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Richmond To Discuss Electricity Tax Break
January 23, 2001

Residents and businesses may be spared some of the impending rate hike if the council can agree on ways to generate alternate income 

By Shawn Masten

RICHMOND -- The City Council tonight will consider giving Richmond residents and businesses a break on the city-imposed tax paid for electricity and gas usage. 

The proposal by Councilman Tom Butt comes with the state in the midst of an energy crisis that has prompted recent rate hikes by Pacific Gas & Electric Co. 

Butt also is proposing that the city let voters decide in November whether to raise the ceiling on a flat utility user tax the city offers its major power users. Chevron is the only company that takes advantage of the flat-rate option. 

"If we were to ... eliminate Chevron's alternate payment, we could collect a lot more taxes from Chevron and lower everybody else's rate," said Butt, a frequent critic of Chevron over safety and tax issues. 

It's questionable whether Butt's proposals will win the support of a council majority. 

Councilman Richard Griffin said he would not endorse an increase in the flat rate tax paid by Chevron. But he agreed that it may be appropriate for the city to provide some utility tax relief to residents and businesses. 

The city expected to earn about $17 million in revenue this year from the utility tax, roughly half of which comes from Chevron. The amount was projected before PG&E received approval from the Public Utilities Commission to raise rates. 

"We need to look at this more closely and see if we can do something before we sit up there and let Butt push something down our throats," said Griffin. "I'm sure we need to do something, if there's anything we can do." 

Richmond imposes an 8 percent tax on gas, electricity, cable television, telephone and cell phone services. Providers collect the tax for Richmond and other Bay Area cities. 

"If Richmond wants to tax its citizens at a lower rate, they would just give us the rate and we would impose it," said Staci Homrig, PG&E spokeswoman. 

Richmond is not the only city wrestling with how to handle the potential tax windfall posed by rising utility rates. The Berkeley City Council also will consider a cap on its utility tax tonight. 

Other cities with a utility tax include Albany, Benicia, El Cerrito, Hercules, Oakland, Pinole, San Jose, San Leandro and Vallejo. 

The Richmond tax cut, if approved by the council, would be a temporary reduction and would only apply to electricity and gas services, Butt said. 

The amount of the new lower tax would have to be determined after analysis of the city's revenue and expenditures for the rest of the current fiscal year, which ends June 30, he said. 

Butt said he didn't know how long such a review would take. Anna Vega, the city's finance director, couldn't be reached for comment Monday. 

With the rate increases approved by the state Public Utilities Commission this month, the tax could generate hundreds of thousands of dollars more than the $17 million initially expected, even as the city pays more for the electricity and gas it uses. 

The PUC approved residential rate hikes of 9 percent. Rates for small businesses went up 7 percent, and commercial users will see a 12 percent to 15 percent rate increase. 

"People are going to end up getting taxed potentially a lot more than what the city intended," Butt said. "What we would try to do is preserve that stream of revenue as closely as possible to where it was intended without taking any windfalls off of the rate increases." 

The council also will consider placing on the November ballot an amendment that would increase the annual flat rate from $1.1 million to $1.5 million for each percentage point of the utility tax.