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THE UTILITY TAX
TOPIC SERIES


Tax Referendum: Dead Issue? - 09/29/11

The City Versus the Citizens - 09/26/11

Pissing Up a Rope - 09/09/11

The Coming Tax Revolt? - 09/01/11

A "Fair" Tax - 06/21/11

City Commission: Reject the Utility Tax - 06/05/11





Tax Referendum: Dead Issue? - 09/29/11

The Broward County elections supervisor may have saved Deerfield Beach from a potentially embarrassing and expensive election. A utility tax vote might have made a political statement, but without legal effect. The elections office rejected most of the signatures gathered up on the petition for a referendum. SOE found only 2,894 certifiable signatures, far, far less than the number required by the city charter to initiate a referendum election to repeal a city ordinance. 1

Back in March, The Town of Shalimar, Florida, in Okaloosa County, was not so lucky. Shalimar placed a similar measure on the ballot, only to learn days before the election from someone at the Florida League of Cities that the election would not be binding. Shalimar's referendum sought to limit the city's millage rate to 2 mills. The authority to impose ad valorem and utility taxes and the restrictions on local voters to limit or prohibit such taxes spring from the same state statutes. In the case of Shalimar, it was too late to remove the question from the ballot, so voters got to vote on it irrespective.

Jean Robb, the principal organizer of the anti-tax movement that gathered the signatures, said the group may sue. Sue all they want, the law doesn't look like it's on the side of the tax protesters.

The bugaboo is Fla. Stat. 195.207, passed in 1972. The wording is a little confusing, but the intent of the law, apparently, is make sure that the power of municipalities to tax that is to levy ad valorem and so-called utility taxes resides exclusively in the hands of the legislature. It appears the people can neither expand nor limit the power to levy taxes on real property or on the consumption of water, electricity, and natural gas.

Some argue that all the cited statute does is to repeal laws conflicting with the state-given tax authority passed before 1972. It does that for certain, but the Florida attorney general has ruled that the law also precludes future attempts to limit the tax power by citizens. 2 Accordingly, Shalimar's attempt to set a cap on the millage rate and Deerfield's possible attempt to repeal the utility tax ordinance are almost certainly without legal effect. The only viable argument I can see against this conclusion is that the state statute ( 195.207) makes only reference to the charter while the Deerfield movement is intended not to limit the city's authority to tax on a permanent basis, but only to force the repeal or to repeal the newly-passed ordinance authorizing the tax. It's a fine line which pits the law's intent against its exact verbiage. 3

Meanwhile, up in Shalimar, the referendum carried, 153 to 33. Apparently most voters who voted in the commission election on the same ballot (597) did not vote on the tax question. 4 (As a side note, the town adopted a millage rate of 2 mills in its budget, which was the cap sought by the referendum.)

Conclusion: With respect to the question of a referendum on the utility tax, the city may be out of the woods for now. The anti-tax movement could, of course, regroup and submit a new petition for a vote to repeal the ordinance.

1 41,283 eligible voters were registered to vote in 2009. The city charter requires 10 percent of the total number of qualified voters registered to vote at the last regular city election to initiate a referendum to repeal a city ordinance. City Charter 7.05(1).

2 AGO 86-89 (1986).

3 "No municipal charter may prohibit or limit the authority of the governing body to levy ad valorem taxes or utility service taxes authorized under [Fla. Stat. ] 167.431." Fla. Stat. 195.207. See, also, Fla. Const. Art. VII, 9(a), which provides, "Counties, school districts, and municipalities shall ... be authorized by law to levy ad valorem taxes and may be authorized by general law to levy other taxes, for their respective purposes...."

4 Kari C. Barlow, "Shalimar referendum to limit property taxes is not legal," Daily News, Mar. 2, 2011, nwfdailynews.com.



The City Versus the Citizens - 09/26/11 (Updated)

It's hardly the Whiskey Rebellion of 1794,1 but the utility tax recently enacted by the city commission has encountered fierce public opposition. A petition has been circulated for a referendum to repeal the tax. Organizers of the anti-tax referendum movement say they have far more than the required number of signatures to demand a vote. However, Sun-Sentinel staff writer Larry Barszewski reports that the Broward County SOE will certify only 2,894 of the signatures submitted by the Rescind Unfair Taxes group. 4,128 signatures are required for the petition to get the anti-tax referendum on the ballot. 2

It seems that every now and then, it's the city government against the citizens in an ugly confrontation over a policy issue. When I launched this website 11 years ago this week, it was the matter of the city's plans for upscale development, parking garages, and shopping centers in the beach area that was the issue. The latest civil war is over the utility tax levy on the consumption of electricity, water, and gas by the residents and businesses of the city. Voters rejected the utility tax in 1979 and 1986 votes, and Deerfield Beach was until now one of the few Broward cities and only large city to not levy a tax of this nature. It remains to be seen whether the furor caused by this tax will carry over to a vote, if and when the voters get to vote on it; or whether people will tire of the issue and opposition will simply fade away.

In either event, the utility tax is a fait accompli. It's passed and we'll see it show up on our water and electric bills next month. Now the question becomes, does the city have to call a referendum on the tax? I don't think so. The city has retained independent counsel to advise them on this point.

The City Charter empowers the commission to run the city to provide for the health, safety, and welfare of the residents. It does not grant any specific power to tax real property or "public services." The power to impose ad valorem taxes on real property and the utility tax and the limits of this power, in fact, do not come from the Charter but from the State. State statute, moreover, provides that neither the Charter nor the people can further limit this tax power. 3

The Charter also provides for a referendum by which voters may repeal an ordinance of the city such as the utility tax ordinance. It requires that a referendum not only be sufficient as to form (as, for example, having the required number of signatures), but must be legally sufficient in its language. 4

I believe the language of the proposed referendum to repeal the utility tax ordinance cannot be legally sufficient because the voters have no authority to repeal the ordinance under the State Law. It cannot say, a referendum to repeal an ordinance, because the vote, regardless of the results, cannot repeal the ordinance. Thus the referendum has no legal force and effect. While the commission has the authority to order a straw vote, there is no provision in the Charter or law to compel it.

There is no constitutional right to a referendum nor does the commission's refusal to hold a referendum on the tax violate the citizens' First Amendment rights, violate due process of law, or deny equal protection of the law unless its action is "arbitrary, or conscience shocking, in a constitutional sense." 5 In this case, the city followed all procedural requirements, acted under the authority of state law, and held not one or two, but three, public hearings on the issue.

It's another question whether the commission should hold a referendum on the utility tax to gauge the degree of support or opposition to the tax. That's a different issue which is beyond the scope of this article.

Conclusion: In view of the State statutes which preempt local law, I submit that the city commission is not required to hold a referendum on the utility tax.

NOTES:

1 The Whiskey Rebellion was the first tax protest in the newly independent republic. The protest turned to violence and forced governors to call out the militia. The tax was a tax on whiskey proposed by Alexander Hamilton to help pay off the national debt. Legend has it that President Washington himself lead the militia into battle, but it didn't turn out to be much of a war. Some protesters were arrested and later let go and pardoned. In those days only 30 years after the Boston Tea Party and the American Revolution, these United States were not kindly disposed to taxes. You think taxation of water is a big deal, think about taxing Bourbon. That's serious!

2 Larry Barszewski, "Deerfield Beach utility tax opponents come up short for referendum," Broward Politics Blog, Sept. 26, 2011, sun-sentinel.com.

3 Fla. Stat. 166.231, authorizing the public service tax. See also Fla. Stat. 195.207, which nullifies and repeals any city charter provision "or other law, that ... prohibits or limits a municipality from levying utility service taxes ...." It is clear that the intent of the State Legislature was for the state tax power laws to preempt any conflicting local laws.

4 City Charter Art. VII, sets forth procedures for voters to propose ordinances or to propose repeal of ordinances by initiative and referendum and the manner by which an initiative vote or referendum is called. While most of the tests for sufficiency are matters of form, 7.05(5) states: "The sole responsibility of the city attorney with reference to petitions shall be to offer an opinion on the legal sufficiency of the petition language." [Italics added]

5 Cnty. of Sacramento v. Lewis, 523 U.S. 833, 847 (1998). See also, Marderosian v. City of Beavercreek, Case No. 10-3252 (6th Cir. 2011), citing Eastlake v. Forest City Enterprises, Inc., 426 US 668 (1976). "The Supreme Court has never held ... that any particular right to referendum is guaranteed under federal law...."



Pissing Up a Rope - 09/09/11

Jean Robb, the principal organizer of the anti-tax movement, Rescind Unfair Taxes, is none too happy with my previous article about the proposed referendum to repeal the recently enacted utility tax. I can understand why: She and co-organizer Steve Krevoy have gathered over 6,200 signatures for their petition, more than required by the city charter. Robb wrote in her email to me that she's "disappointed in your [my] latest jab at us," adding, "[W]e could do without your message of doom."

Well, my honorable friend, the "message of doom," I presume, are the operating facts. One is that city officials in Deerfield Beach know that the public is apathetic for the most part and thus are inclined to dismiss public opinion when it suits them. They've proved this on numerous occasions over the years. The commission could choose to ignore the referendum petition, if they feel they can get away with it. In the past, on certain occasions, city officials have reversed course in the face of an energized public; but the commission in the instant case, judging by their defensive reaction to the side opposite in the tax debate, does not seem ready to back down quite yet. And, as a matter of law, they don't have to.

It's also important to note that the commission is backed into a corner. The budget for the coming fiscal year and the reduced millage rate already approved were built on the premise that a certain amount of revenue ($6.2 million) would be derived from the utility tax. Outright repeal of the tax would be problematical. However, the millions of dollars saved by the BSO-Fire merger were not part of the budget equation (that is, not taken out). Consequently, there are effectively unallocated funds in the city treasury (or will be) that could go into the reserve or be used to cover other revenue deficits.

As a way to assuage the public, Commissioner Joe Miller has proposed that consideration be given to reducing the utility tax rate from 10 to 5 percent or to exclude water from the tax, which would cost the city around $600,000 in lost revenue. This shortfall could be made up with some the money saved by the BSO-Fire merger. Miller was the lone vote against the utility tax in June.

In 1979 and again in 1985, voters in Deerfield Beach rejected a so-called utility tax on water, electricity, and gas consumption by residents and businesses. Although these votes may not have been legally binding, the commission deferred to the peoples' will for a quarter-century. Now the city has broken that covenant. In that respect, the utility tax is a done deal, and there isn't a whole lot the public can do about it, except complain and vote some people out of office in 2013.

If the commission had been concerned about what you and I thought about a utility tax, it might have sought more public input, perhaps even put the issue to a vote, given the fact that votes were taken and honored before.

Here is the full text of Robb's email:

We have collected in excess of 6,000 signatures, and I am really disappointed in your latest jab at us. Neither you or the OSOB have lifted one finger to help us, so we could do without your message of doom. Whether these people voted in the last election is irrelevant, but they are now sending a message loud and clear to this arrogant commission and their neophyte city manager who has Keven Klopp who was fired from North Miami Beach as incompetent helping him to do Noland's bidding.

It's news to me that only people who have helped "the cause" can have an opinion about it. But let me address the third point first. In my opinion, the way Robb, I, or anyone else feels about the city administration has nothing to do with the policy issues relevant to the utility tax (but, for the record, I strongly dissent from Robb's view that Keven Klopp is incompetent). This is old-time Deerfield politics: rivalry, not policy, is the driving force.

Now I can't speak for the OSOB (the Original Save Our Beach committee). I have spoken to some members of the OSOB and they are divided on the utility tax issue. Of course, as a group, the OSOB focuses mostly on beach, land-use, and CRA issues, not local tax or fiscal policy.

For my part, I have made it clear that I oppose the utility tax. I've lifted all ten of my fingers and typed away on this subject, five articles before this one. To quote myself from the previous article: "The utility tax was the wrong tax, with dubious motives, at the wrong time." In an earlier article, I urged the commission to reject the tax ("City Commission: Reject the Utility Tax," June 5, 2011, below).

I oppose the utility tax. I don't like it. It's bad policy, and bad policy is what I write about. However, I am not gung-ho about the proposed referendum.

State law authorizes cities to levy utility taxes. State law nullifies any charter provision or any "other law" that limits the city's power to impose a utility tax. Therefore, unless the commission itself decides to respect the will of the voters, it is not bound in any legal sense by a referendum on the tax. Can the Legislature nullify "the consent of the governed" to the imposition of a tax? The constitutionality of this law is beyond the scope of this article, but I am not aware of any decision germane to the issue.

In my view, the proposed tax referendum is a waste of time and effort as the law stands. If only this kind of effort were made during the city elections which really do count. And yes, Mrs. Robb, this does gall me and I think it is relevant. I bet the majority of people who signed those petitions could hardly care less about city government and know little, or nothing, about what's going on at City Hall other than the utility tax brouhaha. How many of the people who signed those petitions did not vote in the 2009 or 2011 city elections? What makes us think they will now?

It could be like the situation in District 2 after Sylvia Poitier was suspended. People came to city commission meetings with signs "No Taxation without Representation" and similar protests about the utility tax, because their commission seat was vacant when the tax was approved. But when election time came to elect someone to fill that seat, only one person for every 25 registered voters a total of 660 out of 8,639 the lowest vote in any district election in recent history showed up at the polls.

We could well see this happen with the tax referendum. The people who signed the petitions will have to prove my doubts about the longer-range viability of the anti-tax movement are wrong.

Conclusion: If there is a referendum, I will vote against the utility tax because I feel that "The utility tax was the wrong tax, with dubious motives, at the wrong time." I do so with the understanding that this vote is the political equivalent of pissing up a rope. As an aside, I believe the "Miller Compromise" merits consideration.

REFERENCE: Fla. Stat. 195.207, which provides, "Any ... municipal charter, or other law, that ... prohibits or limits a municipality from levying utility service taxes ... is hereby nullified and repealed."



The Coming Tax Revolt? - 09/01/11

Former Mayor Jean Robb and bagel shop owner Steve Krevoy are gathering signatures for a referendum calling for the repeal of the recently enacted public service, or utility, tax on water and electricity consumers in Deerfield Beach. The petition requires around 4,200 signatures to get the measure on the ballot. The organizers hope to get more to provide a cushion for signatures which may be disqualified.

I sympathize with this movement up to a point. The utility tax was the wrong tax, with dubious motives, at the wrong time. But I have an irreverent question: I wonder how many of the people who put their John Hancocks on this petition went to the polls in the election that put this city commission into office in the first place.

It couldn't have been too many, seeing as how only 6,374 voted for mayor in 2009 out of a possible 41,283 registered voters.

The commission may decide not to call for a special election to put the question on the ballot. They've hired a lawyer to look at the question of whether they have to. The only recourse for the petitioners would be litigation.

Even if it goes to referendum, it's not likely that the results will have legal force and effect. It's just a straw poll. This is because a remote state statute says, in effect, the consent of the governed is not required when it comes to the matter of a utility tax. So vote however you want, the commission can simply ignore the outcome under the current law.

Hanson and the commission hope, of course, to turn the people around on this tax when they see lower ad valorem bills, that the utility tax is a relative drop-in-the-bucket on their utility bills, and results like the Quiet Waters and Pioneer Park improvements. This is the common ploy of governments when politicians do things their constituents don't like. They understand quite well and exploit it that people get riled up, then forget about it when apathy sets in.

So the utility tax effort may be a waste of time.

On the other hand, it could lay the groundwork for a tax revolt in the 2013 city elections when Noland and Ganz are up for re-election and a new commissioner will be elected in District 3. It won't take much of a shift to swing the commission vote the other way on the wisdom of the utility tax. It remains to be seen whether the momentum generated by the current controversy lasts until Mar. 2013 and overtakes other issues.

Conclusion: You get what you vote, or don't bother to vote, for. We got this city commission, which enacted the utility tax. City residents are probably stuck with the tax until if and when the commission repeals it, most likely after 2013.



A "Fair" Tax - 06/21/11

When is a tax fair? Proponents of the utility tax recently passed by the city commission say it's a fairer tax. Opponents have formed a PAC called Rescind Unfair Taxes. They want a referendum to repeal the tax.

One senses a difference of opinion here.

The pro-tax forces say that the utility tax is fairer because it makes renters pay a greater share and could help the city reduce ad valorem taxes paid by landowners. But renters pay rent from which property taxes on rental property are ultimately paid. Isn't this how it works? The landlord gets to deduct his taxes, but renters can't deduct what they pay on the electricity and water they consume. What's fair from this standpoint is what's fair for me.

Opponents say the utility tax hits the poor the hardest. Not necessarily so. The people with the biggest toys swimming pools and irrigation systems will undoubtedly pay the most. Likewise with business. Publix, which operates its regional warehouse out of Deerfield Beach, complains the tax will cost them a bundle in operating costs. Now you might say, Publix is a big company and can easily afford the extra tax heck, $400,000 is a drop-in-the-bucket to Publix but guess why you paid 10 cents more for that loaf of bread you bought this morning.

The tax could actually have a good effect on conservation. People may be more inclined to turn off the sprinklers and turn down the AC a notch to save on electricity. Social engineers believe that higher taxes on consumable resources help lower demand this could happen. Conceivably, the city could end up with less revenue from the new tax than it expects if people conserve.

Every tax or levy is unfair to somebody or from somebody's perspective. The progressive income tax is said to be fairer because the richer folks are taxed at a higher rate. But the tax laws contain hundreds of loopholes lower-income persons can rarely take advantage of. The sales tax is something like the utility tax it's supposed to be fairer because it hits everyone at the same level. But it also increases the price of goods and services to people who have the least money to buy them even without the additional cost.

One of the arguments posed against the new utility tax is that it is unfair to, specifically, the people who live in District 2, whose seat on the commission is vacant due to Sylvia Poitier's suspension from office. There are actually two streams of thought in this argument.

First, it's claimed that Poitier might have opposed and voted no on the utility tax. The vote was 3-to-1 instead, with Miller the lone no vote. The second stream of thought is that the tax violates the civil rights of those same residents under the 14th Amendment because the seat was not filled before the vote on the tax. It was, to use their slogan, "Taxation without Representation."

The problem with these arguments is that the legal processes, both for suspending and replacing Poitier and for the tax itself, have been followed to the letter of the law to the extent practicable. This problem could have hit any section of the city, say if one of the commissioners had died or resigned. To say that anyone is denied equal protection of the law or due process because of a commission vacancy that the city can't help, except to follow the established procedures, simply falls flat.

In my view, the ultimate test of whether the utility tax is fair is how it is spent. If it's wasted, it's not fair to anyone. It's a legitimate question, in this respect, where all the concern for city parks and infrastructure was when the city was so flush with cash it could literally throw it away on street festivals and the like. Why now the importance of parks and infrastructure when the city is supposedly broke?

The test of fairness will not be the answer to an abstract question, however. It will be what is and what material results we see from the additional revenues. The history of the city is replete with cases in which borrowed money was seen as a gift-from-the-gods rather than a debt on future generations of taxpayers.

Conclusion: Citizens can try to repeal the utility tax. But win or lose, they need to hold Hanson's and the commission's feet to the fire to make sure this revenue is spent wisely and as promised.



City Commission: Reject the Utility Tax - 06/05/11

June 7, the city commission will hold public hearings and will likely pass a 10 percent tax on the consumption of electricity, water, and natural or bottled gas. Deerfield Beach is the only large city in Broward County that does not have a so-called utility tax. But when the question was put to voters several years ago, the people said "no" to such a tax.

It might be one thing if the funds from the proposed utility tax were to be used to avert the fiscal crisis we've all been told the city of Deerfield Beach is facing. It could be a different discussion altogether if the $6 million this tax is expected to raise were to be used to save critical essential services which are otherwise doomed to be cut. Or if the crisis and bottomed-out reserve could only result in horrifying increases in ad valorem taxes, fire assessment fees, and/or other user and license fees.

This, it seems, is not the case. The city, unquestionably, is short of money compared, to say, ten years ago. We can no longer afford lavish street festivals that cost taxpayers hundreds of thousands of largely unaccounted for dollars, or boat races, or professional beach volleyball tournaments, or Taj Mahals to park the garbage trucks in. We can't afford to employ 800 city workers, and those we can't afford to fire, we can't pay as much as in the past.

Okay, then, create new revenue streams -- the utility tax or whatever -- to maintain essential services, keep city services in-house, and save jobs. But, you see, this is not how the city intends to spend the six million "free" bucks it will get from the new tax.

About half the money will be used to reduce the ad valorem tax rates. The utility tax will "stabilize our revenues, but it also will help decrease our millage rates and also provide an avenue of capital projects," according to the city manager.

"I'm not talking about capital projects of building large facilities," he said. "I'm just talking about infrastructure improvements, parks and recreation improvement, things like that."

Indeed, some of the projects the city plans to undertake -- improvements to Pioneer Park and development of the new Tam O'Shanter Park -- are good projects. And what property owner wouldn't like to see his millage rates go down?

The problem is the new revenues are not going to be used for critical needs and it will hit the people hardest who can least afford to pay additional taxes. The parallel idea that it will be a "fairer" tax, because renters don't pay taxes now, is just plain goofy. I wonder how many renters will see decreases in their rent (because the landowners' costs are reduced by lower tax bills in the future) to offset the utility tax.

This isn't a fairer tax for anybody. Not if the money isn't really needed -- and that appears to be the case. In fact, the city fathers and mothers are talking out of both sides of their mouths. We need money for food, but let's spend it on candy.

Note as well, that the tax, if enacted, will take $6 million out of the local economy, probably, mostly, the retail sector. So there will be an economic impact that stretches beyond the individual resident taxpayer.

Conclusion: The city commission should reject the utility tax for now and look for better ways to reduce costs of government and increase revenues, if necessary. When we're out of the current economic mess and supposed fiscal crisis and can afford them, then let's talk about new ball fields and projects of that nature.



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