Berkeley could be the first municipality in the state to share the pain of soaring energy costs with its residents by not collecting taxes on utility rate hikes.
The recommendation comes from the Citizens Budget Review Commission that voted unanimously Tuesday to ask the City Council to make the gesture to residents and small business owners who are feeling the pinch of higher energy costs. Commissioners want the city to refuse tax assessments on gas and electric rate hikes.
Berkeley charges residents a utility tax of 7.5 percent for a variety of services including gas, electric, telephone, cell phones and cable TV. Last year the city collected $11.8 million from the tax. The commission is requesting the city not assess the tax on gas and electric rate hikes.
The savings would not be huge, about $4.91 per resident per month just for electricity. But in this case, supporters say it’s the thought that counts.
“This is certainly not the answer to rising energy costs,” said Commissioner Bill Gilbert, who proposed the idea to the commission. “But at least the city won’t be a coconspirator with the utilities.”
PG&E representative Mindel Penn said it would be easy to change the tax to reflect the city-imposed cap.
“Each city charges a different tax rate, so it should be no problem to adjust the rate accordingly and users would not be charged the difference,” Penn said.
She added that she has not heard of any other city that is considering an “empathy cap.”
Gilbert said the exact language of the recommendation has not been worked out yet. He said another possibility, if it is too difficult or cumbersome to implement the tax cap, is collecting the revenues from the increases and depositing them in a special fund that would be used for an undetermined project, presumably to benefit Berkeley residents. He estimated that the fund could generate anywhere from $1.5 to 3.5 million each year.
Mayor Shirley Dean said she has not yet seen the recommendation but thought it sounds like a good idea. It would make more sense to not tax residents for the rate hike, rather than creating a city-maintained fund, she said.
“I like the idea of capping the increase at the source. It’s a more efficient way of doing it,” Dean said.
Councilmember Kriss Worthington said he is also enthusiastic about the recommendation. “I think the city should not reap a windfall from utility taxes while residents and small businesses are getting hit with massive electricity and gas bills,” he said.
Several budget commissioners will make a brief presentation at the Jan. 16, City Council meeting and then submit a formal recommendation for the council’s consideration at the following meeting on Jan. 23.