Oak Harbor officials’ plan to adopt a business and occupation tax to help fund marina dredging, the construction of a marina breakwater and a city recreation center fell apart during vigorous debate at a city council meeting Tuesday.

In the end, the council voted 4-3 to table the tax proposal until Aug. 6 after several council members questioned the city’s financing plans and argued that the North Whidbey community should first explore the creation of a metropolitan park district.

As presented, the proposed tax would affect only 26 businesses, or the top 1% of businesses by earnings.

David Goldman, deputy city administrator and finance director, explained that the proposed B&O tax would exempt the first $5 million that businesses earn. At a rate of 0.002, the tax would earn an estimated $825,000 a year.

He also showed options of lowering the exemption level to $2.5 million or $1 million — which would affect more businesses and raise more money — although council members previously supported the upper level.

Goldman argued that a B&O tax on large, corporate businesses would help level the playing field with homegrown, smaller businesses harmed by big-box stores. He said research bears this out.

Three people submitted written comments in opposition to the tax. At the meeting, three people affiliated with a soccer club spoke in favor of the tax, especially if it would fund an indoor recreational facility. Sandi Peterson, a candidate for council, spoke against it. Byron Scooby, a member of the marina committee, said the problems at the marina are dire.

“Every month without funding secured brings our marina closer to failure,” he said.

Mayor Ronnie Wright was clearly not pleased with the delay and pointed out that the city loses out on nearly $64,000 every month the tax isn’t in effect.

During lengthy discussions, Councilmember Eric Marshall emphasized apparent problems with the plan, or lack of planning, on the city’s part. He pointed out that the city’s proposal to use the proceeds from the B&O tax to pay the debt service on a 20-year bond to fund $10 million in dredging would leave little money for the breakwater or the recreation center.

In addition, Marshall said the city’s own consultant concluded that the dredging would only last 10-13 years before it needed to be done again. Goldman acknowledged that the bond would then have to be for 15 years, which could bring the annual debt service up to about $1 million a year — and that means another project likely couldn’t be financed with the tax.

Councilmember Tara Hizon, however, countered that the B&O tax, as previously discussed, was only meant be one part of a financing plan that would require several different revenue sources.

“It was the consensus of council that we need to pursue every available avenue, every available funding source, every available voter initiative because there is no one solution,” she said.

Likewise, Councilmember Barbara Armes said the city is working with state and federal officials, including to U.S. Rep. Rick Larsen, to obtain funding for the projects. According to Larsen’s office, there is a provision in the Water Resources Development Act that requires the Army Corps of Engineers to look at the channel and breakwater in Oak Harbor to determine if federal assumption of maintenance, including dredging, is merited.

Armes emphasized how the marina is important to the community beyond just boat owners. She spoke about how children recently visited the young salmon being raised in a pen at the marina and how the facility supports the downtown core.

“If we get rid of it, what will it be?” she asked. “Because once we get rid of it, it will never come back.”

Marshall proposed that the community should consider a metropolitan park district, which he said could raise more money from a larger number of people. Metropolitan park districts are similar to park and recreation districts but generally offer more fiscal capacity and flexibility, according to Municipal Research and Services Center.

Under state law, the city council and the board of county commissioners would both have to agree to place a measure on the ballot to let voters decide whether to create a metropolitan park district with boundaries that would likely extend beyond city limits — possibly the school district boundaries.

Marshall said the voters have shown time and time again that they will support taxes if there is a well-grounded proposal.

“They will approve additional expenditures if you show them the value of what you are giving them,” he said. “Right now we can’t do that because we don’t even have a solid plan in place internally.”

City officials have also discussed the creation of a port district on North Whidbey. Under state law, the decision to place such a measure on the ballot would be in the hands of the county commissioners. Commissioner Jill Johnson said nobody from the city has approached her about the port district idea, although she talked to a city council member about a possible metropolitan park district — which she said seems to make more sense.

In his comments, Councilmember Jim Woessner argued that the city wasn’t thinking big enough and needs a full-scale plan before adopting any B&O tax. He said the city hasn’t put serious thought into the numbers because “we’ve been trying to pull this thing together on a shoestring budget.”

“And I think shoehorning ourselves into trying to be frugal right now might be a mistake,” he said.

Woessner also said a metropolitan park district is worth exploring.

Councilmember James Marrow said he was reticent to move forward with large capital projects that don’t provide essential services. He said the projects may be better suited to a port or metropolitan park district.

Councilmember Christopher Wiegenstein said he thought the $5 million exemption level was essentially a wasted effort because it wouldn’t bring in enough funds. He also spoke in favor of creating a port or metropolitan park district since a larger portion of the North Whidbey population would be involved.

Councilmember Bryan Stucky didn’t express any strong feelings about the issue but pointed out that the tax wouldn’t result in higher prices in Oak Harbor stores as compared to other nearby communities which already have B&O taxes.

In the end, Hizon, Armes and Stucky voted against tabling the issue but were outvoted.