CITY OF POMONA
COUNCIL REPORT
February 3, 2025
To: Honorable Mayor and Members of the City Council
From: Anita D. Scott, City Manager
Submitted By: Andrew Mowbray, Finance Director/City Treasurer Rosalia Butler, City Clerk
Sonia Carvalho, City Attorney
SUBJECT: IMPACT ANALYSIS REPORT ON THE POSSIBLE EFFECTS OF THE PROPOSED INITIATIVE MEASURE TO REPEAL THE CITY’S UTILITY USERS TAX (UUT) ON WATER SERVICE RECOMMENDATION:
It is recommended the City Council take the following actions:
Receive and file the Impact Analysis Report on the possible effects of the proposed initiative measure to repeal the City’s Utility User Tax (UUT) on Water Service; Based upon the Impact Analysis Report, Submit the Measure to the voters at the “next regular municipal election,” occurring at least 88 days later. Under Elections Code section 348, a “[R]egular election is an election, the specific time for the holding of which is prescribed by law.” Under the recently amended City Charter, the City’s next regular election will be its Primary Municipal Election, which will coincide with the Statewide Primary Election on June 2, 2026; and Adopt the following resolutions (Attachment No.’s 1-3):
RESOLUTION NO. 2025-10 – A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF POMONA, CALIFORNIA, SUBMITTING TO THE QUALIFIED VOTERS OF THE CITY OF POMONA AN INITIATIVE MEASURE REPEALING THE CITY’S UTILITY USERS TAX (UUT) ON WATER SERVICE, AT THE PRIMARY MUNICIPAL ELECTION TO BE HELD ON TUESDAY, JUNE 2, 2026 RESOLUTION NO. 2025-11 – A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF POMONA, CALIFORNIA, REQUESTING THE BOARD OF SUPERVISORS OF THE COUNTY OF LOS ANGELES TO CONSOLIDATE A PRIMARY MUNICIPAL ELECTION TO BE HELD ON JUNE 2, 2026 WITH THE STATEWIDE PRIMARY ELECTION TO BE HELD ON THAT DATE PURSUANT TO ELECTIONS CODE SECTION 10403 RESOLUTION NO. 2025-12 – A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF POMONA, CALIFORNIA, PROVIDING FOR THE FILING OF PRIMARY AND REBUTTAL ARGUMENTS AND SETTING RULES FOR THE FILING OF WRITTEN ARGUMENTS REGARDING A CITY MEASURE TO BE SUBMITTED AT THE JUNE 2, 2026 PRIMARY MUNICIPAL ELECTION EXECUTIVE SUMMARY:
On January 6, 2025, the City Council directed staff to prepare an impartial and informational report analyzing the impact of the proposed initiative measure to repeal the City’s Utility User Tax (UUT) on Water Service. The citizen initiative measure would repeal the City’s UUT on water service within the City of Pomona (“Water UUT”), resulting in the permanent reduction of approximately $3.2M in annual revenue to the City’s General Fund.
SB1439/GOVERNMENT CODE §84308 APPLICABILITY:
☐ When this box is checked, it indicates the agenda item is subject to the Levine Act SB1439 requirements. Councilmembers are reminded to check their campaign contributions and determine whether they have received a campaign contribution of $250 or more that would require disclosure and/or recusal from discussing or acting on this agenda item. Campaign contributions of $250 or more made 1) by any person or entity who is identified in the agenda report as the applicant or proposer or 2) on behalf of the applicant or participant, including a parent, subsidiary or otherwise related business entity, or 3) by any person who has a financial interest in the agenda item requires a councilmember to comply with SB1439.
FISCAL IMPACT:
The estimated cost of holding an election for this measure on June 2, 2026 or a special election for this same measure is currently unknown. However, the FY 2023-24 cost paid from the General Fund for the March 5, 2024 Primary Municipal Election was $583,613, this included the Transaction and Use Tax (TUT) measure and the competing TUT measure, as well as 4 City Council seats.
Approval of the proposed initiative measure to repeal the City’s Utility User Tax (UUT) on Water Service will require that residents of Pomona that currently pay a general Utility Users Tax (UUT), at the rate of nine percent (9%) on the charges for using water service within the City of Pomona would no longer pay this tax. For Fiscal Year (FY) 2023-24, the water UUT generated approximately $3,379,749.48 in General Fund revenues. It is projected at this time that $3.2M in General Fund revenues will be received in FY 2024-25. Detailed, financial data and analysis of the proposed initiative is presented under the heading “Financial Impact Analysis Report (Prepared by UFI).” PREVIOUS RELATED ACTION:
On January 6, 2025, the City Council directed staff to prepare an impartial and informational report analyzing the impact of the proposed initiative measure to repeal the City’s Utility User Tax (UUT) on Water Service.
DISCUSSION:
On April 22, 2024, the City received a Notice of Intent to Circulate a Petition and proposed initiative measure (“Measure”) from Pomona resident John Mendoza, the proponent of the Measure. If approved, the Measure would repeal the current UUT on water service. UUT on telephone/telecommunications, electricity, and gas service are unaffected by this Measure.
Section 904 of the City’s Charter provides that local initiative measures shall follow the procedures set forth in the California Elections Code, except where in conflict with the Charter or Municipal Code. There are no conflicting provisions of the Charter or Code, and, therefore, the Elections Code governs the City’s initiative procedure. In accordance with the Elections Code, the City Attorney’s office timely prepared and sent a ballot title and summary of the Measure to the proponent on May 2, 2024. The proponent then had 6 months from receipt of the ballot title and summary to gather enough signatures to qualify the Measure for the ballot. On October 30, 2024, the proponent timely submitted a signed petition to the City Clerk’s Office. The City Clerk’s Office verified the validity of the petition signatures with the assistance of the Los Angeles County Registrar of Voters.
On December 16, 2024, after verification of voter signatures was completed, the City Clerk’s Office notified the proponent that the petition contained 1,411 valid signatures. For most local initiative measures, Elections Code section 9215 requires the valid signatures of at least 10 percent of the City’s registered voters to qualify a local measure.
However, there is a special rule that makes it much easier to qualify local tax initiative measures. California Proposition 218, a provision of the State Constitution (Calif. Const. Art. XIIIC, Sec. 3), provides that a local initiative measure that repeals, reduces or otherwise affects a local tax may qualify for the ballot if a petition contains the signatures of at least five percent (5%) of the number of the City’s registered voters who voted for any candidate for Governor at the last Statewide election (November, 2022). This significantly reduces the minimum signature requirement to 1,136 voters. Therefore, the Measure has qualified for the ballot.
At the January 6, 2025 meeting, the City Council received the City Clerk’s Certificate of Sufficiency of Initiative Petition certifying that the proposed initiative petition to repeal the City’s Utility User Tax (UUT) on Water Service has obtained the required number of signatures. Therefore, the City Council’s options under Elections Code section 1405 were as follows:
Adopt the Measure, without alteration, at this meeting, or within 10 days after. Under this scenario there would be no election.
Submit the proposed initiative Measure to the voters at the City’s next regular municipal election occurring not less than 88 days after the date of the order of election.” Under Elections Code section 348, a “[R]egular election is an election, the specific time for the holding of which is prescribed by law.” Under the recently amended City Charter, the City’s next regular election will be its Primary Municipal Election which will coincide with the Statewide Primary Election on June 2, 2026 Submit the Measure to the voters at a special municipal election occurring on a Tuesday that is not on, before or after a State holiday, that is between 88 and 103 days after the City Council calls the election. If the Council were to call a special election tonight, the date options would be either Tuesday, May 6 or May 13, 2025 – unusual dates for an election; or d) Direct Staff to prepare an impartial and informational report analyzing the impact of the proposed initiative Measure on the City’s finances, ability to provide public services, land use and development regulations, and the like. Staff must present the report not later than 30 days after the City Clerk certifies to the Council that the petition is sufficient (by February 5, 2025). After receiving the report, the Elections Code requires the Council to select one of the three options above.
At that meeting, the City Council directed staff to prepare an impartial and informational report analyzing the impact of the proposed initiative petition to repeal the City’s Utility User Tax (UUT) on Water Service on the City’s finances, ability to provide public services, land use and development regulations, and the like.
Staff worked with the City’s Financial advisor, Urban Futures, Inc. (UFI), to prepare the following financial impact analysis.
Financial Impact Analysis Report (Prepared by UFI)
Fiscal Impact Evaluation Tool - City’s Long-Range Financial Forecast Model In accordance with its adopted fiscal policies, the City utilizes a Long-Range Financial Forecast Model “to evaluate known internal and external issues impacting the City’s financial condition.” The Financial Forecast Model is intended to help the City achieve the following:
Attain and maintain financial sustainability.
Obtain sufficient long-term information to guide financial decisions.
Identify sufficient resources to provide programs and services for the stakeholders; Identify potential risks to on-going operations in the long-term financial planning process and communicate these risks on an annual basis; Establish mechanisms to identify early warning indicators; and Identify changes in expenditure or revenue structures needed to deliver services or to meet the goals adopted by the City Council.
When evaluating the City’s future financial condition, the City employs the following two-step process utilizing the Financial Forecast Model:
Baseline Forecast. The first step is to create a “Baseline Forecast.” The Baseline Forecast establishes a neutral projection of the City’s 10-year financial outlook based on the City’s current organization, operations, and revenue/expense structure. The Baseline Forecast represents the City’s best prediction of the City’s future financial condition assuming no changes to the City’s organizational structure or operations, with all revenues and expenses projected using current econometric forecast data, the City’s historic financial data, and appropriate forecasting algorithms.
Scenario Forecast. The second step is to create a “Scenario Forecast.” The Scenario Forecast provides an alternative projection of the City’s 10-year financial outlook based on a set of identified changes to the assumptions in the Baseline Forecast. The Scenario Forecast can be compared to the Baseline Forecast to evaluate the near and long-term financial impact of the changed assumptions.
For purposes of evaluating the impact of the Measure, the City utilized the updated Financial Forecast Model with the City’s current and prior year financial data, current econometric data and projections, and updated data from the City’s third-party tax consultants.
Water UUT (Status Quo) – Baseline Forecast
As stated above, the Baseline Forecast assumes the “status quo,” which includes the existing structure and revenue generated by the Water UUT. The Water UUT currently generates approximately $3.2 million annually in voter-approved, locally controlled revenue. The annual revenue is deposited into the City’s general fund and is spent to pay for the costs of delivering municipal services including police, fire, streets, parks, community centers, recreation programs, libraries, and neighborhood services.
Annual revenue from the Water UUT currently provides approximately 2% of the City’s total general fund budget. The Water UUT has been in effect since 1969, with the rate of taxation varying over the years. For households with limited gross incomes, an exemption from the UUT may be available, based upon income and family size.
For fiscal year 2024, the Water UUT generated $3,379,749 in revenue to the general fund. For fiscal year 2025, the City estimated conservatively that the Water UUT would generate an estimated $3,200,000. The City’s Financial Forecast Model projects a 3% average annual growth rate in the Water UUT revenue, based on the financial, economic, historical performance and other data that drive the model’s forecasting algorithms.
Water UUT Repealed (proposed Measure) – Scenario Forecast Staff recommendation above, in accordance with Elections Code sections 1405 and 9215, is for the Council to place the initiative measure on the next regular municipal election, which is scheduled for June 2, 2026. Approval of the measure would repeal the Water UUT resulting in the elimination of this revenue to the City’s general fund beginning in fiscal year 2027.
The Financial Forecast Model can be used to evaluate both the estimated near-term and long-term fiscal impacts of the measure by creating a Scenario Forecast in which all assumptions and inputs to the Baseline Forecast are held constant, except for repeal of the Water UUT as proposed by the measure.
The following table shows the estimated annual and cumulative change in revenues generated by the Water UUT status quo (Baseline Forecast) as compared to repeal of the Water UUT (Scenario Forecast) through the end of the forecast period in fiscal year 2035.
Estimated Impact on Revenues Generated by the Water UUT Forecast Year
Baseline Forecast
Water UUT Revenue
(status quo)
Scenario Forecast
Water UUT Revenue (proposed Measure)
Annual
Gross Revenue
(Loss)/Gain
Cumulative
Gross Revenue
(Loss)/Gain
FY 2027
3,415,882
-
(3,415,882)
(3,415,882)
FY 2028
3,522,764
-
(3,522,764)
(6,938,646)
FY 2029
3,632,556
-
(3,632,556)
(10,571,202)
FY 2030
3,744,665
-
3,744,665)
14,315,867)
FY 2031
3,856,297
-
(3,856,297)
(18,172,164)
FY 2032
3,967,616
-
(3,967,616)
(22,139,780)
FY 2033
4,078,637
-
(4,078,637)
(26,218,417)
FY 2034
4,189,458
-
(4,189,458)
(30,407,876)
FY 2035
4,300,058
-
(4,300,058)
(34,707,934)
However, looking in isolation at the impact of the proposed Measure on general fund revenues fails to consider the net impact to the financial position of the City’s general fund due to another measure (Measure Y) recently approved by the voters in November 2024. Measure Y requires an annual transfer of total unrestricted revenue from the General Fund to the new Children & Youth Fund, starting at 2% in fiscal year 2025 and rising to 10% by fiscal year 2031. As detailed in the fiscal impact analysis report prepared for Measure Y, under the status quo Baseline Forecast, implementation of Measure Y creates a significant and growing annual operating deficit that is projected to deplete the General Fund reserves by fiscal year 2030 (see Baseline Forecast columns in table below) with estimated sustained annual operating deficits in excess of $21 million. As a result of Measure Y, the City must undertake significant and permanent reductions in current municipal services delivered to Pomona residents and businesses in order to maintain a positive general fund position.
The following table shows the additional estimated impact of the proposed Measure on the City’s finances in light of the fiscal transfers mandated by Measure Y. The data in the table shows the proposed Measure is projected to both accelerate the depletion of the General Fund reserves and increase the annual operating deficit to over $25 million, requiring even deeper reductions in municipal services in order for the City to maintain a positive general fund position.
Net Impact to the Estimated Financial Position of City’s General Fund Baseline Forecast
Status Quo
(includes Measure Y impacts)
Scenario Forecast
Proposed Measure
(includes Measure Y impacts)
Forecast Year
Annual Operating
(Deficit)/Surplus
Fund Balance
Annual Operating
(Deficit)/Surplus
Fund Balance
FY 2027
(10,569,990)
40,973,263
(13,985,872)
37,557,381
FY 2028
(13,119,796)
27,853,467
(16,642,560)
20,914,821
FY 2029
(15,656,869)
12,196,598
(19,289,425)
1,625,396
FY 2030
(17,696,318)
(5,499,719)
(21,440,983)
(19,815,587)
FY 2031
(19,709,976)
(25,209,696)
(23,566,273)
(43,381,860)
FY 2032
(20,153,531)
(45,363,227)
(24,121,147)
(67,503,007)
FY 2033
(20,586,393)
(65,949,619)
(24,665,030)
(92,168,037)
FY 2034
(21,071,745)
(87,021,364)
(25,261,203)
(117,429,240)
FY 2035
(21,096,873)
108,118,238)
(25,396,932)
(142,826,172)
CONCLUSION:
This impartial and informational impact analysis report details how the proposed Measure will only increase the known significant and growing annual operating deficit in the general fund created by Measure Y, resulting in a projected depletion of the general fund reserves by fiscal year 2030. Voter approval of the proposed Measure will require further cuts (in addition to the deep and significant cuts already required by Measure Y) to City services funded by the general fund including, but not limited to Police, Fire, Library, Parks, Recreational Programs, certain Public Works operations, Development Services, City Council, Administration, City Clerk, Finance and Human Resources.
Prepared by:
Andrew Mowbray
Finance Director/City Treasurer
ATTACHMENT(S):
Attachment No. 1 – Resolution No. 2025-10 – Calling Primary Municipal Election on Measure Attachment No. 2 – Resolution No. 2025-11 – Requesting Consolidation of Primary Municipal Election Attachment No. 3 – Resolution No. 2025-12 – Setting Argument/Rebuttal Rules and Deadlines for Election Impact Analysis Report – Proposed initiative petition to repeal the City’s Utility User Tax (UUT) on Water Service