In something of a carrot-and-stick approach, Rancho Cordova residents will be asked to reduce a local tax rate while extending the tax to a broader range of services.
The majority of the City Council agreed last week to place a measure on the Nov. 4 ballot that would revise an existing ordinance to reflect changes in federal tax law and technology.
Under an ordinance that the city inherited from Sacramento County upon incorporation, users of electricity, gas, cable and telecommunications pay a 2.5 percent tax on those services.
Finance director Donna Silva said the tax is an important source of revenue for the city, generating about $2 million a year, or about 5 percent of the total general fund, which pays for basic municipal services.
But the ordinance predates cell phones and other wireless technologies, so the tax applies only to land-line telephones, whose users bear an unfair burden as a result, Silva said.
The city could achieve equity by eliminating the tax, she said, but the loss of about $500,000 in annual revenue would force a cut in city services.
"It would be better to craft an ordinance to treat all communications users equally," Silva said.
Changes in federal tax law have called into question current ordinance's validity as it applies to long-distance calls, she said, and updating is necessary to prevent the potential loss of about $250,000 from those services.
The proposed ordinance would reduce the tax rate to 2.25 percent but extend the tax to modern telecommunications services, including interstate and international calls, wireless, Voice Over Internet, paging and private communication services such as T-1 lines for providing data, video and voice services.
The tax would not apply to Internet access such as DSL and cable modem lines, nor to Internet services such as purchase transactions and downloads of music, books, ring tones or games.
Mayor Linda Budge said local voters passed measures approving the utility users tax and a hotel tax. Both were on the ballot with the cityhood measure in 2002, she said.
Budge and Councilmen Bob McGarvey and Dan Skoglund favored putting the matter on the ballot. Councilman David Sander voted no, and Councilman Ken Cooley abstained. To pass, the measure must be approved by a simple majority of voters.
Call The Bee's Cathy Locke, (916) 608-7451.
