Tax hikes passed in budget deficit fix
EVERETT — Residents can expect their utility taxes to increase on Jan. 1 after the City Council passed a set of tax increases on water, sewer, cable and garbage service.
An up to $20 car tab fee for all vehicles also could be coming next year per a council vote.
Also, city’s business license fees were increased to $75 and restructured to have an annual renewal fee.
All of the changes are part of Mayor Ray Stephanson’s recommendations list to help right the city’s growing structural deficit. Opponents say these deficit fixes largely come on the backs of residents.
The structural deficit was poised to be $13 million in 2015 and could grow to $21 million by 2018 without corrective action. The city is required to produce a balanced budget, so in past years it deferred multimillion dollar expenses to make up for the growing deficit.
The utility tax changes are a rate hike of all current utility taxes from 4.5 percent to 6 percent starting this January, and the introduction of a tax on cable and garbage service starting at 2 percent for 2015.
Some council members said increasing utility taxes is a regressive measure that unfairly impacts low and middle-income residents.
The council voted 4-3 on utility tax hikes, with Councilmen Paul Roberts and Ron Gipson and Councilwoman Brenda Stonecipher voting no.
The council unanimously approved a mechanism to create a $20 car tab fee (but not the fee itself) and voted 6-1 on increasing business license fees.
Utility Tax Increases
The city estimates that a four-person household would see an increase of $7 per month for their average utility bill next year.
The proposed tax increases created mixed emotions among council members.
“I do want to point out that this type of tax, a utility tax, is about the most regressive form of tax you could ever choose,” Stonecipher said.
Utility taxes will have a greater impact on people with lower income, Stonecipher said. She voted no to the hikes.
“Before we look at tax policy solutions, we need to know what the total tax burden would be,” she said, adding that a study on the total tax burden currently faced by Everett residents should be conducted before these taxes are implemented.
Councilman Paul Roberts agreed. A tax study would give the council an overall snapshot on how people are taxed, he said. Roberts also voted no on the ordinance.
Stephanson responded that people have ways of controlling their tax burden by taking steps such as weatherizing their homes or by living in a smaller place.
“This will give us a foundation of revenue,” Stephanson said of the rate increases, adding that Everett has been fortunate to not have to raise tax rates in the past 10 years.
Councilman Scott Bader concurred with the mayor.
“We have to play the hand we are dealt,” he said, referencing the voter-approved limit on annual property tax increases created by Tim Eyman in the late 1990s. “It appears to me that the best way to move forward is to take these measures, as painful as they are.”
Although Council President Jeff More ultimately voted to approve the taxes, he shared Stonecipher’s concerns on the taxes’ regressive nature.
“The main reason we are looking at this is because of the loss of property taxes, which were not regressive,” Moore said. “I’m with you, I would love to have non-regressive taxes but I don’t know how to get there.”
Judy Tuohy, who is running against Councilman Rich Anderson this fall, urged the council to not make a kneejerk tax increase to alleviate the structural deficit, because by 2016 or 2017 the rate increases may not be necessary if the city is able to cut back expenses. Tuohy cited a study that the rate increases would give Everett the third-highest tax rates in Snohomish County.
“Instead I urge council to find ways to close the gap this year,” Tuohy said during citizen comments. “Hold off the need for taxes until it can be demonstrated.”
Anderson, Bader, Moore and Councilman Scott Murphy voted yes on the increases.
Business License Fees
The city has not changed its business license fees since the late ‘70s, which is why it came up for discussion.
Last week’s vote increases the business license fee from $10 to $75 and created a new annual renewal fee.
Local business owners are against the change and an unofficial downtown business alliance that sprung up now has 30 local businessowners. The businessowners say it’s unfair to increase the license fee because big companies would not be paying comparatively higher rates adjusted to their earnings.
Stonecipher was the lone no vote.
“Though this seems like a small amount, I worry about really small businesses that are right on the edge and might not be able to make it,” Stonecipher said. She later added that the annual renewal fee is a bigger concern to her than the one-time license fee.
The rest of the mayor’s recommendations also passed unanimously.
These include a law forcing owners of cars impounded for parking illegally to pay any outstanding parking tickets before recovering their car, increased fees for land use permits and increasing traffic mitigation fees on developers.
The City Council now has a mechanism called a transportation benefit district where it can impose an up to $20 car tab fee for each car registered in city limits. If approved soon, the car tab fee could come into effect in 2015.
The increased taxes and fees cumulatively will increase city revenue by more than $6 million next year.
Mayor Stephanson also has proposed eliminating 15 positions, cutting the Everett Public Library bookmobile and wants to renegotiate city employee insurance co-pays.