Politics & Government

Proposition O Would Impose Tax on Oil Companies

Supporters say the $1.44 per barrel tax would help the cash-strapped city, but opponents say it will harm small businesses.

A proposition on Tuesday's ballot that would slap a $1.44 per barrel tax on oil extracted within city limits has been cast by supporters as a new revenue source for the cash-strapped city, but opponents say it would hurt small businesses and cost jobs.

Proposition O is one of the 10 ballot measures in the March 8 municipal election and it has received considerable attention. Oil companies and other opponents have contributed more than $400,000 to the "Stop the L.A. Oil Tax, No on Prop O" committee that is sponsored by the California Independent Petroleum Association. The Committee to Support Measure O and P, the latter requiring the city to maintain an emergency reserve fund, has raised just $11,500.

Proposition O was endorsed by City Council members Jan Perry, Bernard C. Parks and Paul Koretz, who argue that it will generate $4 million annually in general fund revenue that can be spent on city services such as police and fire and programs at city parks and libraries. Other cities, such as Beverly Hills, Inglewood, Long Beach and Seal Beach, have their own extraction tax for oil companies. There are 55 known oil fields within the nation's second-largest city with wells scattered from Venice to Wilmington to Sherman Oaks to downtown.

Scott Mcdonald, a spokesman for "No on Prop. O," said the measure should be rejected by voters because imposing a new tax while the economy remains sluggish would lead to layoffs. He also said the $4 million generated by the new tax would hardly help the city's dire $350 million budget deficit.

Small-business owners have come out against Proposition O, saying it would have a trickle-down effect on local businesses.

“Small- and minority-owned businesses are especially vulnerable to a new tax that would take $4 million out of the economy each year,” said Earl “Skip” Cooper, president and CEO of the National Black Business Association. “That doesn’t just hit those working in the oil fields. Businesses from the dry cleaners to your favorite local restaurant all feel the pinch as spending is reduced because of a new tax.”


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