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City is trying to avoid taxing PG&E hike
As the energy crisis continues across the state, the city is trying to find an effective way to apply a utility tax break for gas and electricity users.
The City Council asked the City Manager’s Office to look into implementing a utility users’ tax break on recent increases in gas and electric rates. The tax break would represent more of a gesture than a significant savings. But the Budget Commission, which recommended the idea to the council, said it’s important the city not benefit from the financial pain of increased utility rates.
If the city caps the gas and electric utility tax, it would save the average residential user, based on recent rate increases, $4.40 per year according to the city’s energy office.
Berkeley charges utility users 7.5 percent on a variety of utilities including telephones, cell phones, electricity, gas and cable. Last year the city collected $11.9 million in taxes on all the utilities combined. The tax on gas and electricity alone was about $5.9 million.
PG&E spokesperson Staci Homrig said only 70 of the 300 municipalities PG&E serves charge a Utility Users’ Tax and of the 70 Berkeley is among the highest. “The cities that do charge the tax range anywhere from 1 percent to a higher end of 8 percent,” Homrig said. She added that one city, Firebaugh, Calif. charges a rate of 10 percent.
The most effective way to implement the tax cut, according to Homrig, is for the city to adjust the utility tax rate of 7.5 percent so the revenue generated is the same as before utility increases. “We could compute that figure and all the city would have to do is approve it through whatever process they use,” said Homrig.
But Budget Director Paul Navazio expressed a reluctance to adjust the tax because once it’s lowered it can’t be raised again without the increase going before the voters. Navazio also said because of the volatile energy market, the tax might have to be adjusted every month, which would be an onerous administrative task.
Mayor Shirley Dean said she would prefer that utility users never be charged taxes on the increase in utility rates, but if it proves too difficult to administer she would support putting the extra revenue into a specific fund that would somehow benefit Berkeley’s utility users.
Councilmember Kriss Worthington said there are a number of ways to implement the tax cut. “Another possibility is reducing or eliminating the tax for residential properties and maintaining it for commercial properties,” he said.
Worthington said that commercial property owners already have enough breaks under Proposition 13 which froze property tax rates in 1978 – unless a property is sold at which time it is reassessed.
