Divided Oak Harbor City Council moves forward with 2011 tax hike

Despite the wave of anti-tax sentiment expressed in the general election, Oak Harbor will move forward with its state-allowed 1 percent property tax hike in 2011.

The City Council approved the proposal, which will add just $37,460 to city coffers next year, in a 5-2 vote last Wednesday evening. Council members Beth Munns, Danny Paggao, Jim Palmer, Rick Almberg and Bob Severns voted for the tax hike while Jim Campbell and Scott Dudley voted against it.

Under state law, municipalities and junior taxing districts, from counties, cities and towns to fire districts, can increase their budgets by 1 percent each year without a vote of the people.

Although the November election results seem to indicate a very clear message of no new taxes — voters resoundingly defeated a state income tax initiative, repealed a candy and soda tax, and reinstated rules that require new state taxes to be approved by a two-thirds majority in the state Legislature — the only person to speak at Wednesday’s public hearing urged the council to approve the tax hike.

“Things are pretty grim and I think they are actually going to get worse as a result of this election,” said Mel Vance, an Oak Harbor resident. “Nobody likes paying taxes; I can’t stand paying taxes. But if there is any bank capacity that the city has I urge you to add this on and definitely at least bring on the 1 percent.”

The City Council also heard from Oak Harbor Finance Director Doug Merriman. Like Vance, he recommended the measure’s adoption. The annual property tax increase is one of the city’s only tools to keep up with inflation, which he said has been outpacing Oak Harbor’s property tax intake since 2001.

City officials may be tempted to forego annual 1 percent tax increases, but such a practice will have long-term effects, he said. For example, the $37,460 could no doubt be found in the budget but the money to fill the gap would have to come from somewhere else both next year and the year after that. At the same time, inflation would continue to rise, ever widening the gap.

“Whether you chose a property tax one year or not is more than just a one-year exercise,” Merriman said. “You have to think long term of what the effect of the that is.”

The city does have a healthy financial reserve of about $2.88 million, but Merriman advised against using that to backfill the 1 percent increase. He is expecting the economic downturn to continue another six years and they city will need every penny of its reserves to weather the financial storm.

Merriman also pointed out that even with the 1 percent increase, the amount people pay for the Oak Harbor portion of their property tax bill — about 26 cents of every dollar — will actually decrease about 5.83 percent in 2011 due to the expiration of the city’s 1996 Safety Bond.

Two council members were not swayed by Merriman’s presentation, however. Although he voiced support for the proposal in October, Campbell said he was voting “no” largely because the people of Oak Harbor need a break.

Now, and over the next few years, taxpayers will be forced to shell out millions for expensive city projects, from the $8.35 million SE Pioneer Way improvement project to a new wastewater treatment plant expected to cost about $70 million. He said the public “will understand” that some services may disappear as a result of declining revenues.

“It’s time for this City Council to take leadership and show our citizens that we’re going to do our very best to stay within budget,” Campbell said.

Dudley also voted against the measure, citing the council’s recent decision to hike rates for three of the city’s four utilities. In combination with the paid off safety bond, the city has hundreds of thousands in extra revenue at its disposal.

Responding to a question from Munns, Merriman confirmed that utility revenues do go into the general fund and can be spent at the council’s discretion.

Other council members, including Severns and Palmer, voiced considerable concern about the impact any new taxes would have on the public but ultimately agreed the increase was both prudent and justified. Munns, Paggao and Almberg said they also believe the tax to be necessary and in the best interest of the public over the long term.

“I’m going to exercise my option of what I think is leadership and support the recommendations of the staff,” Almberg said.

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