Council advances temporary 4‑month reduction in gas utility users tax; second reading set for Aug. 15

The Los Angeles City Council on Aug. 8 advanced a first reading of an ordinance to temporarily reduce the gas component of the utility users tax (UUT) from 10% to 6% for four billing cycles, with the reduction scheduled to begin Dec. 1, 2001 and tentatively end April 15, 2002.

Council Member Misakowski said the temporary reduction was intended to return roughly $10 million to city ratepayers in recognition of unusually high natural gas prices earlier in the fiscal year. "It's an estimated $10,000,000 in tax relief that this ordinance is going to help give back to the ratepayers in the City of Los Angeles," she said.

Antoinette Cristobal, Director of Finance, told the council the ordinance would become effective on Dec. 1, 2001 and last for four billing cycles, tentatively ending April 15, 2002. Council members asked whether the measure responds to current gas prices and whether the city would be able to reinstate the previous 10% rate after the temporary reduction. Cristobal said the ordinance as drafted begins Dec. 1, 2001 and lasts four billing cycles; the city attorney advised that a temporary reduction structured in this way would allow reinstatement of the prior rate when the ordinance expires.

Several council members pressed legal and technical questions. Council Member Hahn asked whether staff had considered tying the reduction to a price trigger; staff said that had not been addressed and that the ordinance was prepared as part of last year's budget package. Council Member Bernsen raised concerns about potential legal challenges, citing municipalities that had faced lawsuits after attempting similar changes. Council Member Weiss and others said the city attorney had advised that the approach being used (a temporary reduction in the collection rate implemented by ordinance rather than a rebate) reduces litigation risk but does not eliminate it.

Council members also debated whether the change would be a true refund of taxes already collected or a temporary change in the rate billed going forward. Several speakers clarified that the ordinance reduces the collection rate for upcoming billing cycles rather than issuing rebates for taxes already collected. The council asked for clear explanatory language in the ordinance and a footnote clarifying the intent and mechanics.

Because the ordinance requires a second reading, the council carried the item over one week for the second reading on Aug. 15.

Action taken: first reading approved and item continued for second reading; the council did not adopt the ordinance on final reading on Aug. 8.