utility Users Tax (UUT) collected on utility bills is paid to the City; unlike property tax and sales tax where the City receives only a small portion of the total taxes paid.
Where do other cities get funds for public safety, Libraries and recreational programs (General Fund supported departments)?
Cities receive General Fund dollars primarily from property taxes, sales taxes, Utility Users Taxes, and fees. Other cities receive much more in sales taxes compared to Sierra Madre. On average Sierra Madre receives $200,000 - $300,000 annually in sales taxes while other cities receive much more. Of the 88 cities in Los Angeles County, only five cities receive less in sales taxes compared to Sierra Madre (Bradbury, Rolling Hills, Palos Verdes Estates, La Habra Heights, and Hidden Hills). Sales taxes in Monrovia, South Pasadena and Arcadia exceed $2.5 million annually. (South Pasadena is the lowest at $2.5 million, followed by Monrovia at approximately $7 million and Arcadia at approximately $11 million.)
Some cities have special assessments to fund public safety or the library, examples include the City of Monrovia which has a number of special assessments (library assessment, open space, and a general assessment) and San Marino with a public safety assessment. Assessments are voter approved increases to a property’s tax bill to fund a specific items such as libraries or police and fire.
What is a franchise fee and how is it different from a utility users’ tax?
Franchise Fee revenue is derived from a fee paid to a municipality from a franchisee for “rental” or “toll” for the use of city streets and rights-of-way. No person or business may construct, install, or operate facilities in the public rights-of-way, or provide service using any facilities installed in the public rights-of-way, without a franchise agreement that authorizes each and every service provided. In consideration of the cost incurred to construct, install, operate, or provide services using the public rights-of-way, franchisees pay the City a fee generally expressed as a percentage of gross revenues. The franchise agreement (a contractual obligation) specifies the fee to be paid, and the gross revenues to be included in the fee calculation.
The City of Sierra Madre currently has four franchisees – Athens Disposal, Time Warner Cable, Southern California Gas, and Southern California Edison. These franchisees provided just under $373,000 in General Fund revenue through franchise fees last year and are estimated to provide $356,000 this year - less than 4% of the anticipated City’s General Fund revenue. It is important to note that due to changes in State law, should another television provider, like Verizon FiOS, ever come into Sierra Madre, the City will lose the franchises fees from Time Warner cable, which made up 36% or $113,000 of the franchise fees last year. In comparison last year Athens Disposal provided 42% of the revenue, Southern California Edison 13%, and Southern California Gas 10%.
Franchise fees, like other fees and taxes, vary from city to city. Once again, Sierra Madre receives less revenue in comparison to its neighbors:
| Arcadia |
$1,071,000 |
| Duarte |
$820,000 |
| La Cañada |
$645,000 |
| Monrovia |
$922,000 |
| Pasadena |
$2,361,000 |
| San Marino |
$578,000 |
| So. Pasadena |
$805,000 |
Whereas, municipal franchise fees, similar to business franchise fees (think Subway) are the result of an operator paying an owner for the privilege to use something - a street for a municipality or a name for a business – through a negotiated agreement. A utility users’ tax, by contrast, is a tax approved by the voters on the consumption or usage of the actual utility (trash, cable television, natural gas or electricity).
What is the City’s Budget?
The charts below show the current allocation of General Fund expenditures. (Note: Chart does not include the paramedic program at $891,953.) For additional information, please view the FY 2015/2016 Annual Budget.
Is it true that the City keeps increasing the number of employees working for the city?
No, in fact, the total number of city employees is at an all-time low, as compared to 2008. The chart below shows the total number of Full-Time-Equivalent Employees (FTE’s) from 2008 to the present (budgeted). There are ten fewer FTE’s compared to 2008.
What is the difference between Unrestricted and Restricted funds?
UUT is General Fund revenue. Unrestricted funds (also called General Funds) are the only funds that the City Council has complete authority to allocate for any governmental service or program the City provides. Unrestricted funds are used to pay for general city services such as public safety services (including the salaries of police officers), library services, and recreational services. By contrast, restricted funds are designated to pay for specific city services or projects and cannot be used for any other purpose. For example Water Enterprise Funds must be used for the Water Department and cannot be used to pay for library staff salaries, and grant funds can only be used to pay for the specific projects approved by the granting agency.
A water and sewer rate increase was recently approved, won’t that help the City General Fund?
No, because water and sewer funds can only be used for Water and Sewer related purposes, and cannot be used to fund general City services, such as police, paramedics, library or recreation services.
What about Property Taxes? I thought Property Taxes would increase from sales of properties, and the additional property tax would make up the loss of the UUT Revenue?
First it is important to note that Sierra Madre collects approximately 21 cents of every dollar paid in property taxes. Most of the property taxes paid go to the county, school district and other special districts. Property taxes are estimated to increase by approximately $200,000 per year from FY 2013/2014 to FY 2015/2016, which isn’t adequate to close each year’s General Fund budget gap.
Why does the City need a 10% UUT? Why can’t the City just “tighten its belt”?
Historically revenues have not kept pace with increasing costs, so the City has had to make budget reductions to balance the budget.
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In the City’s 2011-2012 General Fund budget, City Council maintained the UUT tax collection rate at 10% (the maximum rate permissible was 12%), even though the City originally had a projected shortfall of over $1,000,000. Staff recommended cuts in expenditures in excess of $900,000 which included more than $300,000 in police department reductions and $250,000 in Fire expenses. The remaining budget reductions came from reducing Public Works budget by contracting out park maintenance, reductions in recreation and library programming and reductions in City cost allocations (overhead).
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Additionally during the 2011-2013 biennial budget, in December 2011, the California Supreme Court upheld AB 1X26 which dissolved all Community Redevelopment Agencies, including the City of Sierra Madre’s Community Redevelopment Agency (CRA). This resulted in a decrease of $1.3 million in incremental property tax income to the City that was used, partially, to staff positions that oversaw eligible projects funded with CRA monies within the former redevelopment project area, and for eligible public infrastructure and other projects. These type of projects ranged from replacement of broken playground equipment in Memorial Park (completed before the loss of the CRA) to repaving City parking lots (not completed) to installing a new water main at the east end of Sierra Madre Boulevard, and all associated overhead costs. When financial resources are reduced due to the economy and State take-aways, the City must respond by reducing services, which means reducing staff.
At the start of Fiscal Year 2012-2013, the City experienced its first layoffs in a decade. Prior to Fiscal Year 2012-2013 staff attrition was used to reduce staffing. In total, since 2008, the City has reduced staffing by a little more than 10 full-time equivalent employees (from 96.25 FTE’s to 86.07 FTE’s.) This was accomplished through eliminating some services (dog licensing), out-sourcing some services (grounds maintenance, building & safety services, and the operation of the municipal swimming pool), and by remaining employees assuming additional duties. In May 2012 (effective July 1st), the City Council approved a staffing reorganization plan that resulted in the savings of $260,000 in General Fund expenditures. A number of positions were laid off, or downgraded.
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In October 2014, the City Council approved a staffing reorganization plan that resulted in the savings of $180,000 in General Fund dollars, in addition to establishing a financial cap on management and executive health and welfare benefits, a change that is estimated to save more than $600,000 over a five year period.
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To balance the Fiscal Year 2015-2016 budget a total of $227,500 was eliminated from the budget. A total of $150,500 was eliminated from administration; $10,000 from the fire department, $57,000 from the Library, and $10,000 from the police department.
History of the UUT
What happened in April 2007, when Measure U and Measure UA were approved? And how did Measure U get on the ballot?
In 2007, a citizens’ Ad-Hoc Finance Committee concluded that there was no feasible way to generate enough money to provide raises to the police officers and to continue providing paramedic services by reducing City expenses -- without impacts to other City services. The Ad-Hoc Finance Committee recommended that the City Council place a revenue measure on the April 2008 ballot. The revenue measure was the current UUT which increased the collection rate from 6% to 12% over a three year period. (However, the Council never imposed a rate higher than 10%.) Since 2008, the City’s budget has reflected an increase in police, fire and paramedic program expenditures (primarily for public safety staff salary and benefits) that exceeds the increase generated by current Utility User Tax.
The City’s police employees were provided raises over a three year period (9% for sworn officers and 4% non-sworn officers in 2008; 8% for sworn officers and 3.5% for non-sworn officers in 2009; and 7% for sworn officers and 3% for non-sworn officers in 2010); these raises cannot “just be rescinded”. Surveys show that Sierra Madre Police Officers continue to remain at the bottom of the pay scale for all San Gabriel Valley departments. The current staffing costs of the police department will remain a City obligation, even if the UUT rate decreases to 6%.
What does the current law (2008’s Measure U) provide?
In April 2008, the voters approved an increase in the UUT by approving Measure U. The ordinance allowed for an increase from the base amount of 6% to 8% in July 2008, to 10% in July 2009 and to 12% in July 2010. However, the Ordinance permits the City Council to establish a lower than maximum rate – and the City Council never established the rate at higher than 10%.
The current ordinance/law (approved by voters in April 2008) provided for a decrease in the UUT rate beginning on June 30, 2014. On July 1, 2014 the UUT rate could not exceed 10%, on July 1, 2015, the UUT rate could not exceed 8%, and on July 1, 2016, the UUT Rate could not exceed 6%. This step-down or decrease is referred to as the “sunset” clause (Ordinance Section 3.36.180). In 2008, Measure U also expanded the base (types) of taxable utilities by adding sewer, cable, and trash; and it modernized the communication utility. The utilities which are subject to the tax will not change under Measure UUT (on the April 2016 ballot).
How has the Utility User Tax provided for City services?
The UUT is a General Fund revenue source which funds general City services such as police, fire, paramedics, recreation and the library. In FY 2014-2015, at the 10% tax rate, the UUT provided $2.5 million in revenue (27% of total General Fund Revenues). In this same year, the City spent $5.7 million on public safety services (police, fire, and paramedics).
Because of the increased UUT in 2008, the police officers were provided salary increases of 9% in 2008; 8% in 2009; and 7% in 2010; no other city employees were given these salary increases. (Even with the increase in police officer salaries, our police officers are the lowest paid in the San Gabriel Valley.) With the sun-setting of the UUT to 6%, there will be insufficient funding to continue to pay the current salaries of the City's police officers and continue to provide all other current city services (such as recreation, senior services, paramedics and library services.) There have been no Police Association cost of living increases since 2011.
Additionally, because of the 10% UUT, the City was able to continue to fund the $700,000 in unfunded paramedic program costs. Prior to 2007, the City did not have advanced life support, i.e. a paramedic program. In 2007, a paramedic program was implemented, but there wasn’t adequate funding identified to maintain the program after 2009. (The program was initially funded from the sale of an unused fire station in the canyon area of Sierra Madre, but these were one-time proceeds of the sale, and the funds were exhausted in 2009.)
Measure UUT will provide for a 10% UUT rate, that will continue the amount of revenue the City received in Fiscal Year 2013-2014 from the Utility Users Tax, and without this revenue, the City will not be able to maintain all of City services as they are currently provided. Service level reductions and changes will need to be made so that the City’s General Fund budget can remain “balanced”. In total approximately $1 million in reductions will be necessary by July 2016. The actual service reductions and changes will ultimately be decided upon by the City Council. Possible options include contracting the police department to another agency, such as the Los Angeles County Sheriff’s Department; no longer operating a city-run paramedic program; significantly reducing the number of hours the library is open; eliminating recreational programming and special events; reducing the number of hours City Hall and the planning department are open to the public; and eliminating senior services.
Separating Fact from Speculation
I heard there are two UUT measures? What are the two measures and when will the voting be held?
Measure UUT is on the April 12, 2016 ballot. The Council unanimously took action to place this measure before the voters and if approved, the measure will result in a 10% UUT rate. This FAQ page pertains to Measure UUT.
An initiative petition was also circulated by two individuals and an adequate number of signatures were obtained to require voting on a different UUT-related measure at a future election. The proponents did not qualify the initiative in time to be on the April 12, 2016 ballot. This measure is called the “Stop the Utility Users’ Tax”. If approved by the voters, it would result in the repeal of the City’s UUT. The UUT rate would be zero and the City would not receive UUT revenues. The estimated impact of this measure can be found in the “Elections Code 9212 Financial Impact Report”, approved by City Council at the February, 9, 2016 Council meeting.
Pursuant to State law (the State Elections Code) this measure would be on the April 10, 2018 general election unless the City Council takes action to schedule and pay for a special election to be held before April 10, 2018.
Can the City save over $700,000, while providing increased patrol hours, by contracting with Los Angeles County Sheriff’s Department?
No, the City cannot save money and increase patrol hours by contracting with the Los Angeles County Sheriff’s Department (LASD).
In May 2015, the City received two formal proposals from LASD to provide police services. Proposal A cost $200,000 a year less than the current police budget, but it reduced the number of patrol hours and closed the police station between the hours of 10pm and 6am. Proposal B would cost $400,000 more than the current police budget, and provided the most comparable level of service to what the City provides, including keeping the police station open 24/7. A third option, the minimum level of service LASD is willing to provide, would result in the most savings, approximately $841,000; however, patrol hours would be reduced and the police station would be permanently closed – resident services would be provided at the Temple City Sheriff's Station.
Please note that these savings/costs reflect the second year of contracting; first year costs are more expensive due to accrued liabilities that are owed to employees who are laid-off. Estimates are based on a 2.3% COLA for SMPD and a 5% CPI for LASD; estimates do not include the 4% increase recently announced by LASD. Information from City Council staff report dated October 27, 2015.
The proposals from LASD specifically states that the proposals would reduce current law enforcement costs while increasing patrol coverage. The City has stated that it cannot contract with LASD and reduce costs while increasing coverage. Why is there a discrepancy in these statements?
At first glance, the LASD proposal seems to save the City money while increasing services. However, when the City Council received the proposal from LASD it commissioned a citizen committee to review the proposals and to dig deeper into the numbers. When the committee did this, the committee took all the City’s cost related to the police department into consideration as illustrated in the chart below, including special event overtime, parking enforcement and humane services; these are costs the City would continue to incur, that were not included in the LASD proposal. The committee also considered overhead costs including facility costs and potential liability costs (both workers compensation and lawsuit-type costs). With the evaluation of all of these cost considerations, the proposed savings diminished. In a report delivered to the City Council on October 27, 2015, the committee determined that first year cost of Proposal A is estimated at $202,000 more than the current police department budget; however, in year two, the City might realize savings of $200,000.
Questions?
If you have any questions, or would like additional information, please contact the Administrative Services Department at (626) 355-7135.