Compromise Eases Tax on Santa Ana’s Largest Employers

Business and municipal leaders here have reached a compromise on a proposed utility tax increase that helps balance next year’s city budget but does not create financial havoc for the city’s largest employers.

The Santa Ana Chamber of Commerce agreed Thursday to a four-point plan that includes raising the current $6,000 annual cap on utility taxes by $1,000 increments over the next five years and increasing the tax from 4% to 5% for residential customers and smaller businesses.

About 40 representatives of the city’s largest employers--including medical, manufacturing, retail and other firms--had opposed City Manager David N. Ream’s first recommendation to remove the cap that protected the larger businesses from paying excessive utility taxes. Under that proposal, they said, some companies would have seen their bills increase $100,000 to $200,000 a year.

The utility tax applies to gas, electricity, telephone service and for the first time, long-distance telephone calls and water.

City officials said state and county governments balanced their own budgets last year by imposing new fees on cities for such county services as collecting property taxes and booking inmates in county jails. In Santa Ana’s case, the result was a $5-million shortfall.

If the Legislature gives in to pressure from cities to reverse those fees, Chamber of Commerce President Michael Metzler said, the business community has demanded that the city revoke the utility tax increase.

If the tax remains in effect, Metzler added, the city has agreed to dedicate the $3 million in new revenues to public-safety needs.

The business group also agreed to the compromise, Metzler said--on condition that the city create a year-round panel including Chamber of Commerce leaders to study the city’s finances and make recommendations for the 1992-93 budget.

Metzler said that the business community is sympathetic to the city’s financial plight but that businesses also need to protect themselves.

“We feel we can live with this agreement under these conditions,” Metzler said. “This will help them achieve their end, as well as protect the interest of the business community.”

The utility tax increase is part of the $242.4-million budget proposal scheduled for consideration by the City Council next week. If approved, the tax increase would be effective July 1.