Three D.C. utility companies yesterday threatened $52 million in rate increases that could raise the average customer's monthly bills by a total of $6 or more if the City Council adopts legislation that would increase the gross receipts taxes on utility firms.
Spokesmen for the utilities characterized the proposals as a backdoor method of raising city revenue that amounted to a regressive tax on consumers.
"If we were having a hearing on a direct taxing measure here today, this room would be packed," Charles E. Morgan, public affairs spokesman for C&P Telephone Co, said at a sparsely attended hearing at the District Building. "There would be guards at the doors. People would be standing up, screaming and hollering."
But council member John A. Wilson (D-Ward 2), chairman of the Finance and Revenue Committee and a sponsor of one of two utility tax bills now being considered by the council, said the financially strapped city government needs the money.
"I know you're going to have to ask for a rate increase if we pass this bill," Wilson told representatives of Pepco, Washington Gas Light Co. and the C&P Telephone Co. during a hearing at the District Building.
"I know we're going to raise the consumer's utility rates," Wilson said. "But you will not change my mind with that point of view because the simple fact is that everbody's going to have to pay their freight."
Wilson, a recently declared challenger to Mayor Marion Barry in next year's Democratic primary, acknowledged at one point that the utility tax measure was tantamount to a hidden tax on city residents that could be politically volatile.
But he argued that it was only one of a series of tax increases that the council eventually will be forced to enact over the next two years because of continuing city financial problems that are being exacerbated by election-year politics.
"Technically, we may have a balanced budget (as Barry has announced), but in reality, we don't. Technically, I'm a nice guy. In reality, I'm not such a nice guy," Wilson said. "I would assume that by 1982 to 1983 there are going to be tax increases and there are going to be major tax increases . . . It's going to hurt."
The utility tax proposals now before the council are designed to shift the burden of paying utility taxes away from residential and business customers and onto currently tax-exempt customers such as the federal and District governments, foreign embassies and nonprofit institutions, such as churches.
Currently, governmental and nonprofit institutions do not have to pay the city's 6 percent sales and use tax on utility services that is added to the monthly utility bills of residential and business customers.
Under the tax reform proposals, the sales and use tax no longer would apply to utility bills. The city would, however, recoup the lost revenue -- approximately $3 million -- by increasing the 6 percent tax now levied on the gross receipts of utility companies.
Under one version proposed by Barry last April, that tax would be raised to 7.1 percent for phone service and 9.8 percent for gas and electric services. A similar measure proposed by Wilson in a separate bill would raise the tax to 8.3 percent for telephone companies and 11 percent for gas and electric companies.
Carolyn L. Smith, director of the D.C. Department of Finance and Revenue, testified that, while the city would break even under the mayor's proposal, it would net $8.2 million in new annual revenue under the Wilson plan.
People's Counsel Brian Lederer and Rick Powell of the city's Consumer Utility Board told the committee that the proposals would help distribute the utility tax burden more evenly among different types of customers.
But Wilson noted that this could trigger a political backlash for the council when nonprofit institutions -- such as churches -- realize that they indirectly will be losing a currently lucrative tax exemption.
In 1978, an election year, strong opposition from religious organizations led city political leaders to abandon a proposal that would have assessed payments in lieu of taxes against organizations now exempt from paying property taxes -- including churches and religious organizations.
At the hearing, C&P gave no estimate of changes in average city telephone bills if the measure were approved. However, Lederer's office estimated that, based on figures supplied by the telephone company in conjunction with rate increase requests now before the D.C. Public Service Commission, the $8.18 monthly bill of a customer for basic monthly service with unlimited calls could go up by 35 percent to 49 percent if one of the measures became law.
David Oliver, assistant comptroller for Pepco, said his firm would seek a $40 million rate increase which, if granted, would mean an increase of about $1 in the average customer's $30 monthly bill.
Jim Myers, a staff analyst for Washington Gas Light, predicted a $2 million to $3 million rate request that would raise the average customer's $68 monthly bill by $1.36.
"They're bellyaching," Lederer responded later, saying that the increase in local taxes would be more than offset by federal tax breaks granted utilities under tax legislation recently adopted by Congress.