Long Beach Advances New Tax Measure for November’s Ballot
After being presented with four tax options, the Long Beach City Council voted to place a removal of the Utility Users Tax (UUT) exemption on the November ballot.
Now, Long Beach voters will decide the fate of the new tax proposal.
What is the Utility Users Tax (UUT) Exemption?
Currently, two power plants in the city enjoy a tax exemption from the 5% utility user tax.
LADWP owns one plant, and Alamitos Energy Center (AEC) owns the other. Neither plant directly produces energy for Long Beach residents.
The city is expected to generate $15 million annually if the exemption is removed.
City staff reported that the impacts on residents would be minimal; however, Edison, the operator of the AEC plant, may seek approval to pass on the tax costs to Long Beach ratepayers only.
The back-and-forth between proponents and opponents of the measure makes it unclear what the actual cost could be for ratepayers in the region.
Other Tax Proposals Considered
At its June meeting, city staff presented three other tax ideas to the city council.
- Real Estate Transfer Tax
- Option 1: All property sales taxed at $5.60 per $1,000 of value (regardless of the overall sale price)
- Option 2: Property sales up to $1 million of value taxed at $3.30 per $1,000. Any value above $1 million is taxed at $5.60 per $1,000.
- Business License Tax Increase
- Electric Franchise Fee Increase
The city staff ranked these taxes based on their impact on Long Beach residents and businesses.
They labeled the UUT as least impactful.
We advocated strongly against the consideration of a transfer tax.
City staff presented this tax as minimally impactful to residents, which we disputed strongly.
Mayor Richardson seemed skeptical, from the outset, about supporting a business license tax increase while the city is promoting "Grow Long Beach."
Ultimately, the city is facing declining oil revenues. Though the city has not pursued these other tax proposals now, they remain ideas on the shelf.
We must remain vigilant in the years to come as the city considers how to adjust to lower oil revenue.
Impacts on You
In the broader context, we avoided a fight against a transfer tax in the county's second-largest city, which is a win in this environment.
With all of the other issues our industry is facing from local government, we want to avoid adding a ballot box fight against a transfer tax.
That being said, how the Utility User Tax will impact our members remains to be seen.
It's assuming voters pass the measure in November. And it will ultimately depend on how the power plant operators pass on the costs of the new tax.
Members may see marginally higher utility costs if the utility is distributed to consumers region-wide. This is better than the prospects of higher business license taxes or a new transfer tax.
Still, it would be better for the city in the future to consider additional creative ways to enhance revenue without raising new taxes at the ballot box.
We do not want austerity in the city, which will be a challenging transition from oil revenue. And we stand ready to work with the town on creative solutions.
Solutions include boosting commercial districts and bringing people back to buildings.
Stay Connected
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