Utility tax advocated for Valley
Spokane Valley City Manager Dave Mercier recommended Tuesday that the council impose a 6 percent utility tax on residents starting Jan. 1.
Mercier said that’s the best way to close the growing gap between the cost of running the city and providing services for citizens, and the amount of revenues it’s receiving. The tax would generate $6 million for the city next year.
A 6 percent utility tax “does the very most to remediate the deficit schedule we have been looking at and wrestling with since last February,” he said. “It’s very somber news for the council.”
The tax would be on electric, gas, trash and telephone bills. An estimate of what that would mean for typical households wasn’t available Tuesday. Sewer and water services wouldn’t be taxed because Spokane Valley doesn’t own those utilities.
The city’s staff presented the council with a balanced 2005 budget proposal last month, but its six-year fiscal forecast shows expenses increasing at a rate of 6 to 8 percent while revenues are only growing 1 percent.
The staff showed how that might impact different city departments. For example, Spokane Valley expects to spend about $2.2 million next year on street maintenance. In 2006, the city will have to cut that to $600,000, Mercier said.
“That would be about enough to do snow plowing, but not much else,” he said.
Without more money, the staff said the city would need to reduce the police force 74 percent by 2010. That would slash the number of police officers in Spokane Valley from about 100 to about 25.
A 6 percent utility tax would allow the city to build a $2.5 million reserve fund next year and pay off the debt it incurred to pay start-up costs, Mercier said. In following years, it would generate just enough money to maintain the services to which citizens are accustomed now.
The staff listed various options for raising revenues, including boosting business registration fees, increasing the gambling tax or imposing a utility tax of less than 6 percent. But staff said a 6 percent utility tax is the best alternative for the long-term health of the city.
During a break in the meeting, Councilman Mike Flanigan said, “I believe there could be other options.”
The financial situation for cities is so bad, Washington state legislators might take action, he said. They could, for example, increase the gas tax, which helps cities maintain their streets.
The city of Spokane also is struggling to make ends meet. It may have to cut $10 million after forecasting tax revenues of $116 million. By comparison, Spokane Valley’s staff had to trim about $500,000 to keep spending within the $27.6 million the city expects to collect in 2005.
The council will hold a public hearing on the 2005 budget proposal during next week’s meeting. The council is expected to discuss the tax recommendation and other revenue options during the next several weeks.
Most Washington cities have a utility tax, and a Spokane County Boundary Review Board study done prior to incorporation said Spokane Valley would need one to survive. A separate study touted by incorporation backers said the city wouldn’t need a utility tax.