Council says no to 4 percent utility tax

April 9, 2009

By Jim Feehan

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The City Council voted unanimously March 10 to reject imposing a 4 percent utility tax to help pay for city services. 

“The economy has tanked and this is no time to ask for a tax hike,” said City Councilman Sonny Putter. “I don’t feel it’s in the best interest of our residents to pony up more money.”City Councilwoman Lisa Jensen said families are cutting expenses and businesses are eliminating or furloughing their workforces during the economic downturn.

“This is not the time to be raising taxes, but to be more thrifty,” she said. “It’s time for everyone to cut back, including the city.”

The city’s operating expenses continue to exceed revenues and the problem will only worsen in the next two years due to a dramatic drop in development-related revenues, said City Manager John Starbard.

The city’s operating budget relies on three main sources: property tax, sales tax and development-related revenue from home construction. Development related revenues were off by $580,000 in 2008. To offset the budget shortfall, the City Council considered a utility tax and a property tax levy lid lift, where the city would ask voters to increase their city property tax by 18 percent above the allowable 2010 property tax levy by a levy lid lift of 30 cents per thousand dollars in the first year. 

The utility tax would have been imposed on electricity, natural gas and telephones. About 88 percent of cities in King County have some form of utility tax. Current projects show a budget gap of about $337,000 for next year and a budget shortfall of $437,000 if the streamlined sales tax is $100,000 lower.

“This isn’t the time to raise taxes,” said City Councilwoman Carol Simpson. “Too many of our people are unemployed.”

City Councilman Dan Hubbell asked Starbard whether he had examined the budget for any “additional low-hanging fruit” for possible cuts later this year.

City staff members were told in February there were no guarantees of cost of living or merit-based raises in 2010, Starbard said.

“We gave fair warning a month ago,” he said.

City employees received a 4.86 percent cost of living raise in addition to the possibility of a 3 percent merit pay hike when the City Council approved the 2009 operating budget last December.

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