Oak Harbor raises taxes
July 3, 2008 · Updated 12:21 PM
"The Oak Harbor City Council passed a compromise tax increase to help make up the budget shortfall from Initiative 695 Tuesday night, after arguing and listening to public comment for more than four-and-a-half hours.The council agreed to create a 0.1 percent business and occupation tax on gross sales within the city and a 4 percent tax on city utilities, while the city administration asked for a 0.2 percent B and O tax and a 6 percent utility tax.The city has to find $800,000, or possibly more, to balance its budget after the passage of the initiative, which dismantled the Motor Vehicle Excise Tax, or car tab, system. The state funnels excise tax money to Oak Harbor through sales tax equalization, criminal justice and other programs.The two new city taxes are a compromise measure suggested by Councilman Danny Paggao, who voted against the tax increase along with the entire council except John LaFond when the administration first proposed it last month.According to City Finance Director Doug Merriman, the compromise tax increase still leaves about $400,000 that needs to be trimmed from the city budget, which could mean employee lay-offs and service cuts. The 0.1 percent B and O tax will bring in about $188,000 next year and the 4 percent utility tax will raise about $230,000.Well over 100 people packed into the council chambers Tuesday night, and many of them spoke during the public comment period. The audience seemed to be divided into two camps: business people who protested the proposed B and O tax, and residents who supported the tax because they want continued services or dont want employee lay-offs.Were not just playing cops and robbers. Many of us are looking at futures in law enforcement, maybe even in Oak Harbor, said Matt Magorrian, a recent graduate of the Explorer Scouts. He spoke in favor of the tax increases, arguing that programs like the Explorers, which has been named as a potential cut, are worth keeping.The Explorer Scouts are a group of local youths, ages 14 to 20 years, who are trained by the police department about law enforcement and then help officers with a variety of events, projects and emergencies during the year.Since the police department budget amounts to 45 percent of the general fund budget, it will have to bear nearly half of the cuts or about $400,000.On the other hand, several businesspeople argued that a business and occupation tax is an unfair way to raise revenues. B and O taxes are levied against gross sales, whether a business makes a profit or not.B and O tax is one of the most regressive, oppressive and excessive taxes that could be levied against business, said Randy Bradford, manager of Coachman.Councilman Richard Davis, who was the one who asked to bring the tax increases back to the council for a second look, agreed that a B and O tax is not a good tax. It hits business like car dealers, who sell expensive items but get a very small profit margin, much harder than it hits other types of businesses.Davis said he could not support the full 0.2 percent, but reluctantly voted for the 0.1 percent tax.Davis said arguing for a tax increase put him in an awkward position, as it must Councilmember Sheilah Crider. They are both self-described pro-business, fiscal conservatives.I have a lot of business friends who will probably never speak to me again, he said before he voted for the tax increase.On the other hand, Councilmembers Rex Hankins and Paul Brewer, whove been accused of being both anti-growth and anti-business in the past, argued vehemently against raising taxes.I feel if were really creative and look, were going to find some of the revenues, Brewer said. He said he was against the taxes because they will harm low-income people. Theyre going to hurt the very people were here to protect.Paggao first said he would support exactly half of the the proposed tax increase percentages, but finally made a motion for a little more than that a 4 percent utility tax and 0.1 percent B and O tax after incoming Mayor Patty Cohen made a speech urging the council to increase revenues.But as a condition of the tax ordinances, the council members voted to bring the new taxes before the voters at the next general election and placed a year 2001 sunset on them. The new taxes will be automatically lowered or rescinded if the state gives the city any monetary assistance to deal with the effects of I-695.In addition, business are exempt from paying B and O taxes on the first $100,000 of gross sales. Since 91 percent of the 2,842 businesses in the city dont gross over $100,000, the city will only collect money from 267 businesses.The council also passed a provision that lowers utility bills for the low income.Over the next couple of months, Merriman said City Supervisor E.T. Silvers and incoming Mayor Cohen will study the budget to find places to cut, since balancing the budget is the responsibility of the city administration.Mayor Dernbach has offered to let Patty Cohen come in and help, since shes the one who will have to live with the budget, Merriman said.Merriman said the budget problems may get even worse. The city is relying on getting the last piece of excise tax money in the first quarter of the year 2000. That money may be greatly reduced, however, if car owners dont pay tabs that are due in November and December. The city could lose $100,000 or more, he said.The City Council is scheduled to have a budget workshop on Dec. 14."