Measure O on the Los Angeles ballot March 8 would impose an extraction tax on local oil drilling in an effort to pump new revenues into cash-starved city coffers.

Supporters say the new tax would be reasonable and reimburse the city for the industry's impact on communities by generating $4 million a year.

Opponents argue there would be economic pain because the tax would discourage small oil producers from doing business here, affecting L.A.-based subcontractors and taking away local jobs.

Measure O appears with nine other initiatives on the city ballot featuring elections for the City Council, school board and community college district.

Council members Jan Perry, Bernard Parks and Paul Koretz are among backers of the proposal to tax oil-producing businesses at a rate of $1.44 per barrel of crude, adjustable for inflation.

"I think it closes a gap, to ensure companies are paying their fair share," Perry said.

The rate was calculated to approximate the gross-receipts tax that Culver City places on companies that extract oil there, Perry said.

With oil currently trading at $86.20 per 42-gallon barrel, Culver City's 1.8 percent tax actually would pinch local producers for $1.55 a barrel.

Oil-tax supporters say that, unlike nearby cities, Los Angeles receives no direct economic benefit from its 55 oil fields and more than 30,000 oil-producing wells.


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And they say the city deserves compensation for the way oil drilling lowers nearby property values, diminishes air quality and adds to traffic congestion.

As an example, Perry pointed to the Baldwin Hills area of unincorporated Los Angeles County, where drilling has caused sidewalks to crack and roads to bulge.

But oil companies and business groups that are fighting Measure O say they fear voters will get the wrong impression.

First, they say, the tax would be imposed on top of existing business taxes.

"We're not trying to avoid paying taxes. We already pay all these other taxes," said Gregory C. Brown, an executive with BreitBurn Management Co., an independent oil company with headquarters in downtown Los Angeles.

Also, Measure O opponents say, $1.44 a barrel works out to nearly twice the average for oil taxes in other Los Angeles County cities, including more than three times what Beverly Hills and Long Beach charge.

Brown called $1.44 an "arbitrary" figure.

Finally, the anti-O campaign contends the impact would not be felt by the oil giants who are held up as villains by some gasoline consumers.

"The proponents of this measure want you to believe it's a tax on big oil companies," campaign spokesman Scott MacDonald said. "It's not. There are no big oil companies drilling in Los Angeles."

Opponents of Measure O say it will hurt "small oil" - companies with 50 or fewer employees.

Some opponents contend the new tax would raise gasoline prices, but measure supporters and independent analysts scoff at that claim.

Brown said City Hall, hungry for revenue to close the city's $350 million budget deficit for the next fiscal year, sees the oil industry as an easy target for a tax hike.

"Let's face it, they're targeting an unpopular, politically incorrect business," Brown said. "And when you target a particular business, I think that's a dangerous path to go down."

The oil industry's unpopularity will indeed help Measure O, said Jessica Levinson, who analyzes ballot initiatives for the L.A.-based Center for Governmental Studies.

"The more proponents use the phrases `oil companies' and `high profits,' the better they're going to do," Levinson said. "The way to make an initiative a winner is to say you want to stick it to oil companies, politicians or lobbyists."

Levinson added: "I would say, yes, they are targeting an unpopular group. But that, in and of itself, doesn't make it improper."

The oil-tax proposal is one of two measures on the March ballot that aim to raise revenue for the city. The other, Measure M, would impose a 5 percent tax on the gross receipts of medical-marijuana dispensaries. Measure M opponents say it's illegal to tax medicine and nonprofit organizations.

In the case of oil extraction, Levinson said, most voters are likely to conclude it's fair for Los Angeles to impose the same kind of tax that neighboring cities have.

"It's just a question of what the (amount) should be," she said.

kevin.modesti@dailynews.com