A few weeks ago Southern California Edison (SCE) notified municipalities in their service area of a change in the utility users' tax (UUT) remittance policy. I haven't seen any discussion by CSMFO members on this issue. I want to alert everyone about the potential revenue impact and recommend contacting SCE about an alternative payment "switch over" procedure. Currently, SCE remits 80% of the UUT billed for the month and the remaining 20% in the subsequent month. SCE's letter dated May 3, 2000 states that beginning with the June 2000 remittance, UUT remittances will reflect the UUT payments actually received from their customers. In addition, this remittance will reflect a one-time adjustment of all previously billed UUT payments remitted by SCE to the City, but not yet paid by customers. Per Edison's letter, "This will result in an estimated reduction of 100% to 150% of the June remittance." For cities in which the UUT is a major revenue source, the impact on cash flow is significant. Affected municipalities will probably not receive a June remittance and July's remittance will more than likely be reduced. For Santa Monica, the loss in June will be approximately $600,000, and in July, the loss could be an additional $300,000. SCE claims they advanced the cash to cities for customers who have not yet paid. In other words, when a municipality first adopted a UUT ordinance and SCE began collecting the tax, they initially remitted a payment to the municipality based on projected customer payments. It seems highly unlikely that SCE "fronted" millions of dollars to the various municipalities. However, assuming SCE did "front" the initial UUT remittance, this policy change will play havoc with budgets and revenue forecasts which assumed a regular monthly payment from SCE. An alternative scenario is for SCE to phase in the change over a number of months (i.e. 80%/20% first month, 70%.30% following month, then 60%.40% etc.). Ralph Bursey Treasurer/Revenue Manager City of Santa Monica
