The Star-News


Speaking out against Chula Vista's proposed Proposition H

Sat, Sep 11 2010 12:00 PM Posted By: Ed Herrera

The city of Chula Vista is proposing a ballot initiative entitled Proposition "H" on the November 2, 2010 gubernatorial general election that, if approved, would broaden its 5 percent Telecommunications Tax under the City's Utility Users' Tax (UUT). The purpose of the measure is to allow the city to expand the scope of taxable services, collecting UUT revenue on a broad range of telecommunication services currently not covered by the existing ordinance.

For the first time, the city would impose the taxation of interstate and international telecommunications services, as opposed to only intrastate telecommunications. The initiative expands the definition of telecommunications services to include: wireless communications (such as mobile phones), text messagin prepaid/postpaid telecommunications, private communication services (T-1 lines), paging, voice over internet protocol (VoIP), and toll free numbers such as 1-800's.

The City Hall-led ballot initiative comes to voters a year after the Chula Vista City Council voted to hold a special election to ask voters for a 10-year, 1 percent sales tax increase, which would have set the rate from 8.75 percent to 9.75 percent, the highest in the county of San Diego.

City Hall is proposing yet another tax increase. According to City Hall, the Utility Users' tax proposes a simple modernization/update to protect the city's telecommunications tax revenue stream claiming "...a perceived loophole in the current ordinance and changes in technology, which have put this funding at risk."

However, what the measure does is expand scope and reach of the tax, thereby increasing taxes. In fact, many wireless subscribers will see an immediate 0 percent to 5 percent increase. What is most troubling is that the ballot language fails to indicate possible increases in taxes. It states quite the opposite. It asks voters if the existing ordinance should be modernized "...with no rate increase..." Even knowing this, the City Council voted to place the unamended language swiftly on the ballot. That did not sit well with many, Cox Communications being one of them.

"Cox Communications feels that it is disingenuous to voters to claim that the proposed measure is not a rate increase...The ballot language says that there is no rate increase. This is incorrect and misleading," wrote a representative for Cox Communications in a letter to the Mayor and City Council dated June 8, 2010.

According to the letter, in a quick estimation, the expanded service definition would result in an estimated $255, 000 rate increase for Cox customers alone.

A common argument in support of the measure from City Hall is that the proposed modernization of the UUT is necessary for the language to be technology neutral, allowing the "City to treat all consumers equally." This statement is a wolf in sheep's clothing.

What this simply means is that City Hall would like to legally force the tax onto all carriers and therefore, consumers under the proposed expanded scope. This also means there is no sunset clause. It is a permanent tax that will likely serve as a slippery slope to adaptively tax just about every form telecommunications as technology progresses-giving new meaning to the wireless phone commercial pitch: "We've got you covered." And they will, in taxes.

Perhaps the most misleading argument in support of the measure is that, if passed, tax dollars collected will go towards funding public services.

The truth is Proposition H contains nothing but rhetoric when it comes to protecting services. Not one cent of this tax is required to go to police, fire, or any other core city service for that matter. Prop H is a blank check and city politicians can spend this money any way they choose. And there is reason that they may.

Aside from budgeting for service and personnel expenses, the City has several contractual obligations that it is legally bound to including pension funding, debt servicing, and pay raises.

On the topic of contractual obligations, some of which the sitting city council is responsible for, Proposition H proponents, in their ballot argument, list conditions that will be met upon the measure's approval stating: "Chula Vista's Fiscal Health Plan requires a balanced budget, adequate reserves, and pension benefit reform."

Yet, a simple look at the proposed ballot language reveals nothing requiring any reform. City Hall politicians had over a year to implement such reform which would have likely started saving millions of tax dollars, more than what would be collected by the proposed tax.

What proponents are asking voters to do is to put the cart before the horse. Incidentally, they are admitting that they are requesting additional revenue before reform.

With an ailing local economy with foreclosures rampant, hitting every corner, east and west, of the Chula Vista, many families continue to struggle, as victims of the recession continue to mount. Proposition H will undoubtedly take more than an extra toll on families.

Recent studies by the Centers for Disease Control illustrate how wireless taxes and fees are regressive in nature. According to the CDC survey (released in May 2010), nearly two-thirds of adults living in poverty or living near poverty live in wireless-only households. Taxing wireless services at an average rate of at least 11.83 percent every month adds up quickly and hurts those that can least afford it.

Proposition H is an example of poor public policy that fails to consider the harsh reality of the impact of the global recession and the larger economic landscape.

It is by simple terms a dash for taxpayer cash and its casualties are more than the truth and economics. Voters should not be fooled. It is very important to delineate that if it was the primary intention of City Hall is to protect itself from legal challenges and protect future revenue then, it should have included the newly defined scope of the services whilst providing a rate decrease so that it is such the case the proposed language is revenue neutral-however, it chose not to.

Herrera is the CEO of the San Diego South County Chamber of Commerce and President of the Chula Vista Civic Association.


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