The Sun
Sunnyvale's Newspaper

Council may ask voters to increase utility tax

By Katherine Petersen

Sunnyvale voters may be asked to approve a hike in their utility taxes next year to prevent a decrease in the city's cash flow. But even with an increase, electric bills all over town are expected to drop dramatically.

The state's Public Utilities Commission has ordered the deregulation of electric companies as of Jan. 1, 1998, and residents' bills will automatically drop by 10 percent.

The city receives $3.1 million from its 2 percent utility tax, an amount that would decrease along with residents' bills. This tax is the city's third-largest source of money, and the city's utility tax falls far below the statewide average of 5 percent, City Manager Tom Lewcock said.

In putting a measure on the November ballot, the city would ask residents to pay extra to maintain the city's current cash flow. The council is still considering whether to put the issue to the voters.

Put simply, the city receives $2 from every $100 on an electric bill. If the same bill is reduced to $90, the city's take is reduced to $1.80. The ballot measure would ask residents to make up the 20-cent difference.

Vice Mayor Jim Roberts said he could argue both sides of the matter easily and would like it to be the voters' decision.

"There's no doubt that over the next 15 to 20 years our general fund will not be as strong as it is today, given the projections and reductions in revenue including the utility tax," he said. "If we don't backfill the loss in revenue, we may have to look at cutting some services."

Yet some would argue that city government should be able to handle downsizing, just like any other company, he added.

"There's not a lot of trust in government, but maybe the voters would give us the benefit of the doubt," he said.

Bills for large commercial and industrial accounts such as Lockheed would probably decrease by about 5 percent, Lewcock said.

Those rates will have dropped another 30 percent by 2002.

Residential rates will drop another 10 percent in 2002 and another 10 percent in 2008, Lewcock said.

The city also receives 1 percent of every electric bill as a franchise fee in return for allowing the electric company to string wires around town, but this fee does not appear on bills. The franchise fee, too, will be affected by the deregulation rate cuts.

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This article appeared in the Sunnyvale Sun, June 4, 1997.
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