Monday, May 11, 2009

The Utility Users' Tax Increase Debate

As I'm sure you know already, Sierra Madre voted itself a big tax hike in 2008. The Utility Users' Tax, which covers everything from cell phone usage to trash collection, was increased radically with the cooperation of the voters. How much that hike will eventually be is still something of a mystery.

Item no. 6 on this Tuesday's City Council agenda is a discussion of a possible suspension or decrease in the Utility Users' Tax. So what we need to discuss here is just how did we get to this point? And was the trust the voters put in City Hall betrayed in the first place? Let's dig in.

I've selected several newspaper articles that were written at the time the tax increase scenario was being rolled out to the voters. This starts as the story of how Measure U was successfully sold to the taxpayers of Sierra Madre. But then something happened to make the ending an unhappy one.

The first article we'll cite was printed in the true paper of record here, The Sierra Madre Weekly. It was given the scary title of Committee Hears Harsh Realities of City Finances, and was written by Erica Blodgett. In this segment we can see that our fiscal condition was being described then as being in horrific straits. Here are the most alarming passages:

"According to the analysis of the initiative prepared by the city's finance director, Karin Schnaider, the cost of the initiative could be anywhere from $759,000 to $1,243,000 annually with the potential for it to go as high as $1.4 million depending on how current salary negotiations unfold in a number of cities the initiative references ... If the city does not find a way to increase revenue and the (Police pay increase) initiative passes there is a possibility that one or all of these services (paramedics, library, etc) could be eliminated. In order to put all the information together the ad-hoc (finance) committee has created a subcommittee to evaluate how much money different measures - utility users tax, parcel tax, assessments - could generate and what the community would tolerate."

In a typically one-sided Mountain Views "Observer" article (10/26/07), a front page sales pitch titled "Councilman Buchanan Speaks Out: A Sustainable Future For An All America City," found the former Mayor having this to say:

"What we ... know is that at the end of two years current revenue streams will not cover the cost of existing general fund services. Revenue increases (mostly from property tax, utility users tax, and limited sales tax), do not keep pace with the cost of delivering existing services."

There is no record of the Mountain Views "Observer" offering similar space to present the argument against raising the Utility Users' Tax. But if they had, the question would have been this. How could John Buchanan have really known that the City was in the kind of fiscal distress he claimed? After all, the City of Sierra Madre had at this time not completed fiscal audits in the previous 4 years! Something that had cost Sierra Madre $25,000 in state levied fines. And, as you will see later in this article, it is this very thing that has now put the UUT hike in jeopardy while causing this City considerable embarrassment in the daily press.

The Ad Hoc Finance Committee was those citizens tasked with the unenviable chore of creating an argument in favor of raising the UUT rate. Here is how the gig was described in a Sierra Madre Weekly article titled Committee Makes Recommendation to Council:

"The ad hoc committee had to confront and discuss finding possible support for operational needs in three areas. That would include for the police department and paramedic services through possible cost of living adjustments; making recommendations to the council on the source of new revenue; and show council members just how much revenue will be generated."

And, in what seemed to this observer at the time to be a predetermined conclusion, the ad hoc finance committee did indeed recommend a tax hike. They had combed through all the numbers provided to them, and based on the information available to them at the time, what other conclusion could they come to than increase the UUT?

"A six percent increase in (the) utility user tax, and creation of a special revenue tax are among the recommendations made by the committee. By raising the utility user tax from six percent to 12 percent, the city would receive a windfall ... Councilman John Buchanan said there is a strong backing for the raise in the utility user tax."

Long story short, the UUT hike was put on the ballot. All of the information dug up by the Ad Hoc Finance Committee was provided to the voters and, trusting in both the veracity of those making the tax increase recommendation and that the numbers provided by City Hall were for real, the voters approved Measure U overwhelmingly.

But it turns out that those numbers were nowhere near accurate. And the warnings put out by the anti-tax hike minority, that a city that had not completed it audits in 4 years had no business asking the taxpayers for more money, turned out to be spot on. And almost a year to the day later an article published by the Pasadena Star News ("Audit finds extra $1 million in Sierra Madre") dropped the big one:

"An independent audit of the city's finances has found more than $1 million more in the city's reserves than had previously been thought, but not everyone in town is celebrating the windfall ... An audit of the fiscal year 2006-2007 found an increase in (the) general fund balance of $1,036,795, attributed in part to higher-than-expected revenue from property taxes and a corrections (sic) in accounting records ... The audit is one of two recent financial reports that paint a less bleak portrait of the city's financial status than in the past ... But the good news doesn't have everyone cheering. At least one city official, Mayor Kurt Zimmerman, has focused instead on questioning why voters were asked to pass a utility users' tax hike in 2008 ... "When the voters approved the UUT tax increase, they were unaware of this surplus," Zimmerman said. "I was under the impression that the city's finances were in dire straits and it turns out that is not the case."

So here's the problem as I see it. Perhaps the city does still need the money that was raised by the Utility Users' Tax hike, and that basic services here really would suffer should it be removed as one of the City's revenue raising options. And that is a strong argument. The matter should be looked into and the case made that the money is needed.

But there is a catch. This additional money was raised through a tax increase initiative put on the ballot and approved by the voters. And the missing $1.o36 million dollars was not to be found in the information provided to the voters when they were considering that hike. And that is because the proper audits were never done. In other words, City Hall went out and asked for a tax increase when it didn't really have the foggiest notion of how much money it really had. Incompetence was multiplied by chutzpah, and the sum result was that the voters gave themselves a tax hike based on highly inaccurate data.

Now the argument that I find particularly appalling goes something like this: The City needs this money, and the voters did approve the increase. Maybe the information put out was bad, but we need the money, so we shouldn't risk losing it by doing anything about the UUT.

So can anybody tell me just how ethically wrong that argument is? We got what we needed out of the taxpayers, so who cares that we fed them garbage to get it? In this the era of tea party tax protests, I'm surprised Sierra Madre hasn't painted City Hall a nice pekoe orange yet.

The best way to deal with this is for the City to first admit it made a bad mistake. It needs to subject itself to a forensic audit for all 4 of the years that the audits were screwed up. An outside counsel also needs to be brought to discover just exactly how much was actually involved and how that money was spent. Every dime. All the current audits have done is rearrange the same bad numbers that existed before. Garbage in, garbage out as the phrase goes.

And then once all the money is accounted for, and forensic audits completed, then the case must be made once again for a Utility Users' Tax increase. We probably need it, but the people who have to fork over the money should be allowed to kick the tires again. Trust betrayed is hard to regain, but that attempt must be made.

And only when these steps have been taken should the question of a UUT increase be put back on the ballot. We deserve a revote. If the money is needed, I suspect the voters will approve it all over again. But at least this time everyone will know that the information is accurate.


  1. Indeed,where is the outrage!We sit here like simpletons waiting to be shafted again by these scoundrels at City Hall.Yes,to outside audits and whatever else it takes to sort out this mess.

  2. Something this article doesn't deal with, and which i find disappointing, is any inquiry into why the city did not complete its audits back through 2007. This seems to be one of the most basic responsibilities of any city. Why did it take until now to get them done? And was this just incompetence, or was there a motive?

  3. Now that there is a citizen's committee to review the tax....what are they being charged to review? The mere fact the money was spent or will the city allow them full access to everything? Our council appears to be divided on what powers this committee will have.

    Kurt is to be commended for saying we did not give the voters accurate information so they could make an informaed decission.

    If the UUT was put to a vote and it did not pass, would the police pay raise still go through because it was based on the passage of the UUT?

    Is everyone aware that Southern California Edison is asking for a 43% increase in electric bill beginning 1/2011? The notice was in the electric bill a couple of months ago.) If you use $100 of electricty your bill before taxes will be $143. The UUT will bring it up to almost $160 from the current $108. The city will reap $$$$ on this increase.

  4. The question I have is what - or who - is being protected here. Is there a fear that the UUT could be jeopardized should a forensic audit take place and the findings prove negative? Or is this really being driven by the desire to protect those who didn't get their work done a few years ago. Elaine Aguilar and Karin Schnaider relly do need to be appreciated for the job they have done cleaning things up. But why does the process need to stop there? It seems to me it has only just begun.

  5. The MVN just ran an article criticizing Kurt for doing the right thing by raising this issue and suggesting we put the UUT back on the ballot. Will the dirts show up at tomorrow night's council meeting and go after him? We should probably show up to support him just in case.

  6. I'll be writing about the Looney Views News article tomorrow as a follow up to this one. The big issue that I have with it is the rage. How can anybody be that angry over the possibility of a forensic audit over 2 year old business? Susan is way over the top on something that is really a pretty dry issue.

  7. I agree with Pasta's post.
    It will be interesting to find out more about this Tuesday night.
    Bear in mind people, anything the DIRTS, especially Joe Mosca and Susan Henderson are so opposed to, needs to be thought out very carefully, because you know they NEVER have your best interests in mind.

  8. Eric, you are right on target. This is a perfect example of the kind of corruption we've had to deal with throughout the Shenanigan Era. The tax was passed with a misunderstanding on the part of the public. There is no debate about the ethics.

    I also agree that the people will once again approve the tax if needed, but they deserve the respect of an apology and an accounting. Let's make that common practice in our city politics, huh? If someone lies or makes an honest mistake, for Heaven's sake, ADMIT & APOLOGIZE!

    As Eric put it: "The best way to deal with this is for the City to first admit it made a bad mistake. It needs to subject itself to a forensic audit for all 4 of the years that the audits were screwed up. An outside counsel also needs to be brought to discover just exactly how much was actually involved and how that money was spent."

    This is an essential part of the restoration of Sierra Madre's civic integrity.

  9. One friend of mine has said, the City Council can't be blamed because they didn't know they had a surplus. That's the point isn't it? They didn't know they had a surplus and they didn't know that they had a deficit, either, but that didn't stop them for asking for a big pay raise.

    I'm not one of those people who believes that less government is good governmnnet, but come on people, why should we give government an increase when it was obtained on false grounds? Why not run our city under an admittedly adequate tax scheme rather than taking more from people to build a reserve that some other City Council can squander on something like I-97-1? Or more downtown planning?

  10. why do we need to stall with a committee/Hello,this is fraud,pure and simple.If this were a business, legal action would be prompt.We Taxpayers have the"RIGHT" to know the TRUTH,no matter where it leads.It's our MONEY!

  11. This would be another huge victory for the people of Sierra Madre. And Mosca is making a speech about it? What more does anyone need to know?

  12. Sierra Madre business ownerMay 11, 2009 at 1:02 PM

    12:55, have Mosc and Buch come out against an independent audit supervised by outside counsel? That would be helpful. No question then what must be done.

  13. It's pretty obvious that John/Joe are
    against an outside forenci auditor
    coming to poke around City Hall. Who
    knows the dirt shenanigans that would
    be unearthed if that happens. And Joe
    is maing his $11 speech against Kurt

  14. You just KNOW that Joe wrote the Mtn-Views News piece.

  15. One Carter,Cong church,late audits,Scag,Joe,police scam and Oh Yes,conning the citizens with bogus numbers to illegally raise our taxes.Quite a little city we have here.

  16. Greetings all,
    I have posted Shirley Moore's Traitor Joe Speech, as well as Kathy Childs, if you can sit through it.

  17. What confounds me is why Mosca thinks he's going to get any political mileage out of opposing Zimmerman's proposal to put the UUT on the ballot a second time. Doesn't he know that a tax cut is always popular? Doesn't he know that most of the voters in town trust Kurt. Heck, even the Pasadena Star News, which has always opposed Zimmerman, approved of his proposal in a glowing editorial. Joe seems to be doing everything to ensure that he will not be re-elected.

  18. Joe doesn't like it when people vote. The DSP vote didn't meet with his favor, so why would he want to help set the record straight on the UUT mess with another vote like that? Our little friend Joe would have made a splendid commissar.

  19. Thank you SOOOOO much, Neuroblast!

  20. Mama Clem and make a good case.

    Love the Shirley Moore YouTube!

  21. 3:15 Mosca doesn't care about Sierra Madre or its residents. Mosca only cares about the developers he met and worked for in the San Fernando Valley.

  22. Mosca only cares about Mosca.
    He is a classic pathological narcissist.

  23. Please run again Joe so I can vote against you.

    Your 1,900 votes last election will be maybe 200 votes this election.

  24. Has anyone heard of any government entity giving back a tax even if obtained by fraud? Of course not.You may be sure that we citizens will be offered hand wringing sob stories as to why they can't right a wrong.Hence a committee,a well known ploy use by governments to divide,perplex,divert and obfuscate the members from the real issue...FRAUD..Stealing from the citizens thru illegal taxes.This is an effort to COVER UP!

  25. Thank you Anonymous 4:22 and 4:29... and Shirley Moore always had it right on!!

    And Orleans, maybe, just maybe since Kurt found the extra money we will have proof that there is a bigtime wrong. Go JOE Go, run again, so you and the dirts can melt like the Wicked Witch, you and your Susan and other narcissistic path ?friends?....a lost election may do you all good....

  26. Fraud:"version of truth in order to induce another to part with something of value or to surrender a legal right".Webster's collegiate

  27. Orleans....That reminds me of Karen Schnaider whining about how hard she and the 8 people in the accounting department have to work to get things done.

    It's called "Protecting Your Paycheck."

    I suspect we will hear a lot from City staff about how hard they work. In my opinion, it's a bunch of bunk.

    Let's see if they'll let Sir Eric, et al. go through, not only payroll, but benefits packages, vacation time and time off as well. Although they may stall him, should he ever ask for that info. Too much damning information to cover up!

  28. Yes to a forensic audit..will it be expensive..Yes but so is having a corrupt and or incompetent staff handling the city finances.I will wait with interest to see who supports an audit and who does not.This may give the beleaguered taxpayers a clue as to who we look to represent us at the next election.

  29. Is anyone aware there is a TAX REVOLT going on?How does anyone believe that people are going to allow an improper tax hike to stand?

  30. People will be watching who supports the good guys who support honest government.It's interesting think about where all that money was laying a shoe box? Come on,somebody knew.

  31. Neuroblast: Thank you for posting those! Finally got to see Shirley, Caroline and Kathy's remarks...much appreciated!


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