Please Kill The Utility Tax...We Want Our Money Back

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Revenues earned from the utility tax are buried deep in the bowels of the 2013-2014 Oro Valley Town manager recommended budget,  In fact, they are buried so deep that they are indecipherable. You cannot find them. They are not listed separately. We can find all other kinds of things like for example the $500,000 that you pay to Comcast gets paid to the town in an annual franchise fee.

 But what we can't find is the amount of the utility tax planned revenue.

So I asked town Finance Director Stacey Lemos.  Her response:  "The 4% utility tax is not segregated separately in the budget. It is included in the Local Sales Tax figure in the General Fund. The amount we estimate for utility tax specifically is $2.9 million for next year."  That's $725,000 for each percentage point of the tax. It is an increase per point over prior years because TEP rates are higher.  That's right.  Whenever your utility bill goes up, so does you utility tax. It's "the gift that keeps on giving."

"The nearest thing to eternal life we will ever see on this earth is a government program."(Source) Our utility tax has reached this level.  The utility tax was enacted by Town Council in December 2006 as a 2% tax.  At that time, a sunset clause was included to end the utility tax in April 2009. (Source) The Town Council in March 2009 voted to extend the utility tax, at the 2% level, with no sunset clause.  Mayor Hiremath and those elected with him on May 4, 2011 decided to increase the tax to a 4% level.  The vote was 5-2 on Council with Council Member Gillaspie and Garner voting "no."

As we look through the budget for 2013-2014 we find ample areas that can be reduced such that the town can recind the 2% increase of two years ago and return us to the voter approved level.  At least, they can give us back the 2%. Give us back $1.45 million.  They can give us back our money.

You think its gonna happen? You think?  Not in your lifetime.  Governments never reduce or eliminate a tax.  Instead, they find ways to spend the money... your money.

Yes. I'm a bit frosted on this. Yes, I am like a dog with a bone. I just can't let go.

This is because the utility tax hurts everyone.  And, yes, its a good reason for those businesses and residences that the town wishes to annex to avoid annexation.  After all, this tax will cost them big bucks.

The utility tax is nothing more than a property tax in disguise and the voters of Oro Valley have never approved a property tax. They never voted for a utility tax.  Perhaps we need to begin action to eliminate this tax.  Perhaps we need a voter referendum.
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Why John Musolf Spoke Against Continuing The Utility Tax

Our friend John is extremely knowledgeable when it comes to finances. Although the council voted 4-3 to continue the Utility Tax----with No Sunset Clause, John asked that we post the following message especially for those citizens that were not present or not watching the meeting..
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Art

Although the utility tax was extended I would still like the LOVE BLOG to publish the presentation I made to Council on March 4, 2009.

John Musolf

Vote Against Town of Oro Valley Utility Tax Extension – March 4, 2009

· The Town of Oro Valley Council voted down the 4% utility tax in the 2005-2006 budget.

· The Town of Oro Valley Council voted down the 4% utility tax again in September 2006.

· The Town of Oro Valley Council proposed and approved a reduced 2% utility tax in December 2006.

· At the December 6, 2006 some council members stated that many verbal, email, and written comments had been received by the council members or town staff that supported the utility tax proposal. However, no documents were produced or quoted from and made part of the public record???

· At the December 6, 2006 meeting two of the council members spoke eloquently on the behalf of the taxpayers they represent:

o Mayor Loomis: “We cannot expect to continue to think that we can tax others (via fees) to pay for Oro Valley Services. The taxpayers need to contribute to the viability of Oro Valley. The utility tax is just one short-term method to obtain the necessary funding”.

o Councilman Kunisch: “The citizens need to pitch in and help maintain the quality of services in Oro Valley. The utility tax is just one short-term method to obtain the necessary funding”.

· It is true that a tax cannot be earmarked for a specific purpose but must be directed to the general fund. However, it was perfectly clear from the power-point presentation made by Town of Oro Valley staff and the discussions by the Town Council at the December 6, 2006 meeting that the 4% utility tax was being considered to fund 18.5 new staff positions (1.2 million dollars) and capital improvements (900,000 dollars). These requests had been repeatedly turned down in the budget process.

· When the proposed 4% utility tax was reduced to 2%, a sunset clause was added to end the short-term utility tax in April 2009.

· Now, with the sunset clause due to expire in April 2009 some members of the council want to extend this tax and place the revenue into the general fund because of budget shortfalls. I hope the Town Council does not follow the Federal Rescue Model and try to “Tax Our Way To Prosperity” to deal with the economic problems and our budget shortfalls.

· I would like to recommend to the Town Council that the sunset clause be enforced and the utility tax be allowed to expire in April 2009.

· Instead, the Town of Oro Valley should concentrate on ways to reduce spending, not tax its citizens. A couple of suggestions on spending reductions:

o Eliminate the $160,000 “donation” to the Metropolitan Tucson Convention and Visitor’s Bureau. The contribution is based on the “trickle down theory” that any economic gains that accrue to Tucson and Pima County tourism will benefit Oro Valley for simply being adjacent to Tucson and part of Pima County? What percent of the statistics in convention sales is directly related to Oro Valley only? How many times did MTCVB feature Oro Valley specifically in travel brochures and trade shows? Answer: None!

o Eliminate the $25,000 “donation” to the Critical Path Institute. As a Federal Taxpayer and state taxpayer I am forced to support the FDA’s Critical Path Initiative. Why as an Oro Valley taxpayer am I being asked to contribute again?

o Eliminate expenses for the Town Council members and Town Staff. I used to “eat out” once a week. I cut this down to once a quarter (3 months). Why can’t the TOV do a little belt-tightening?

o The Town publishes its own bi-monthly newsletter, The Oro Valley Vista. The newsletter is sent to all Oro Valley Postal Customers. Save money by suspending the printing of the “Vista” until the economy improves.

o Postpone the start of building and funding of the new Municipal Operations Center until the economy improves.

· It should be noted that no tax once enacted, has ever been rescinded in over 200 years since the revolutionaries in the original 13 colonies threw off the tax on tea from Britain and founded the United States of America.

John Musolf

Oro Valley Resident and Taxpayer

Time To Cut The Utility Tax

Wednesday, the Oro Valley Town Council will consider to direct Oro Valley Town Manager Greg Caton to "explore lower levels of the utility tax during the preparation of the 5-year financial forecast."  They are not going to actually consider lowering the utility tax at this time.  They are merely going to ask the town manager to use it as one of the options as he develops the 5-year financial forecast.

"On April 1, 2007, the Town Council approved an increase to the utility sales tax rate, raising it from 0% to 2%. The original ordinance included a 2-year sunset clause. On March 4, 2009, the Council voted to extend the utility sales tax. On May 4, 2011, Council approved a 2% increase to the tax, raising it to 4%. The 4% tax is applied to the utility bills of those Oro Valley residents and businesses that receive water service from the City of Tucson, Metropolitan Water Company and the Oro Valley Water Utility, electric power service from Tucson Electric Power Company, and natural gas service from Southwest Gas." (Source)

The utility tax has served its purpose.  It was voted by the then council to be a 2% tax.  It was later doubled by Mayor Hiremath and Council Members Hornat, Snider, Waters and then Council Member Solomon to pay for more police services.

We've written so often about the unfairness of this action and of the ridiculous nature of the utility tax that our heads are spinning.   We hate the utility tax.  The utility tax is nothing more than a tax on necessities of life: Water, electric and gas.  It taxes the rich.  It taxes the poor.  It taxes struggling families.  It taxes retirees on fixed income.  It has no energy saving benefit.   We recall Council Member Salette Latas telling us that she was in favor of utility tax because it was a "sin tax".   She, too, is wrong. It is not sufficient enough to truly reduce energy consumption.  It is just another burden on the citizens.

Politicians always try to do things to favor themselves for reelection.    Talking about reducing taxes is always a favorite.  It is no surprise that Mayor Hiremath and Council Member Waters put this on the agenda so they can talk about it.  It really means nothing.  But it makes them look as if they're interested in reducing the tax.

Our message to them:  Talk is cheap. It is action that matters.

We have had discussions with Council Member Zinkin regarding the utility tax for many months.    We believe that Zinkin is in favor of reducing this tax now.    After all, as Mayor Hiremath pointed out in his State Of The Town remarks, Oro Valley had a budget surplus in 2013.  The Mayor pointed out in his remarks that Oro Valley is no longer in a budget crisis.  A budget crises was the purported reason that the tax was doubled.

It is time to reward the utility tax payers of Oro Valley, which is most of us, by eliminating this tax.  First, it is time for the Majority-4 Council step up and fix what they broke.  Cut the tax now to 2%!  Then, consider killing it altogether, as was the original intention when it was "sunsetted".

Like we said: Talk is cheap. It is action that matters.
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The Utility Tax Strikes Again

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The Town of Oro Valley is in the process of annexing an area southwest of Suffolk Rd.   The area includes: Tohono Chul Park, Platinum Fitness, the Catholic Church radio station, a motel, medical office suites and residential homes.

Annexation of an area requires that 50% of the property owners and 50% of the property values approve the annexation. To date, the area has not agreed to annexation.  The Town has until April to  finalize this agreement.

The "Law Of Self-Interest" also known as: "What's in it for me?" is the governing rule when it comes to annexation.  The enticement for those being annexed are the road improvements that would invariably be part of any "agreement" and the extension of the Oro Valley police in for the town,

The inducement for the town is the potential for additional sales tax revenues and revenues generated by the utility tax.    The revenues generated by the sales tax are a transfer from the Pima County coffers to Oro Valley's coffers since the annexed area would now be part of Oro Valley.   So to those being annexed the transfer is transparent to them when it comes to the sales tax.

The utility tax that is the  disincentive for those to join our town.   The utility tax is not a pass-through tax.  It is a 4% tax added to every utility bill: Water, gas, electricity.   It is, really, like a property tax. You pay it simply because you happen to own a property that uses these necessary products.   There is no comparable utility tax paid by these potential annexes.   The utility is an added cost of doing business.    It will cost those who annexed thousands of dollars a year simply because their property is now part of Oro Valley.  In effect, the utility tax is a disincentive.

We don't know whether the owners will approve this annexation.  What we do know is that we've never liked the utility tax.  We even hate it when we play "monopoly."  It is nothing more than a property tax in disguise.  It would good if this tax, "sold" to us as a temporary tax, went away.  Unfortunately, utility tax is a tax that keeps on hurting.
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John's Place: The Perpetual Life Of The Oro Valley Utility Tax

The primary reason for the enactment of the Town Of Oro Valley 2006 utility tax was insufficient recurring general funds to support 18.5 new positions. The 18.5 new positions had been turned down twice in previous council budget votes because of lack of funds.

The original utility tax rate was proposed at 4%. The 2006 Council placated the taxpayers by reducing the tax rate from 4% to 2% and by adding a sunset clause “promise” to eliminate the utility tax in two years. Tax revenue was forecasted at $1.3 million per year.

There were some immediate unintended consequences from adding this utility tax! The Pima County taxpayers (including Oro Valley residents) pay for the Amphi School District budget. The Amphi School District budget then had to pay approximately $37,500 per year utility taxes to Oro Valley for its schools located in Oro Valley.

The utility tax was extended on March 4, 2009 for “more revenue” needs. So much for any “elimination promises” to taxpayers!

On May 4, 2011, by a 5-2 vote, the utility tax was doubled from 2% to 4% by the Majority-5 (Mayor Hiremath, Council Members Hornat, Waters Snider and appointed Council Member Solomon) of council. The stated reason was “to enhance the diversity and stability of town revenues and to provide needed resources to maintain town service levels."

Again, there were some additional unintended consequences from doubling this utility tax! The Pima County taxpayers (including Oro Valley residents) pay for the Amphi School District budget! The Amphi School District budget then had to pay approximately $75,000 per year utility taxes to Oro Valley for its schools located in Oro Valley.

Incidentally, in 2014, the utility tax still supports many of the 18.5 positions (13 in the police department alone) that were added in 2006.

It seems that, once elected officials get ahold of a funding source, they never let go. Even when they promise to let go.  The revenue source has a perpetual life!

Do you think that the Town of Oro Valley’s experience with their utility tax has been a sterling example for the taxpayers to ponder prior to voting in the Mayor and Council member election in August 2014?
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John Musolf retired to Oro Valley in 2003, moving here from Wisconsin. He has a B.S. in Economics/Accounting from University of Wisconsin and MBA in Computer Management from the University of Phoenix. He has taught Project Management at a number of Universities. He is a “Bucky Badger” and “Packer Cheesehead.” One of his married daughters went to college at University of Arizona and he and his wife visited her in Tucson frequently. John was a management consultant (accounting and computers) and traveled all 50 states as well as the world internationally. He was a political activist in Wisconsin and continued on in Oro Valley. He believes in traditional values. He is an old codger (1937) being a father, grandfather and great-grandfather. He will slow down when he becomes a great-great-grandfather. He has been married to his wife, Judy, for 54 years. His other interests include church activities and extensive reading and researching.
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Oro Valley Resident Questions Legality of Utility Tax
The Explorer
Brian P. Nanos
February 7, 2007

Oro Valley resident Bill Garner has already failed in one attempt to stop the town’s 2-percent utility tax from taking effect, but he isn’t giving up that easily.

In a Jan. 31 letter hand-delivered to town attorney Melinda Garrahan, Garner charges that the town council vote approving the tax was invalid.

And, if Garrahan and the town disagree with his letter, Garner later told the EXPLORER, he “will absolutely” file an injunction to stop the tax from taking effect when it’s due to kick in April 1.

“On face value,” he said, “the whole process was halfheartedly done.”

Before the EXPLORER’s print deadline, Garrahan had not yet reviewed or responded to Garner’s letter. However, Councilman Terry Parish is confident that Garner’s reading of the law is wrong and statements made by the town’s finance director before the tax’s approval also indicate that it was passed legally.

Even if Garner gets his way and the tax is put to another vote, it is likely to pass again.

The 2-percent utility sales tax on water, electricity and natural gas will pay for 18.5 new town positions, mostly in the police department. It was approved by the town council Dec. 6. A 4-percent tax had been rejected in 2005 and later in September 2006.

Oro Valley town code requires all ordinances to be the subject of a public hearing before they get passed. The minutes to the Dec. 6 council meeting include a reference to Mayor Paul Loomis opening and closing a public hearing on the utility tax, and during discussion of the tax, Finance Director Stacy Lemos told the council that the item had previously been discussed at two public hearings.

Garner, however, claims that while the previously rejected 4-percent utility sales tax ordinances were the subject of public hearings, the December vote was on a different ordinance, one that Garner points out had “completely different” language, a different ordinance number and was never subject to a public hearing.

He also said the agenda published before the Dec. 6 meeting did not refer to a public hearing, only “discussion and possible action.”

“It’s pretty clear, at least this is my opinion,” said Garner, “that there was not a public hearing.”

According to Parish, who claimed to have discussed these issues with Garrahan before the tax was approved, a new public hearing would only have been necessary if the approved utility tax would cost the public more than the rejected one would have.

The less-expensive compromise, he said, is allowed.

“I had an idea that there would have to be a compromise, so I asked if we could do that,” Parish said.

Garner said he hopes the town council will be forced to vote again on the utility tax, and that before that vote, citizens will be able to convince Councilman Al Kunisch vote against the tax. Kunisch twice voted against a 4-percent tax but voted for the 2-percent version.

When asked of the possibility of changing his vote, Kunisch said, “No way. Absolutely not.”

“There are a lot of needs and not a lot of money,” Kunisch explained. “I voted for it. I support it. I think we need it. That’s it.”

Garner’s earlier attempt to stop the utility tax failed when he came up more than 100 signatures short of the 793 needed to file a referendum putting the issue to a public vote.

Even if he had gathered the number of signatures required, the attempt would have been purely symbolic. The town had already ruled that the tax, because it paid for support and maintenance, was exempt from referendum. Additionally, a communication breakdown between Garner and Oro Valley Town Clerk Kathi Cuvelier lead him to unknowingly miss the deadline for applying for the referendum.

Parish said the tax is the council’s attempt to provide the city with needed services.

“It’s unfortunate that we have to go through this type of controversy to get something that the citizens not only need, but demand,” he said.

Cut The Utility Tax = Help Our Schools

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In our posting "The 2012-2013 Oro Valley Budget: Something For Almost Everyone" we wrote that the town budget did not include a reduction of the Utility Tax.  As you'll recall, the current council voted to double the Utility Tax in order to pay for police and related services when there was a budget shortfall in 2010.

At the Town Council Meeting on April 18, 2012,  John Musolf suggested to the Town Council that the  2012-2013 Oro Valley Town budget include a reduction in the Utility Tax.  His basis for recommending this is that the budget has a surplus. The Town is also expected to receive $583,000 from PIMA County from transferring the Town of Oro Valley Library from affiliate to branch status.  The Town is expected to save $200,000 by switching Coyote Run from Town of Oro Valley to RTA funding.

Lest you think that John is "whining" about the Utility Tax and how much it costs him individually, you are wrong. Yes. The Utility Tax has cost John and all of us a significant amount of money.  It will continue to do so, especially as utility rates increase.

We are not the only ones who are impacted.  Businesses are also impacted.

Our schools are impacted. For example, the Amphi School District currently must use $75,000 of its budget to pay the Oro Valley Utility Tax.  This reduces the funds that the Amphi school district has available to educate our children.  Certainly, educating our children is a top priority for a "Town Of Excellence."

So, considering all this, John recommended to Council that it consider reducing the Utility Tax.

We agree with John's recommendation. A tax on the necessities like electricity or gas or water is a regressive tax. For this tax to be used to fund items that have absolutely no relationship to the item on which the tax is imposed is both "illogical" and "confiscatory".

Is time for the Oro Valley Town Council to rescind at lease a portion of this tax, helping both our senior citizens, who live on fixed incomes, and the children who attend our schools.
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The Explorer Endorses Keeping Oro Valley's Utility Tax

We're not at all surprised that Explorer editor Dave Perry has come out on behalf of OV keeping the Utility Tax. Since his arrival in town, Mr. Perry seems to always endorse ways for Oro Valley to tax its citizens.

Here's his Feb. 25 editorial titled "Keep A Tax"

Nobody likes paying taxes. But 2009 doesn’t appear to be a good time for local governments to be cutting taxes, with borrowed federal “stimulus” funds about to flow, and traditional sources of local revenue crunched by a struggling economy.

Next week, the Oro Valley Town Council takes up a decision on renewal of the town’s optional 2 percent utility sales tax levied on consumed electricity from Tucson Electric Power, natural gas from Southwest Gas and drinking water from the town of Oro Valley, the city of Tucson and Metropolitan Water.

It’s a $1.5 million, general-fund revenue stream that OV needs as it confronts declining sales tax funds and state assistance. The town council should vote for its extension, we believe.

Oro Valley is one of the few Arizona communities — six among 90, when the tax was first imposed in 2006 — that did not have a utilities tax. Oro Valley doesn’t have utility franchise fees, either, with the exception of cable television. Some communities have both forms of taxation.

Council members are establishing their positions. First-termer Bill Garner, who campaigned with a position that he would not vote for the tax, says he won’t this time. And that’s fine; scrutiny of revenue generation and expenditure is always appropriate.

Oro Valley’s piece of sales tax revenue, estimated to be near $19 million for the current fiscal year, is now expected to be closer to $12.6 million. That’s a big decline, a real “plunge” in this time when the media consider small declines to be “plunges.” Utility tax or not, town government has a painful financial future. Lay-offs — the utility tax supports the equivalent of 18 municipal jobs — and less government service appear inevitable.

A 2 percent utility tax is not a lot of money per capita; less, certainly, than any property tax for operations would generate. While steadfast opposition to a property tax for town operations remains, and in this budget-squeezing time, Oro Valley should not take the utility tax out of the mix.

Oro Valley's Proposed Utility Tax Is A Major Contradiction

Talk about a contradiction, what do you think of Oro Valley's proposed Utility Tax?

In 2007, Oro Valley Council initiated a 2% Utility Tax in order to fund 18.5 new positions.

In 2011, Oro Valley Council proposes a 4% Utility Tax although 40 positions have been eliminated over the last two fiscal years.


Excerpt from the Az Star Dec. 14, 2006--

Utility tax to finance new OV staff positions.

The council voted 4-3 to impose a 2 percent utility tax and amend the current budget to include the 18.5 staff positions, which were formerly excluded due to lack of funds. The new tax will become effective April 1, 2007, and remain in place until April 1, 2009.


Excerpt from Oro Valley agenda for May 4, 2011 meeting---

From Stacy Lemos Finance Dep't

EXECUTIVE SUMMARY:
"Staffing levels have been reduced by over 40 positions, or 13%, during that time-frame." (FY 2011/12)


This begs the question:

If the original 2% Utility Tax was for the hiring of 18.5 new employees, 13 of which were in the police department, and Oro Valley eliminated 40 positions in the last two fiscal years, WHY IN THE WORLD DO WE NEED AN INCREASED UTILITY TAX AND NOT THE ELIMINATION OF THE ORIGINAL TAX THAT WAS TO BE FOR ONLY TWO YEARS?

We can expect our detractors to tell us it's because of other issues, like less building permits & less state shared revenue.Let's call "a spade,a spade." This proposed tax is a major contradiction.

Should Oro Valley Consider A Tax On Rental Receipts?

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Is it time for Oro Valley ro consider a "renters tax"?

A renters tax is added to the rent paid.  Generally it ranges from 1 to 3%.  A rental taxes generally applied to properties which have apartments that are more than two. The tax is collected and remitted by the property owner. For practical application, however, the tax is generally added to the cost of the rent. As a result, the renter does not directly see or pay the tax.

A renters tax is common in Maricopa County.  Many municipalities there have such a tax.  For example, Scottsdale's charges a "privilege and use" tax.  It is collected monthly.  It is 1.65%.  All payments made by the renter are taxable.  This includes  monies received for property taxes, repairs, improvements, telecommunications, utilities, pet fees, non-refundable deposits, forfeited deposits, and common area maintenance charges.  In Scottsdale, the tax is actually subdivided for budgeting fund purposes. For example, 10% of the tax is used to fund public safety.  Scottsdale's rental tax rate is exactly the same as its sales tax rate. Other towns in charge rate includes Tempe (2%), Gilbert (1.5%) and Mesa (1.75%).

None of these towns are Oro Valley. Still, we are growing in that direction.  We are adding rental properties.  Look at the giant bladed area that will result in rental properties on Oracle Road.  This development is going to house over 250 rental units and could add up to 1000 residents to our town. 

Cities and towns in Pima County do not charge a rental tax.  So, if Oro Valley Were to move in that direction, it would be "breaking tradition."  Why not do so?  Oro Valley Is nothing like other communities in Pima County.

The argument in favor of a rental tax is that it is simply a sales tax.  It is justified on the basis that rental properties disproportionally add to the burden of operating the town. For example, the density of rental properties creates greater public safety needs. More police attention is needed. There is greater propensity for crime, not because the people who move into apartments are criminals; rather because the density of housing and the gathering of wealth in one place creates the opportunity for more crime.

In addition, renters do not use the same level of taxing sources that those who own homes do. For example, Oro Valley's utility tax will be less on renters than on property owners simply because renters use list of items such as water. Yet, the need for town services is exactly the same.    Remember, the utility tax is a source of general fund revenues.

The argument against a rental tax is that it will unfairly burden those that rent property and, that it is therefore discriminatory to them.  In addition, there are those who argue that taxing a necessity like a home in which you live is wrong.  Finally, some would argue that any rental tax even as minor is a 1 or 2% tax would discourage economic growth or put Oro Valley at a disadvantage because it would be the only community in Pima County to charge such a tax.

Oro Valley Is no longer a little community. Oro Valley will have 50,000 people within just a few short years. This will require the town to look for sources of continuing revenue. Yes. Some of this revenue will come from the sales tax. Some of this revenue will come from the utility tax.  A rental tax will add to this stream of revenue. Other sources are likely to either remain the same or possibly decrease over time. This would include revenues from construction or revenues received from the State.

The "knee-jerk" reaction for adding a continuing, sustainable revenue stream is a property tax. This is something that we are hoping that Oro Valley will avoid.  Consequently, identifying creative ways to generate future revenues will be critical as Oro Valley grows.

So, we ask again: "Is it time for Oro Valley to consider a renter's tax?"
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John Musolf Says: "Loomis Never Met A Tax He Didn't Like."

Our Oro Valley neighbor John Musolf points out what most of us know in his letter to The Explorer----John writes "Mayor Loomis never met a tax he doesn't like."

If Loomis kept control over our out of control expenditures, we'd manage, as we always have, without coming to the citizens for more taxes.

This is another reason to vote for MIKE ZINKIN FOR MAYOR


Here's John's letter.
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Mayor never met a tax he doesn't like


Quoting from the Explorer news article, "OV candidates offer views, make cases," Jan. 20:

"Oro Valley Town Council and mayor candidates were asked Saturday if they would 'consider' a first-ever property tax to bolster a lagging general fund."

Mayor Paul Loomis said Oro Valley is the largest town in Arizona that does not have a property tax.

It seems that Paul Loomis had the same "mind set" when the mayor and council passed the utility tax in 2006. The third slide in that utility tax presentation at that time stated: "Oro Valley is one of only five other communities that does not currently tax utility services."

More recently, on Nov. 2, Mayor Loomis wrote a letter to The Explorer stating: "Raising our utility tax from 2 percent to 4 percent would put us in alignment with other southern Arizona towns."

In my opinion, Mayor Loomis likes to make sure Oro Valley taxes keep up with other Arizona towns.

Mayor Loomis has never met a tax he didn't like (especially if Oro Valley is one of the few communities in Arizona that does not have that particular tax or he thinks that tax should be increased).

Some of the same reasons for wanting a property tax today are the same reasons that were given for wanting a utility tax in 2006: 1) lack of diverse funding sources and an over-reliance on one time construction related revenues, 2) 10 percent reduction in states shared revenues in FY2009/2010 (the percent of state shared revenue reduction has grown astronomically since 2006), 3) an alternative funding source for capital improvement plan, 4) to achieve better bond ratings and thereby lower interest rate costs.

The fifth reason was insufficient recurring general funds to support 18.5 new positions. The 18.5 new positions had been turned down twice in previous budgets. The utility tax was an end run by the mayor and council to secure that revenue without voter approval. It is fortunate that property taxes require voter approval.

In my opinion, Mayor Loomis likes taxes, not justifying expenditures or cutting them.

John Musolf, Oro Valley

Bill Garner Says "No" To Continuing Utility Tax

As we noted in a previous posting, March 4 Oro Valley Council Meeting--- Utility Tax On Agenda The Feb. 25 Explorer reports that the issue of the Oro Valley Utility Tax is on the March 4 council agenda.

Bill Garner is quoted in The Explorer article as saying: “I’m not going to support any new taxes. I’m going to support the sun-setting of the utility tax. The utility tax should not be used for recurring expenses.”

On the other hand, not at all surprising, Mayor Loomis & Council Member Kunisch who voted "yes" on this tax in 2006 (the other two "yes' votes were Parish & Dankwerth, both of whom were soundly defeated in their re-election bids) are eager to support the continuation of this unnecessary & unwanted tax on the citizen's necessities---Gas, Water & Electricity.

Kunisch is quoting as saying: “I haven’t heard one person come to me and say it’s a burden on them.”

Perhaps Mr. Kunisch should read this blog, where more than 50% of the responses to our poll question, said, "Let The Utility Tax Expire."Majority Respond To Our Poll: Let Utility Tax Expire On 4/1/09

Read The Explorer article here.
http://www.explorernews.com/articles/2009/02/25/news/doc49a489f0b6b11809841533.txt

Kiplinger: Oro Valley No 6 In Highest Local Taxes In Arizona

High local taxes
Oro Valley local taxes are higher than those of most Arizona cities and towns, according to a study by Kiplinger, a personal finance advisory company. The study, published in September, ranked the 30 largest cities and towns based on the estimated local tax burden.

Marana tops list....but Oro Valley isn't far behind
Marana was the town with the most local taxes. It was followed by the City of Tucson.  Casa Grande, Apache Junction and Maricopa had more taxes than Oro Valley, but not by much.

Oro Valley's High sales tax
Oro Valley's high local taxes are driven by several factors. One is a high sales tax. We've documented this in a recent prior post.

Tucson and Oro Valley lead the Southern Arizona pack when it comes to sales tax. Oro Valley's half cent sales tax golf levy is indeed unique. It's the only one in Arizona.

Oro Valley's high utility tax 
The Oro Valley utility tax didn't exist until 2007, when a 2% tax was enacted. It was enacted during the recession to avoid cuts in town staffing.  It got doubled to 4% in 2011 to avoid having to reduce the police budget, a reduction that would have been in line with other town staff reductions at that time.

The original 2% utility tax was supposed to have been rescinded two years after its inception in 2007.  That never happened. The 2 percentage point increase imposed in 2011 was supposed to have "gone away" when the economy improved. The economy has improved substantially. Yet, the doubled utility tax remains today.

Want to learn more? Read our deceased colleague John Musolf's post:  "Perpetual Life Of The Utility Tax."

Oro Valley’s high water cost
LOVE has previously reported on the high cost of Oro Valley’s water in our posting: "Taxes, Add-On Fees, and an Inverted Rate Schedule Make Oro Valley Water Expensive.” Fees and tax levies add 41% to the cost of water. Water rates have gone up since that post; and with that increase in rates, so have the add on fees. Oro Valley's high water cost was not considered in the Kiplinger survey.

Oro Valley's higher than average county property values per square foot
Oro Valley also has a leadership role in property values. These values are the basis for the property taxes we pay. LOVE has also documented that Oro Valley's property values are higher per square foot than the rest of the county. Our 2015 analysis revealed that Oro Valley's population was 4% of Pima County but its assessed property values were 9% of total county property values. The result: Oro Valley residents pay more property taxes per square foot than other areas. Oro Valley's higher property taxes per square foot was not considered in the Kiplinger survey.

Up Next: Oro Valley Is Growing Too Expensive for Retirees
Arizona has always been a destination for retirees. Oro Valley has been the beneficiary. This fact accounts for why Oro Valley's median resident age is almost 50 years, while the national median age is 38.  Next monday, learn how things are changing.
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Guest View: Mike Zinkin ~ Why cut taxes when you can reallocate the additional funds instead?

 

The above question should not surprise anybody

After all, don’t all governments find a way to spend tax dollars, even when there is no longer a need for the original subsidy?

The history of the increased sales tax to fund the Community Center and Golf Courses
On March 1, 2015 Oro Valley initiated an increase of our sales tax from 2% to 2.5% with the additional .5% to be dedicated to the Community Center Fund. The Town had purchased the HSL properties to include golf, tennis, swimming, and a community center. The Town knew that it needed additional revenues to cover this investment.

According to the ordinance (O) 14-17, “an additional revenue source is necessary to subsidize the operating costs and fund the capital needs of the facility over time.” The tax was forecasted to “generate approximately $1.6 - $2 million annually in additional revenues.”

Some more background for the new residents in town
Immediately after the Town Council motion to purchase the HSL property, a PAC called TOOTH (Tee’d Off Over Tax Hike) was formed to gather signatures to invalidate the Council decision. TOOTH was a play on words as the mayor at that time was a dentist. They needed 1,148 signatures to get the referendum on the ballot.

Despite having to collect the signatures over the Christmas holidays (from 12/18/14 to 1/16/15), TOOTH collected 3,158 signatures (more than twice the required amount) only to have the Town Clerk void the petitions due to a minor clerical error. With one day left to gather the required signatures, another PAC was quickly formed and gathered over 1,100 signatures in just 5 hours. This was just shy of the 1,148 they needed to force a ballot issue. As such, the residents never had an opportunity to vote on whether they agreed with the tax increase to fund the Community Center, thus the purchase and accompanying tax became a reality.

Two Choices
In the current budget (FY 2020/21) which ends on June 30th, the dedicated sales tax is now forecasted to provide $2,492,960. So what does our government (Town Council) propose to do? Instead of reducing the tax, they find another reason to spend the additional revenue. Looking ahead to next year, the Town Manager’s Recommended Budget for FY 2021/22 forecasts the sales tax revenue to be $2,857,779.

The increased tax imposed on the People was to subsidize the Community Center Fund. Now that the revenues are well above the initial $1.6 - $2 million specified in the ordinance, the Council has two choices: (1) reduce the tax or, (2) find reasons to spend the additional revenue. They have chosen the latter and I believe that doing so is fiscally irresponsible.

This tax has forced the entire community of 44,000 residents to subsidize fewer than 300 “golf members.” The tax was wrong to begin with and will continue to be wrong if it is no longer going to be spent as originally proposed.

More tax history: The Utility Tax that never went away
Oro Valley already pulled a similar stunt when they passed a temporary 2% Utility Tax in 2006 to fund 18.5 new staff positions, mostly in the police department. The tax was supposed to sunset in 2009, but in 2009 the Loomis council voted to extend it at the 2% level with no sunset clause. Then, in 2010, the Hiremath council increased it to 4% and we have never gotten rid of this “temporary” tax.

Oro Valley should only tax for what it needs and nothing else.

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Mike Zinkin and his wife have lived in Oro Valley since 1998. He served on the Oro Valley Development Review Board from 2005-2009, the Board of Adjustment from 2011-2012, and the Town Council from 2012-2016. He was named a Fellow for the National League of Cities. He was a member of the NLC Steering Committee for Community and Economic Development and a member of the Arizona League of Cities Budget and Economic Development Committee. He was an Air Traffic Controller for 30 years. Mike has a Bachelor’s degree in history and government from the University of Arizona and a Master’s degree in Social and Philosophical Foundations of Education from California State University, Northridge.

Is A Franchise Tax A Good Idea For Oro Valley?

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The Town of Oro Valley issued its 2013 strategic plan in January. The 10-page document is available here. The plan set strategic goals in four areas: fiscal responsibility, communication, economic development, and community services.

The fiscal responsibility goal is to "Maintain long-term financial health through diversified revenue sources while investing in community initiatives". Two strategies are defined to implement this goal. One is to ensure the long-term viability of revenue sources to the town. One of the actions listed in this:"Evaluate opportunities to diversify the Town’s revenue sources."

Last week, we wrote about one of the ways the town can diversify revenue sources: a tax on rental revenues. Our purpose in this posting was to begin a dialogue about whether or not that type of tax would make sense in Oro Valley since it is a tax that is frequent  among our northern neighbors.   It is a tax that would not directly affect many of us. However, it would affect some of our newest neighbors and may not be preferable.

Oro Valley's 2013 strategic plan document identifies another revenue source: "Franchise agreements" with utilities.   Unlike the rental tax which would impact only a few residents a  franchise agreement would cost all residents.

In January, we wrote about a franchise tax  In our posting: " Oro Valley Is Considering A Franchise Tax".   We thought that it bears repeating in the form of a second posting because if a franchise tax is ever approved would add another 4% or perhaps even 5% to your utility bill, a bill that is already burdened with a 4% utility tax that is paid directly to the town of Oro Valley's general fund.

What is a franchise agreement? It is an agreement between a utility and the town under which utility's charge an annual fee for the right to use the towns right-of-ways.  That sounds "benign" enough, doesn't it? After all, it's the big bad utility that pays the fee. The town gets a fee.   On the surface, the does not appear to impact residents.

Not so! A franchise fee is just another tax that will appear on the utility bill. You see the utility will not eat the cost of this franchise fee.  Nor will they share it amongst all their customers. They will simply charge it back customers who live in Oro Valley.

Voters would need to approve a franchise fee.

Is a franchise tax a good idea for Oro Valley?

What do you think?
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Jeff Jones Echos Our Position: Do Not Renew This Unneeded Utility Tax

In his letter to The Explorer, Jeff Jones lets the editor know, the utility tax is "not optional" and should not be renewed. We couldn't agree more.
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Taxes aren’t an ‘option;’ OV ought to kill this one

Mr. Perry,

One might assume you don’t live in Oro Valley since you think the current, and up for renewal, utility tax is “optional” for the payers. I don’t recall seeing an option to pay the tax or not on my monthly bill. In fact, is there any tax that is “optional?” If this, or any other tax were “optional,” how often do you think it would be paid?

While it may be at the “option” of the town council to levy this tax, we don’t have the “option” to not pay it. I hope the current council exercises their “option” to not renew this unneeded tax.

Jeff Jones, Oro Valley

The publisher / editor is an Oro Valley resident. – Ed.

Here's the link to Mr. Perry's editorial of Feb 25.The Explorer Endorses Keeping Oro Valley's Utility Tax

A Reader Tells Us; "Fire Council Members Responsible For Our Utility Tax"

One of our astute readers sent us the following message. We believe she echos the sentiments of many Oro Valley citizens. By the way, i was Helen "The Tax" Dankwerth who pushed the utility tax on us. She was joined by Terry "It's A Home Run" Parish, Paul Loomis, the Teflon Man, and Mr. Invisible, Al Kunisch. Although we can't "fire" them, we can certainly vote Dankwerth and Parish out of office in the March 2008 election.

Art
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I read it in an Arizona Daily Star article (Sept 6) and it still grinds me. It was an announcement of the use of the new Oro Valley Utility Tax to expand police presence at our elementary,
middle and high schools. What?? I don't know when Copper Creek, Wilson (K-8) and Painted Sky Elementary schools became hotbeds of crime to justify full time resource officers at each location. Additionally, there are now two full time officers at each of the high schools. Talk about wastefulness.

When the police department spoke of better coverage per capita in our town, I didn't know they meant cushy SRO coverage at our schools. And let's be honest. Have you ever witnessed a local arrest? Officers buzz in from all directions like bees to a hive. Shortage? Why isn't our utility tax money being used for, say, burying utility lines? If SRO's are the most urgent need we have, perhaps that utility tax should be rolled back. And please, please fire the council members responsible for it.

Taxes, Add-On Fees, and an Inverted Rate Schedule Make Oro Valley Water Expensive

Taxes, add-on fees and an inverted rate schedule make Oro Valley water expensive
Oro Valley residents have successfully managed water use. One reason is that water is expensive in Oro Valley. To the consumer, saving water means saving money.

Water is expensive because Oro Valley water cost is based on an inverted water rate schedule. To that, the town adds taxes and fees. The result: Water cost approaching $6 per thousand gallons.

Here's how it works.

Oro Valley's inverted water rate schedule penalizes water use by increasing cost as more water is used

Oro Valley uses an inverted water rate schedule. Each added step in water use is more costly per thousand gallons than the last. This is also called an inverse, or "progressive" rate schedule.  

An inverted water rate schedule is used by many communities as a way to reduce water use by providing the financial incentive to use less water.

The benefit to the town is that an inverted water rate schedule likely increases total revenues because there are some who simply do not conserve water.

Five taxes and add-on fees add 41% to the water cost
20 years ago, Oro Valley water cost included two taxes: A sales tax and a superfund tax. Since that time:

• 2003: In October, the town instituted a groundwater preservation fee of 21 cents per thousand gallons used. This fee increased every year until it got to 95 cents per thousand.
• 2007: In May, the town added a utility tax of 2%. At that time they chose not to show the tax separately on the bill. They included it with "sales tax."
• 2008: In February, the town instituted at stormwater fee of $2.90 per month.
• 2011: The town added another 2% to the utility tax. It is a 4% tax.

The result is today's fee and taxation level:

• $4.50 Stormwater Fee
• 8.5% Sales Tax
• 90 cents per thousand gallons Groundwater Preservation Fee
• .17% Superfund tax 
• 4% Oro Valley Utility Tax

Water taxes and fees have grown substantially
Over the years, the taxes on water and the fees added to the water bill have grown from 5% of the cost of water in 1998 to 41% of the cost of water today.

Today, an Oro Valley resident using 12,000 gallons of water per month pays an overall average of $5.68 per thousand gallons of water.  $1.66 of this is for taxes on water and fees. $4.03 is for water. (See chart above)

Today's overall average total water cost of $5.68 per thousand gallons is far more than the $2.52 per thousand gallons paid in 1999.

Oro Valley increased its water cost in June
Oro Valley upped water rates in June.

More money for the town.

Less money for the homeowner.
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Oro Valley Council Votes Not To Consider Any Change In The Utility Tax

The Oro Valley Town Council voted 6-0 last week to not direct the town manager to consider a reduction in the Oro Valley 4% utility tax as the town prepares its next 5 year financial plan.

Council Member Waters spoke about the history of the tax and why he, Mayor Hiremath, and Council Members Snider and Hornat doubled the tax in 2010.

Council Member Snider discussed why the utility tax provided useful public funds for public good. She too discussed her reasoning behind supporting this tax.  "Frankly, I've received little feedback saying that people are upset about it," she observed.

Council Member Hornat noted that he would in no way consider a change in the tax.  The town simply can not "afford it."  A1 percentage point change in the tax is worth $720,000 to the town.  "I don't see the point of even considering a reduction."

The council will discuss the tax further in November.

However, at the moment, they will not even consider a change in it.

Watch their remarks.

Tell us what you think.
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Annexing Tohono Chul Park Area Still Pending

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The Oro Valley 2013 Strategic Plan identifies annexations as another way of developing sustainable revenues for the town.  The plan specifically mentions annexing the area south of town to Oracle Road.

This area is formally known as the "Oracle/Ina Annexation Area." It is 107 acres.  It includes Tohono Chul Park.   The boundaries of this area are from Chapala Drive to the north, Ina Road to the south, Paseo Del Norte to the west and Oracle Road to the east.  The area includes the park, a motel, and retail businesses.  These will generate sales and bed tax revenues. Other businesses include Platinum Fitness, a religious broadcast station, and Sun Dental Center. Finally, there are some single-family residential properties on the northwest sector of the annexation area.   All properties will generate utility tax revenues.

"For the proposed annexation to be successful, more than 50% of property owners, representing more than 50% of the assessed valuation of real and personal property in the Oracle/Ina Annexation Area, must sign a petition in favor of annexation." (Source: 4-18-12 Memo To Town Council Of Kevin Burke)

In January, in "The Utility Tax Strikes Again", we wrote that the main sticking point was overcoming the added tax to the annexed businesses and residences of the 4% utility tax.  We wrote at that time: "The utility is an added cost of doing business. It will cost those who annexed thousands of dollars a year simply because their property would now be part of Oro Valley. In effect, the utility tax is a disincentive."

The latest update from the town on the "Oracle/Ina Annexation Area." is that the town town is still working on getting the required signatures.

It's been well over a year since the annexation process began.  At one point, in December, the Town and Tohono Chul Park were considering a "pre-annexation' agreement.  This 48 acre portion would be an “island annexation” if the rest of the owners decline annexation.  The Tohono pre-annexation was presented at the December 5, 2012 Oro Valley Town Council meeting.  Tohono Park asked for a continuance. We have heard nothing since.  Perhaps, the town and the park are waiting to see if the required signatures for the entire area can be gained.

There are no other annexations pending for Oro Valley.
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