The Chula Vista City Council on Tuesday declared a fiscal emergency in response to pessimistic revenue projections, and also voted unanimously to place a tax increase measure on the ballot for November.
A fiscal health plan presented by staff said the city is facing a $10.9 million budget shortfall for fiscal year 2010 and 2011.
A declaration of fiscal emergency, which must be made by unanimous vote, is required before the council can place a tax increase before voters. The council determined the projected shortfall qualified as a fiscal emergency, which in turn allows them to go to voters with a change to the city’s utility users tax.
“We declared a fiscal emergency last year and we’re still in it. You take a look at those red numbers,” Cox said, and it’s clear the city is in financial straits.
The UUT tax, as it’s known, was first established in the 1970s, before the age of free long distance and voice over Internet protocol telecommunications, a form of internet telephone. Currently, only calls within the state are taxed, at a rate of 5 percent, while technologies like voice over IP are not taxed at all because of outdated language in the original law. The updated ordinance would tax long distance and state-to-state calling that is currently untaxed and some forms of electronic communication as well.
Representatives from AT&T and Cox Communications both spoke against the ordinance, saying they preferred to work with the council before bringing the measure before voters.
The main reason for the changes, say city staff, is that the current UUT tax is vulnerable to legal challenges. If the tax is struck down in court, the city could lose $7 million in funding, or more than 5 percent of general fund revenue.
