Utility tax cut proposed
July 3, 2008 · Updated 2:38 PM
Oak Harbor City Council members got a couple pieces of good news about the citys finances during their regular meeting Tuesday night, which spurred two council members to suggest doing away with the 6 percent utility tax.
The good news is the city will receive more than $220,000 extra in property taxes this year because of an error in property tax calculations. Also, the city is no longer in the fiscal emergency that began back in February of 2000.
Since we are no longer in a financial emergency, Councilwoman Sheilah Crider said at the end of Tuesdays meeting, and we promised not to have the utility tax any longer than necessary, I want to bring forward a motion to rescind the 6 percent utility tax.
Councilman Paul Brewer seconded the motion, which means the proposed action will be put on the council agenda. A briefing on the subject is set for the Feb. 18 meeting.
The city council passed the 6 percent utility tax, which is tacked onto such city-provided utilities as water and garbage, over a year ago in order to combat the $800,000 budget shortfall caused by Initiatives 695 and 747. Oak Harbor had a similar utility tax in the year 2000, but it expired at the beginning of 2001.
The way the tax actually works is a little convoluted. The city taxes utility providers by 6 percent and the utility providers pass on the tax by raising rates to customers by 6 percent. That means the city is really taxing itself to tax the citizens.
Criders proposal to get rid of the utility tax got a somewhat grumpy reaction from the citys administration. The tax is estimated to raise over $500,000 this year, according to city Finance Director Doug Merriman. Thats 5.8 percent of the general fund budget.
Obviously, the city would have to either make cuts or find other sources of revenue if the utility tax is cut away.
The property tax error could help somewhat. Earlier this year, Island County Assessor Tom Baenen notified the city and 11 other taxing districts in the county that a state audit of the assessors office revealed errors in 2002 property tax levies.
Tuesday, Merriman told the council that the error in the citys property taxes turned out to be greater than previously figured. It turns out that property owners in Oak Harbor underpaid property taxes last year by a total of $221,773. That amounts to about $48 for a person with a house assessed at $200,000.
Members of the city council chose to receive the property tax correction this year. That means property taxes within Oak Harbor will increase this year and only this year by $48 for a person with that $200,000 house.
In an unrelated matter, City Administrator Thom Myers said that several resolutions the city council adopted declaring the citys in a financial emergency have expired. He said theres no reason to pass a new resolution.
We have taken the emergency situation off the table, Myers said.
The city council passed the first financial-emergency resolution on Feb. 22, 2000. The resolution directed the city administration to reduce spending and reorganize services to increase efficiency. Under the resolution, Mayor Patty Cohen laid off several city employees and reorganized planning, engineering and building into the development services department.
Related resolutions were passed in 2001 and 2002. The latest resolution, called the resolution concerning budget administration, took away some of Mayor Cohens administrative power. The resolution stated that city council approval was necessary for any pay increases, new city positions or spending in excess of any line item in the budget.
Without an official financial emergency, Crider said there may be no reason for the utility tax to continue. In an interview Friday, she said its time to reevaluate whether the tax is needed. She said the windfall from the assessors error and better-than-expected sales tax revenue may help balance the budget without a utility tax.
We made a commitment that we would rescind the tax when the city is no longer in an emergency situation, she said. Council never approved that to be a forever tax.
You can reach News-Times reporter Jessie Stensland at email@example.com or call 675-6611.