"With I-695, city writes two budgets"
July 3, 2008 · Updated 12:18 PM
"If Initiative 695 passes, Oak Harbor residents may get a hefty increase in utility taxes and a new type of sales tax.But whether or not I-695 passes, city officials are considering balancing the budget by raising property taxes by the maximum allowed under law, cutting the Citizens on Patrol Program, cutting overtime in the police department, and not filling four new firefighter positions planned for next year.Oak Harbor officials are planning two budgets in case Initiative 695 passes one if it does, and one if it doesnt.If passed, I-695 would eliminate the motor vehicle excise tax and replace it with a flat $30 fee. It also requires that officials get voter approval before passing any type of tax increase.According to City Finance Director Doug Merriman, Oak Harbor will lose about $776,000 from its general fund next year if the initiative passes, which is about 10 percent of its $9 million general fund budget. In the year 2001, the citys loss will rise to more than $1 million. Oak Harbor and 171 other sales-tax-poor cities in the state receive sales tax equalization money from the state to make up for the tax shortfall. The equalization fund comes from motor vehicle excise tax money, which will go away if I-695 passes.The city is not alone in its budget struggles. Stan Finkelstein, the executive director of the Association of Washington Cities, said many cities are drafting two budgets, scaling back capital projects and raising taxes ahead of time to prepare for I-695.He said some cities stand to lose from 30 to 40 percent of their budgets.A number of cities have suggested that they will have to dis-incorporate, he said, since they wont be able to meet even the most minimal services.To make up the lost money in Oak Harbor, the city staff has proposed a 6 percent rate increase on water, sewer, solid waste and storm water utilities, which would increase revenues by $342,000 next year.In addition, they proposed to institute a new business and occupation tax of .002 percent on gross sales of service and products within the city, which will amount to 5 cents for every dollar spent. According to estimates, it would raise $400,000 next year.Although City Supervisor E.T. Silvers originally said the B & O tax will extend to the Commissary and Exchange on the Navy base, Merriman recently investigated and found that it will not. Silvers said he is asking the city council to pass the tax increases and new tax at the Nov. 1 meeting so the city can make its budget deadline. But if the initiative doesnt pass the next day, he said the council can rescind the tax changes.But even if I-695 does not pass, Silvers said the city still will not have a very healthy budget to work with.Just to balance the budget in the first place, Mayor Steve Dernbach proposed $500,000 in cuts and tax increases. He proposed that the city raise property taxes by the maximum 6 percent less the cost of living increase and unbank the 5.85 percent property tax levy that the city council did not pass last year, which will raise a total of about $127,000 according to Silvers.Silvers said an 11.15 percent increase in the citys share of property taxes would mean about a 3 percent rate increase for property owners within the city. Dernbach said the Citizens On Patrol program can be cut to save $10,000. Under the program, the police department loans a retired squad car to local volunteers to patrol the city.In addition, he proposed reducing police department overtime by $105,000, putting off the replacement of a fire chief car and a tractor trailer rig, and not funding four new firefighter positions that have been budgeted.We tried to find cuts that will not affect public safety, Silvers said.What the candidates sayHeres what the candidates say the city should do to balance the budget if Initiative 695 passes. Mayor of Oak HarborRichard Davis, a council member and a financial advisor, said the short-term solution is to cut all the non-essential services and raise some taxes. He said the city should have a lot of public input before increasing taxes or starting any new taxes. We have to find out whether or not they want these other services, he said. The solution for the long run, he said, is to increase sales tax collection by improving the citys economy and getting people to spend more money in Oak Harbor. Patty Cohen, a former long-term city council member, said that she would want to take an in depth look at each department to look for places to tighten the belt. She said the proposed tax increases are a good idea, but only in the short run. She said the city can rely on the expertise of Finance Director Doug Merriman. She said she hopes I-695 does not pass, but that motor vehicle excise tax is reformed in the future.City Council, position 2Eric King, a local business owner, said that the citys proposal to raise taxes to make up for the loss of funds under Initiative 695 is the most prudent move. He said he would rather raise some taxes rather than cut any programs. As a business owner I am not thrilled about it, he said. But were out of options. He said hes not in favor of I-695, which he said is too good to be true.Paul Brewer, the incumbent, could not be reached for comment.City Council, position 3Rex Hankins, the incumbent candidate, said that services in the city have been cut as much as they can be, and raising taxes seems to be the only alternative left. I hate to do it, he said, Im against raising taxes. Yet he said the city should not cut the Citizens On Patrol program. He said the city can find the $10,000 needed to fund the program by cutting back on employee overtime. He said he doesnt support I-695 because of what it will do to transit.Helen Chatfield-Weeks, the chair of the city park board and the Maylor pier committee, said the city should look at a combination of cutting services and raising taxes. She said she supports the tax increases and budget cuts proposed by the city staff. I trust what they say, she said. She said programs like Citizens On Patrol are important but not essential, and should be cut first."