City sales tax worries eclipse impact from I-747

The impact of Initiative 747 on the city of Oak Harbor will be long-lasting and compounded each year, but the property tax limiting measure will have only a small effect in the short run, Oak Harbor Finance Director Doug Merriman said.

Instead, city officials’ real challenge will be to balance a budget dependent on the sales tax at a time of recession.

At a meeting Wednesday night at city hall, the council members said they need citizen input to help them decide how to deal with the budget crunch.

The city was only expecting to raise its share of property taxes by 2 percent for next year’s budget. I-747 was handily approved by voters Tuesday and limits governments from raising property taxes by more than 1 percent a year.

As a result, Merriman said the city will only lose the 1 percent, which amounts to about $25,000.

That’s peanuts when compared to the $400,000 to $500,000 in sales tax revenue Merriman estimates the city will be short in the 2002 budget because of the weak economy.

However city leaders balance the 2002 budget, the sales tax problem means the city can’t begin saving a large reserve fund now to deal with the future and growing effects of I-747. With the 1 percent limit, that means the city loses out on a 5 percent increase each year, which compounds. So three years out, the city will be missing out on a possible $375,000 in property tax revenue.

“Each year you lose that layer of increase,” Merriman said.

Wednesday, Mayor Patty Cohen urged the council members to warn the community about the serious nature of the budget shortfall.

“The only solution is to decrease spending,” said Council member Richard Davis, “which primarily will be police and fire. ... we don’t have answers and we don’t have revenue to balance the budget.”

“It’s very apparent that our citizens have told us they want less,” Council member Nora O’Connell-Balda said, “and they need to tell us what they want us to cut.”

“The citizens need to determine what they can live with and without,” Council member Sheilah Crider said, adding that a special election to raise taxes is an option. “I can’t impress upon you seriously enough the magnitude of what we face.” I-747 allows property tax increases above 1 percent if voters approve.

“The people can’t have it both ways,” Council member John LaFond said.

Council member Paul Brewer offered a novel solution, but one that may not be popular with fellow city leaders and some businesses. “We really need to move forward with the annexation of Goldie Road,” he said. “We’re losing that tax revenue to the county.”

Various industrial, manufacturing and commercial businesses reside on Goldie Road, just past the northern boundary of Oak Harbor. Many of the businesses are hooked up to city water and have signed agreements to annex into the city at some point. Until they are annexed, the city doesn’t collect sales or property taxes from those businesses.

Other city leaders, like Davis, have said they would prefer offering incentives to the businesses to come into the city instead of forcing them in. After all, those businesses could be lured away by more business-friendly cities, as Logos recently was.

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