The South Pasadena City Council expects to place renewal of the city’s user utility tax on the general election ballot in November, but two other items under consideration may have to wait their turn, if they get one at all.
The UUT, which derives revenue from utilities like water, cellphone plans and cable TV, was last renewed by South Pasadena voters in 2011 and is slated to expire at the beginning of the 2022-23 fiscal year. Generating around $3.4 million annually, the tax is the city’s second-largest revenue source after property taxes.
“But unlike property taxes,” explained Lucy Demirjian, assistant to the city manager, at the council’s July 15 meeting, “the UUT is fully recovered by the city and is locally controlled. The use of these funds is not restricted and they go toward core services.”
There was some debate as to whether the panel should modify the UUT’s rate of taxation or how long the tax would be in effect. City Manager Stephanie DeWolfe noted that the tax had been showing diminishing returns in recent years even though it remained critical for the city as it faces economic uncertainty because of the COVID-19 pandemic.
“With water conservation, people are using less water so it’s generating less tax,” DeWolfe explained. “Another good example is cable television. Everybody used to have a cable television bill — sometimes they were $200 or $300 a month. Many people don’t have cable television at all anymore, so that results in a lower amount of taxes generated for the city. We have seen the amount of UUT go down gradually year to year and we are predicting it will continue to go down.”
As for other considerations — a transient occupancy tax and a measure asking whether the building height limit should be increased — some council members either didn’t want to complicate the ballot or opposed the measures outright. The council, which did not take action on any of the three considerations last week, has until its regular August meeting to place items on the November ballot.
“We’re going to be lucky if we just get the UUT renewed,” Councilman Richard Schneider said, voicing a concern about “tax fatigue.”
As presented, a transient occupancy tax, or TOT, would levy a 12-14% charge on any rental stay shorter than 30 days. The tax would target rentals arranged through companies such as Airbnb but would also include any hotel possibly added to South Pasadena.
Schneider added that he didn’t think a TOT was worthy of consideration right now simply, because so few opportunities existed to collect tax with it. Additionally, the city would have to consider regulations to formally legalize Airbnbs, which remain technically banned in South Pasadena.
“I don’t think it’s worth pursuing,” he said. “I don’t think there’s enough money in it. You have enforcement problems and there’ll be opposition to it, and I don’t want to confuse voters on the ballot.”
Councilwoman Marina Khubesrian, who voiced early support for a TOT, agreed that there might be a better time to consider the item.
“I’m not opposed to waiting on this one, maybe waiting another year and considering it for the 2022 ballot,” she said, adding, “but I think our residents are smart enough to understand the difference between a utility user tax and a transient tax.”
The idea of raising building height limits was a bit more divisive, with some arguing that it’s an inevitability because of the need to achieve state housing mandates while others said the city should fight the state to preserve South Pasadena’s character, as it did in opposing the now-dead 710 Freeway tunnel proposal.
The city expects the state’s housing element mandate to require 2,062 more units, with more than half of those considered “affordable.” Those units would need to be constructed throughout the next eight years, with some city officials wondering if building slightly higher up could be a solution. The current height limit is a voter-imposed 45 feet.
“I don’t think there’s any real support in the city for it,” Schneider said. “If there is, it’s probably going to be money coming from outside, like from developers. We really don’t want to have our town destroyed by a lot of high-rise development.
“I think we should look into fighting this,” he continued. “I think it’s an unreasonable amount of houses for a small city like ours, considering San Marino, I believe, only had 27 units required.”
Councilman Michael Cacciotti said he agreed, while Khubesrian and Vice Mayor Diana Mahmud were more open to considering changing the height limit. Mahmud said potential consequences of noncompliance worried her and emphasized that no one was talking about having 10-story buildings in the downtown area.
“Nothing like that, I think, would ever pass muster with the Planning Commission,” Mahmud added. “It is vitally important that we demonstrate compliance with our housing element. We simply cannot afford not to. I’m not willing to roll that dice, of failure to show compliance.
“I think there’s a lot of misapprehension about turning the city into Glendale, and that is not what’s being proposed,” she said.
Khubesrian shot back against some public comments that implied the City Council might be vulnerable to lobbyists when considering this decision.
“None of us are cozying up to developers. Let’s just put some of the conspiracy theories to rest. Let’s just put some of the paranoia to rest,” she said. “None of us here are interested in putting money in the pockets of any kind of developer. That’s just not our town and that’s not our council.”
Mayor Bob Joe said this item ultimately needed “more homework” done on it.
The November ballot also will include races for three City Council seats.