Sunnyvale; Measure K

	Sunnyvale; Measure K

"Shall the City of Sunnyvale, in order to maintain essential services such
as police and fire protection, librariesm parks, and road maintenance, be
authorized to increase the large commercial / agricultural electric utility
tax rate from the present 2% to 3% in 2002, to partially restore City revenues
when electric rates for these users are reduced by approximately 30% in the
next 5 years due to government deregulation of the electric utility industry?"

CITY ATTORNEY'S IMPARTIAL ANALYSIS OF MEASURE K


Measure K is intended to prevent the anticipated decline in utility tax revenues
received by the City of Sunnyvale from large commercial and agricultural
businesses which is expected to occur as a result of state government
deregulation of the electric utility industry. Large commercial businesses are
defined by the state as those with a maximum peak demand equal to or greater
than 20 kilowatts.

Since 1975 the City's electric utility tax rate on all electric utility users
has been 2%. If Measure K is approved by the voters, and if electric rates for
large commercial and agricultural businesses are reduced by approximately 30% as
is supposed to occur by 2002, then the City Council will be authorized to hold
one or more public hearings to consider raising the electric utility tax rate on
these types of users from the current 2% to 3%. The tax rate could not be
increased without the City Council holding at least one public hearing and
adopting an ordinance by at least four affirmative votes. Measure K does not
require the Council to increase the tax rate, nor does it require an increase to
the full 3%. Measure K simply authorizes the City Council to consider and
possibly adopt such a tax rate increase.

With deregulation of electric rates, an increase in the tax rate will not
result in an overall increase to any utility bill. For example, a business that
now uses $100 worth of electricity pays $2 in utility users tax, for a total
bill of $102 If there is both deregulation in electric rates and an increase in
the tax rate, that same business would be expected to pay $70 for electricity
and $2.10 in taxes, for a total bill of $72.10.

The money generated by the utility users tax goes into the City's general fund.
General fund money pays for a wide variety of basic City services, including
public safety, parks, libraries and road maintenance. Measure K is a companion
measure to Measure L, but Measure K should be considered and acted upon
separately from Measure L since neither measure is dependent upon the other.

A "yes" vote on Measure K will authorize the City Council to consider and adopt
an increase from 2% up to 3% in the utility users tax on large commercial and
agricultural businesses.

A "no" vote on Measure K will preclude the City Council from considering or
adopting any increase in utility users tax on large commercial and agricultural
businesses.


VALERIE J. ARMENTO
City Attorney


COMPLETE TEXT OF MEASURE K


Chapter 3.12 shall be amended as follows:

3.12.030. Definitions.

(1)-(4) Unchanged

Add new (5) "Large commercial/agricultural ratepayer" shall mean electric
customers who have a maximum peak demand equal to or greater than 20 
kilowatts.

Existing (5)-(7) renumbered (6)-(8).

3.12.060. Taxes--Effective date.

The taxes initially imposed by this chapter at the rate of one percent became
operative as of July 1, 1969. The taxes at the rate of two percent imposed by
this chapter as amended by Ordinance No. 1774-75 shall become 
became operative
as 
of August 1, 1975. The increases in utility user tax rates authorized by the
voters on November 4, 1997 will become effective only if there are reductions in
the electrical utility rates charged to customers and if, after public hearings
are held, the increases are subsequently adopted by the city council by
ordinance.

3.12.110. Electricity user tax--Imposition--Rate.

There is hereby imposed a tax upon every person in the city, other than an
electrical corporation or a gas corporation, using electrical energy in the
city. The tax imposed by this section and Sections 3.12.120 and 3.12.130 shall
be at the rate of two percent of the charges made for such energy, including
minimum charges for service but excluding charges for electrical energy supplied
to street lights, and shall be paid by the person paying for such energy, unless
the city council by ordinance increases the rates to offset decreased charges
resulting from electrical rate deregulation to no more than the amounts
specified below, with an overall rate cap for all ratepayers of three 
percent.


For large commercial/agricultural ratepayers:

Earliest Effective Date
Maximum Rate Increase 
 Maximum Total Tax Rate
   January 1, 2002
1.00%
3.00%        




ARGUMENT IN FAVOR OF MEASURE K


Sunnyvale is a secure city boasting one of the nation's lowest crime rates. We
enjoy excellent parks, well-maintained streets, and an outstanding library. Our
city government has earned a national reputation for high quality services at
very low cost to taxpayers.  This is the result of a remarkable system for
long-term financial planning and effective public management that is highly
accountable to the public.

Measure K will allow Sunnyvale citizens and businesses to continue receiving
these benefits by restoring a source of City revenue that otherwise will be
lost, beginning next year. Because of State-mandated electric utility
deregulation, electric customers in California will get a 30% reduction in their
bills by the year 2008.

This is good news for local electric customers who will save nearly $100 million
over the next 20 years. However, the City of Sunnyvale forecasts it will lose
approximately $1 million a year in utility tax revenue needed to provide basic
city services. Measure K will partially restore utility tax revenue to current
levels to assure the quality of essential public services such as police and
fire protection, library, parks, and street maintenance. The taxes that
Sunnyvale utility users now pay will not be increased by this measure. In the
event that there is no decrease in electric rates, the utility tax rates will
not be increased. Currently, Sunnyvale's utility tax is almost 2/3 lower than
the average utility tax electric customers pay in California cities.

Sunnyvale businesses and industries pay 70% of the City's utility tax, and
business leaders have strongly endorsed Measure K. They recognize the value of
supporting excellent City services to maintain a high quality of life and a
healthy economy. Along with these businesses and community leaders, we urge you
to vote yes on Measure K.


LESLIE B. LAWTON, Small Business Owner

JIM ROBERTS, Vice Mayor, City of Sunnyvale

RAY MONTALVO, Board Member, Sunnyvale Chamber of Commerce

JAMES W. DAVIS, President, Sunnyvale Public Safety Officers' Assn

ROBERTA "JACKIE" HARRISON, Former Chair, Library Board and Housing & Human
Services Commission


ARGUMENT AGAINST MEASURE K


Measure K is based on an erroneous unstated premise.  It claims the tax increase
is to "restore City revenues."  There is absolutely NO evidence that city
revenues will be lost when utility rates are cut.  In fact, the premise violates
the law of supply and demand.  In a free market, as the price of a good drops,
more of it will be consumed;  this is known as elasticity.  An academic exercise
illustrates this.  A company that formerly plated 100 widgets at an electrical
cost of $100, now able to do so for $70, could maintain the same 20% margin of
profit by selling them for $84 instead of $120.  Alternatively, the company
could consume 43% more power for $100 and sell 143 widgets at the same $1.20
each and make $71.60 instead of the original $20 or the cut rate $14.  The
example only had one cost, electricity, so the increased profit would not be so
grand, but there WOULD BE an increased profit.  On the scale of industry we have
in Sunnyvale, there could very well be an INCREASED consumption of electricity.
The city staff reported on July 22, that PG&E did not have data on elasticity 
of demand. Of course not. PG&E has existed as a regulated monopoly supplier, 
elasticity of demand is a characteristic of the unregulated free market we 
are entering, not the prior regulated market. The data could be extrapolated 
from such relatively unregulated sources of energy as coal, how many more 
units are consumed if the unit price goes down? The city never asked, so we 
don't have the data. The city is not able to repeal the law of supply and 
demand though, so voters need to vote NO on measure K; let the city provide a 
real basis for raising taxes.


DAVID K. SCHUMANN,  Director, Santa Clara County Taxpayers' Association

ELIZABETH A. SCHUMANN, Sunnyvale

FRANCES ROWE, Former Mayor of Sunnyvale
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