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January 22, 1996 01:00 AM

CALIF. ASSOCIATION OPPOSES PROPOSED TAX ON NEW TIRES

Kathy McCarron
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    MODESTO, Calif.-A California tire dealers group is rallying the troops to head off a proposed tax on new tire sales before the issue reaches state legislators. Representatives of the Modesto Energy Project, a $41-million tires-to-energy plant, are pushing for a $2 tire tax to raise revenues for the power plant and other end-users of scrap tires, as well as to reduce the number of illegally dumped scrap tires. They plan to introduce a bill in the California Legislature in its January session. But the Western States Tire & Automotive Service Association wants to stop that from happening.

    Since December, the dealer group, which represents northern California and Nevada, has spent about $3,000 mailing posters to tire dealers and distributing postcards for consumers to send to their representatives in opposition to such a tax.

    WSTASA Executive Director Stephanie McCoubrey said the association decided to try to nip the issue in the bud because it cannot afford to fight the issue once it gets into the hands of the legislature.

    ``We hope to make (the issue) such a hot potato that no one (in the legislature) will want to handle it,'' she said.

    Tire tax proponents want to raise the tire fee from 25 cents on scrap tires to $2 on new tires.

    Of the 29 million scrap tires generated in California last year, 12 million were burned-6 million to generate electricity at the Modesto Energy Project, the state's single largest scrap tire consumer.

    But the Modesto facility may close by 1998 when Pacific Gas & Electric Co. can begin paying market rates for the power it buys from the Modesto plant. The current contract requires the power generator receive more than 10 cents per kilowatt hour, even though the going market rate is roughly 3 cents.

    State officials worry the huge revenue cut will force the facility to close.

    The plant's original owners-Oxford Energy Co.-already went bankrupt when its prime investment partner, Dearborn, Mich.-based CMS Generation Corp., pulled out in 1993. The plant's current operator is United American Energy Corp., a firm brought in to run the plant by its bond holders.

    Michael Gersick, a Sacramento-based attorney who represents the Modesto Energy Project, is spearheading the lobbying effort to increase tire fees.

    The WSTASA supports moving the scrap tire fee from the disposal end to the new tire sale and charging $1-``but we're not going to support just a tax. We need to know where it's going to go,'' Ms. McCoubrey said. ``Show us a good reason for raising the fee.''

    The association views the Modesto plant's proposed fee as subsidizing private industry.

    ``Let the markets develop on their own. Give us another nine years,'' she said. ``Those markets developed on their own during the last nine years. Whenever government subsidizes, it's not a success.''

    But proponents of the tire tax proposal said the state waste board needs more money to handle scrap tires-and needs a new plan. The agency is ``spending its limited funds on the smallest bang-for-the-buck activities,'' Mr. Gersick said.

    The board spent about $5 million in recent years on projects like sound walls and compost bins.

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