Council OKs utility tax plan

Utility taxes are going up. But they won’t be passed on through sewer and water bills – at least not yet.

The Spokane City Council on Monday unanimously agreed to Spokane Mayor Mary Verner’s proposal to begin charging the city’s 20 percent utility tax to certain utility fees that haven’t previously been taxed.

The decision allows the city to take money in the form of a tax from utility reserves – $4.5 million for 2008 – and spend it elsewhere. Most of the new revenue will be spent on streets. The new taxes will not be passed on to ratepayers for now.

Monday’s vote only affects 2008 spending, but it indicates that council members have at least partially accepted what was shaping up to be one of the most controversial parts of Verner’s proposed 2009 budget. Without the utility tax plan in place next year, officials say the city would be forced to dip into reserves or lay off employees.

The council is scheduled to make a final decision on 2009 spending next week.

Verner has said the administration’s goal for the utility tax changes were more about following good accounting practices and state and city law than balancing the budget.

Others, including former City Councilman Steve Eugster, have disputed the city’s legal interpretation.

Most council members expressed concern that much of the owed tax will come from funds earmarked for significant construction in the coming decade. Lowering savings either will require rates to be raised later or force the city to borrow for a portion of the projects.

Still, they said that they could support the change given the alternative of layoffs.

“At this point I think it will help us solve a lot of problems,” said Councilman Bob Apple.

Councilman Al French said utility reserves should be replenished, but not until later.

“The alternative is to raise fees now … and that places an additional burden on our ratepayers during a difficult economic period,” he said.

French noted that utility rates will be evaluated next year after the release of a study examining utility finances.

Budget Director Tim Dunivant said most of the new utility taxes approved for 2008 were slated for streets to make up for the sharp decline in real estate taxes. The street department also needed the boost to replenish the extra amount spent clearing streets last winter, the second snowiest on record.