Susan Morgan: A Better Way to Configure the Oakley Utility User Tax

The following was submitted for publication by Susan Morgan, Oakley resident and Director at the Ironhouse Sanitary District. On Tuesday, the Oakley City Council will consider placing a 4.5% Utility User Tax on the November Ballot which would tax on electricity, gas, cable TV, water and sewer—it does not include telecommunications–to fund fire services.

Morgan argues that the sewer should not be included in the tax and instead, replaced by telecommunications. Here is what she submitted below.

Below are some thoughts for you to consider on a slightly different way to configure the proposed UUT, which may contribute to a more successful result.  Please note that these suggestions are being offered by myself, as an individual, and not as a representative of any agency.

The current UUT configuration results in roughly the following breakdowns:

This alternative UUT configuration would result in roughly the following:

By inserting Telecom into the mix, and removing Sewer, you can reduce your UUT rate to 4.1% and collect approximately the same (or slightly more) revenue, sufficient to fund the additional Oakley fire station.  If you were to reduce the UUT rate to 4% – you would be just $40,000 short of the $2.6M you need to fund the fire station; a small shortfall which perhaps the Fire District could make up.

Why insert Telecom?

• Telecom is the highest-netting revenue provider of all the utilities.  Plus, Telecom is most likely to provide increased revenue going forward, as use and costs increase.
• Brentwood, and most other cities proposing or configuring a UUT, have included Telecom.
  • The Engage in Oakley survey showed Telecom to be the “LEAST adverse” of the utilities surveyed.
  • The vast majority of respondents indicated that they were “Strongly Opposed” to each of the utilities/tax – BUT
    • Telecom had 52% “strongly opposed” – the LOWEST such percent across all of the utilities.
• Although not statistically significant, residents clearly are not more opposed to including Telecom than any other utility in the UUT.
• Lowering the UUT rate to 4% (or, 4.1%) from 4.5% seems to make a BIG difference.
  • Cumulatively, the percent of people in the Engage in Oakley survey willing to support a 4% (or higher) UUT is 50.1%!
  • At 5% (or higher) UUT – the support is only 25.1%!  LOWERING THE PERCENT TO 4% (or 4.1%) MAY MAKE THE DIFFERENCE YOU NEED TO PASS THE MEASURE.

Why remove Sewer?

• The Engage in Oakley survey showed Sewer to be the “MOST adverse” of the utilities surveyed.
  • Sewer had 60% “strongly opposed” – the HIGHEST such percent across all of the utilities.
• Unlike other utilities, Sewer is a fixed fee – not based on consumption.
  • Residents have no way of controlling/reducing the fee (and UUT amount) based on less “consumption” – no matter how many times you flush the toilet, the fee/tax is fixed
  • Sewer fee (and UUT) are assessed to property owners, not utility users – and these groups (particularly for business properties) are not the same.
  • Fixed leases may not allow for the UUT to be passed down to the ultimate user.
• A Sewer UUT ads a measure of risk to the legal solidity of the UUT.
  • In Oakley, Sewer is assessed on the property tax bill to property owners.
    • Although some other cities have included sewer in their UUT, their sewer assessments may be configured differently – i.e., billed monthly to users (similar to gas or electricity), rather than a property assessment.
    • Legal counsel to the City has claimed that the Sewer UUT is “legally defensible” – but legal counsel has not provided a written opinion of counsel firmly backing this up.  Legal counsel understands that adding in Sewer add in some measure of risk.
    • Note that legal counsel to both the Rodeo-Hercules Fire District (RHFD) and the East Contra Costa Fire Protection District (ECCFPD) had told their Districts that the Benefit Assessment Measure offered by each last year was “legally defensible”.
    • The RHFD measure passed, was subsequently challenged by property owners, who later prevailed, forcing an expensive settlement on the RHFD.
    • The ECCFPD measure did not pass, but it is now believed that such measure would be on “very shaky” legal grounds.
    • City Manager Bryan Montgomery, in an email to me, confirmed that the “top of the line” consultants hired by Brentwood strongly urged that attempting to configure fire services as a Special Benefit may be legally INdefensible.

In conclusion – if the City adds Telecom to the mix, removes Sewer, and reduces the rate to ~4%, it may have a better chance of passing the measure and keeping it on solid legal grounds.  We have only one shot at this – let’s make it the best shot we can.

Susan Morgan is an Oakley resident and was elected to serve on Ironhouse Sanitary District.