A utility user tax enacted three years ago now is "a critical element of [La Palma's] general fund revenue" and accounts for 17% of annual income, City Manager Daniel E. Keen told the City Council this week.
Keen said the 5% tax on utilities has enabled the city to keep police and other city services at their current levels. During a public hearing Tuesday night, Keen said that reducing the utility tax even 1% would undermine the city's fiscal position.
Council members said they agreed that the tax must be kept next fiscal year at its current level.
Two residents warned Keen and the City Council that Proposition 62 might threaten the existence of the tax. One resident, Gaspare Scichilone, said he had been reading about the proposition, which may limit taxing by local government governments and has been upheld by the state Supreme Court.
Another resident, Jack McKnight, said the city should be thinking of what might happen if it loses the utility user tax.
City Atty. Joel Kuperberg told the audience that he has advised the City Council to "wait and see" what happens to Proposition 62 in court cases and in the Legislature. Kuperberg said the Proposition 62 case upheld by the high court involved a special district, not a city.
McKnight said he thinks La Palma has been ignoring the possible fiscal problem that Proposition 62 may cause.
Councilman Wally Linn said the city would use its reserve fund if the tax were invalidated.