Tax hikes could fix budget shortfall

November 4, 2008

By Jim Feehan

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Laying off a building department employee, leaving an unfilled position vacant, and possibly implementing a 4 percent utility tax or a property tax levy lid

 lift were discussed at the Oct. 21 City Council meeting as ways to bridge a projected $420,000 budget shortfall for next year.

A downturn in development-related revenue is blamed for the shortfall, which has been trimmed down from $843,000.

Permits for new houses and other land-use applications have declined in the city, as well as the sales-tax revenue from new-home construction and sales. The city’s operating budget relies on development-related income, as well as property tax and sales tax revenue. 

To maintain the current level of services, the city would need to raise an additional $700,000 each year, City Manager John Starbard said. Given the magnitude of the budget shortfall, a property tax levy lid or a utility tax appears to the best revenue options, he said.

“We’re looking for a stable and predictable revenue source,” he said. 

The levy lid lift might amount to 30 cents per thousand, costing the owner of a $750,000 home about $225 extra a year.

A 4 percent tax on electricity, natural gas and phones would cost the average city resident about $180, based on analysis by the city.

In 1999, the City Council passed a 6 percent utility tax, which would have applied to cable, phone service, gas and electricity. The action was met with community outrage — petitions were circulated and the council repealed the tax before it was enacted.

Newcastle is one of five King County cities that doesn’t impose a utility tax. The others are Beaux Arts Village, Medina, SeaTac and Sammamish.

Starbard is recommending the City Council pursue a utility tax and that it be placed on a ballot for voters. The next opportunity for an election in the county is Feb. 19. If a special election were held, it would cost the city about $10,000.

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