A parcel tax and a property tax increase are among the issues on tonight’s Hermosa Beach City Council agenda. The meeting will be devoted to issues related to E & B Natural Resource’s proposal to drill for oil in Hermosa’s tidelands.
The tax measures to be discussed would go on the March 2015 ballot, when voters will also be asked to approve E & B’s oil drilling proposal.
City manager Tom Bakaly put the tax proposals on the council agenda as a funding option for the council to consider should the oil measure fail.
Proceeds from the tax measures would be used to pay the $17.5 million the city will owe E & B should the oil measure fail and also to help fund the city’s $120 million in upcoming capital improvements.
The $17.5 million price tag for a no-on-oil vote is part of the settlement in 2012 of a complex, multibillion-dollar breach-of-contract lawsuit against the city.
The city already has set aside more than $6 million to pay E&B if the ballot measure fails, according to a cost-benefit analysis by a city consultant. The report suggests the city consider a variety of options to come up with the balance of the $17.5 million, including:
· Borrowing against the city general fund at a cost of $850,000 a year for 30 years,
· Seeking loans from the state or federal governments, or from commercial lenders,
· Asking voters for a .015 percent property tax increase for 30 years, or
· Asking voters for a parcel tax increase of roughly $122 per parcel for 30 years.
Any voter-approved tax increase would require approval from two-thirds of the voters.
Councilmember Nanette Barragan said discussion of the tax increases is premature. She pointed out that the consultant’s cost-benefit analysis has not been finalized.
Barragan said previous discussions have centered on financing the possible $17.5 million payout through the city’s general fund. She said a ballot measure to raise taxes should not be singled out for discussion by the council without consideration of the other options.
Council member Carolyn Petty countered that the council must discuss all its options for paying the possible $17.5 million bill. Asking the voters for a tax increase is only one of many possibilities, she said.
Petty said it would be irresponsible not to discuss potential ballot measures, which would have to meet legal deadlines to be placed before voters.
Council member Peter Tucker said he wants to focus on ways to pay the potential $17.5 million bill without asking voters for a tax increase.
Tucker said the city will soon need funding for a number of items, including a $10 million sewer overhaul. He said a projected increase in property tax revenues might make it easier to pay the potential E&B bill.
Mayor Michael DiVirgilio said the appearance of the ballot measure discussion on the meeting agenda does not elevate that funding option above any others.
Council member Hany Fangary could not be reached for comment on Friday.
