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Will businesses be affected if Measure K passes?

By: Carol Feineman, Editor
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City Council and city staff are talking a lot these days about Measure K’s financial impact on the General Fund. Also known as the utility users’ tax, Measure K was placed on the November general election ballot after a unanimous vote June 22 by City Council. City reps obviously believe the measure was worth $54,000 in contracting fees to the Lew Edwards Group. City Council authorized that payment July 13 to the Oakland consulting firm to “educate” Lincoln residents on city budget and service reductions, and how the tax could save positions paid out of the General Fund. But has the city been as diligent in considering how the proposed Measure K will affect Lincoln businesses? If passed, as previously reported by The News Messenger, residents and businesses both will be taxed 3.75 percent of their utilities, with a cap of $300 per year for residents and $6,000 for businesses, according to city officials. And it is up to the utility users, and not the city, to determine when that cap has been reached. Taxed utilities would include water, sewer, garbage, electricity, gas, and cell and land phones. I spent a good hour this week listening to a Lincoln small-business owner. The owner is afraid to publicly name the business because “ of possible retaliation” by city staff. Saying the business is barely holding its own in today’s poor economy, the Lincoln owner said it’s a struggle to keep the doors open. Having to pay up to $6,000 a year to Measure K, the business owner said, could very well shut down the 10-year-old company. That means the owner, and a handful of employees, would then lose their income. It would take on a far-reaching ripple effect since it might take months for these workers to land a new position. Competition in the current job market is fierce as overly-qualified job applicants are now grabbing entry-level positions. And yet the employees’ bills, including their own residential utility taxes if Measure K passes in the November election, would still need to be paid. George Fotopoulos, the Fotos Market owner, didn’t hesitate to go on the record about his displeasure with the proposed Measure K. “I heard about that tax and then I heard about another tax every time I turn around,” Fotopoulos said. “ There’s no tax that will help us.” He said being taxed on his utilities at the market that has been on Fifth Street for the past 33 years will hurt his business. After hearing the two business owners say the tax will harm their business, I asked the city of Lincoln’s economic development manager Steve Art if City Council or city staff questioned him as they worked on the proposed tax. I thought the city would want his opinions on any possible consequences to Lincoln businesses as a result of the tax. “No one approached me,” Art replied Friday. I was surprised that city staff did not research, through their own economic development manager, how a new tax would impact local businesses. I then asked Art if most small businesses in Lincoln could afford to pay up to $6,000 a year for this utility tax. “We didn’t calculate it for businesses. Each business can calculate it for their own,” Art said. “I’m not sure if Anna (Jatczak, assistant city manager/chief financial officer) did. Most of the businesses in the downtown won’t hit the $300 that residential households will.” Art acknowledged that most businesses could not handle an extra $6,000 in taxes per year. “The only reason we put a cap on $6,000 was for three large potential electricity users – Gladding, McBean; SPI and Rogers Family Company,” Art said. City Council authorized Gruen + Gruen and Associates in San Francisco this year to complete a $30,000 study about how to turn downtown Lincoln into a destination for shoppers. The consultants reported that a factor discouraging businesses is “Significant start-up and permit fees for small businesses and a regulatory process and attitude that is not perceived as user-friendly.” Adding a new tax to businesses struggling in today’s economy definitely isn’t being “user-friendly.” I asked Art how new business owners can be attracted here, if they know they might be taxed up to $6,000 a year compared to other cities that don’t have a utility tax. “Businesses will be attracted here knowing that we have a safe town, a good quality of life, parks and libraries,” Art said. “I don’t think $20 a month will affect someone moving here.” Art works under City Manager Jim Estep. So I called and e-mailed Estep, and e-mailed Jatczak, the same questions Friday. As of press time three business days later, I didn’t receive a response from either one. I also tried to talk Friday to Bob Romness, Lincoln Area Chamber of Commerce’s executive director about the chamber’s position on the proposed tax. But he wouldn’t answer and referred me to chamber board President Cindy Eveler. “We’re basically urging residents to get informed and vote,” Eveler said. “We’re encouraging them to read the proposal on the city’s website. Obviously, this is a heated discussion one way or the other; those for the UUT and those who aren’t. In our poll of chamber members, they were both ways.” Neither Romness nor Eveler would give the number of chamber members voting for and against Measure K in the survey. “The majority of those responding wanted the chamber to stay neutral,” Eveler said. “I’m not at liberty to share those numbers.” Again, I was surprised; this time that the chamber, an organization with a mission “to market Lincoln as the area of choice in which to live and do business by attracting, assisting, retaining and promoting our Members,” wouldn’t advise business owners on Measure K’s pros and cons. The chamber, according to its website, takes “a position on issues and represent local business with the City of Lincoln, Placer County and other government agencies.” The chamber president, in fact, encouraged members to read the city’s website, which has been pushing the measure to the tune of $54,000 received by the Lew Edwards Group. Al Holland, who owns a downtown barbershop for 5 ½ years, isn’t surprised that the chamber didn’t respond. “People who work for the city in certain positions are defensive in this issue. They want the measure to happen,” Holland said. And from what he hears from his customers, according to Holland, the majority is not in favor of the tax. “However, mark my words, with scare tactics by the City Council beginning in late October and early November, that might influence people to buy into this ridiculous plan,” Holland said. Holland agreed with the anonymous business owner mentioned above that many owners are afraid to talk because “they don’t want retaliation.” However, Holland would welcome dialogue between business owners and the city because he says a utility tax is not the answer to the city’s financial troubles. “The city management has done a poor job in running this city,” Holland said. “It’s time for City Council and city administration to take responsibility.” Part of that responsibility is researching how the proposed tax will affect Lincoln’s businesses. We need Lincoln’s already existing businesses, as well as new ones, to succeed. A healthy business environment means increased revenue for the city budget. With a $2 million city budget deficit this year, partly due to shrinking property and sales in Lincoln, according to past News Messenger reports, we can’t afford to lose any more businesses. The least we can do is make sure our local businesses can survive. Carol Feineman can be reached at carolf@goldcountrymedia.com