L.A. City Voters to Decide on Telephone Utility User's Tax

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Los Angeles city leaders warn of dire consequences if Proposition S fails on Tuesday's ballot. The L.A. city measure is a telephone utility user's tax that would preserve hundreds of millions of dollars in revenue to the city. Critics say it could mean new taxes.

Frank Stoltze: When he's not out campaigning for Hillary Clinton, Los Angeles Mayor Antonio Villaraigosa is urging passage of Proposition S on the city ballot. Without the telephone utility users tax, the mayor says, an already strapped L.A. faces even deeper budget cuts.

Mayor Antonio Villaraigosa: Everything's off the table. That's another 270 million on top of a projected deficit of 300 million. There's nobody, except for somebody who's got a magic wand, that could come up with the revenues that we would need to address that level of a deficit.

Stoltze: At a recent news conference in Watts announcing a drop in crime, the mayor and LAPD Chief Bill Bratton warned that the city could be forced to reduce police and fire services if Prop S fails.

Police Chief Bratton: If the city were to lose that approximately $250 million, then all bets are off.

Stoltze: Proposition S would replace an existing tax on cellular and land line calls. That tax is the subject of three lawsuits, including one by AT&T Wireless. The courts might rule it illegal soon.

Anti-tax activists oppose S. Greg Lippe of the San Fernando Valley Industry and Commerce Association concedes that the city would lose revenue if it fails. But, he says, the city needs to cut fat first.

Greg Lippe: I'd certainly be willing to cut out things such as the calligraphy department – that's $550,000 a year for the purpose of decorating proclamations.

Stoltze: He also laments a recent five-year, 22% pay raise for some city employees. Lippe points out that Proposition S expands the city's telephone utility users tax by allowing for new levies on Voice Over Internet Protocol, text messaging, and high quality T1 lines many businesses use. In exchange, the measure lowers the tax from 10 to 9%.

Lippe: Why didn't they just ask taxpayer to approve a tax that was equal to the one that's being declared illegal?

Stoltze: Los Angeles City Councilman Bernard Parks chairs the council's budget committee.

Councilman Bernard Parks: This tax has been in place for two decades. A lot of technology has come about since then. There is a need to recover for those types of activities.

Stoltze: The campaign for Prop S has amassed a two-and-a-half million dollar budget – enough to buy TV ads featuring the city's top public safety officials.

TV ad with Fire Chief Doug Barry: I'm Fire Chief Doug Barry. In an emergency, firefighters and police officers will tell you that every second counts. It's all about response times. And that's why proposition S is so important...

Stoltze: Most of the campaign money has been funneled through Mayor Villaraigosa's Committee for Government Excellence and Accountability. City labor unions and downtown developer AEG have made six-figure contributions. Both deny they're trying to curry favor with the mayor. They say they're concerned about the city's financial health.

The anti-tax opponents of Prop S have raised little money. They concede that this tax is smaller than most. Cal State Fullerton Political Scientist Raphe Sonenshein says the telephone users tax still generates a lot of revenue for L.A. and other cities.

Raphe Sonenshein: Cities, in general, are at the low end of the food chain when it comes to tax revenue. The federal government – they can pass a $150 billion anti-recession stimulus. If the state of California runs out of money, what do they do? They take it from the cities, or they take it from the school districts. But when you get down to the city level, it's kind of tough.

Stoltze: That may be one reason the L.A. City Council voted unanimously to declare a fiscal emergency before placing Proposition S on the ballot. That means a simple majority of voters supporting S, instead of the usual two-thirds for a tax, can make it law.