City backs away from B&O tax

"Businesses get a break, but everyone else will pay higher utility fees"

  • Tuesday, January 4, 2000 9:00am
  • News

“On the second to last day of the year, the Oak Harbor City Council responded to pressure from local businesses and reversed itself on part of a compromise tax increase that was meant to ease the financial blow of Initiative 695.It was also the second to last day that the council could, and did, raise taxes without a vote of the people. Mayor Steve Dernbach and Councilman Danny Paggao were both absent.The council voted 5-1 to rescind a 0.1 percent Business and Occupation tax of gross sales and raise the city’s utility tax up to 7 percent. The decision does not raise additional city revenues, but substitutes utility taxes for business taxes.Under I-695, which voters passed in the general election, the Motor Vehicle Excise Tax was reduced to a flat $30 fee and government cannot raise taxes without a vote of the people. In the new year, Oak Harbor will lose $800,000, or 10 percent of the general fund balance, that it received from the state before I-695.In November, the council passed a compromise tax increase of 0.1 percent B & O tax and a 4 percent tax on city utilities, which raises about $230,000 in revenues, to help offset the anticipated shortfall.But after the council passed the new taxes, local businesspeople banded together and lobbied hard against the B and O tax, which they feel unfairly burdens businesses. The B and O tax was on gross incomes over $100,000. Several businesspeople pointed out that some businesses have high grosses but little or no nets.“Some people are working on margins that are very small,” former Chamber of Commerce interim director Tamra Sipes said, adding that a small tax increase could put them out of business.“With a B and O tax, 10 percent of the businesses take on the burden,” local businessman Gary Funk said. “Spread the burden equally. I mean, it has to be fair.”“It seems like we’re asking the business owners to pay twice,” local attorney Mark Hansen said.Jim Earl, appearing at his last meeting as a councilman, said that the voters feel the city is “circumventing” I-695 by raising taxes right before the end of the year. He voted for both ending the B and O tax and increasing the utility tax.On the other side, several citizens criticized the council members for reversing themselves so quickly on the tax increase and being “wishy washy.” Others, like resident Kenneth Ford, spoke against the utility tax increase and urged more budget cuts.“Find the money we need by cutting salaries, going back to a half-day mayor,” he said. “In the past we have squandered our money. The Taj Mahal we have for the utilities boys is ridiculous.”Only Paul Brewer voted against rescinding the B and O tax and increasing the utility tax. He said he was concerned about raising the taxes of the low income.Under the conditions of the utility tax increase, city residents will get a chance to vote on it at the next general election. If it doesn’t pass, the increase “sunsets” on Dec. 31, 2000.City Supervisor E.T. Silvers said new Mayor Patty Cohen will likely have a lot of work to do on the budget, with more possible cost cutting, even with the tax increase. The 2000 budget eliminates two parks positions, he said, reorganizes part of public works department and eliminates 14 summer positions. He added the city will not know the final effect of I-695 until months into the new year.”

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