When the Liberty Lake City Council approved a 6-percent utility tax last October, much of the discussion centered around bridging a projected $700,000 deficit in the municipal budget for 2011. At the time, city officials anticipated the tax generating approximately $825,000 annually, although a range of $725,000 to $1.2 million was mentioned as potential revenue.
By the end of August this year, the levy on cable, gas, garbage disposal and electric services had raised $726,000, according to Liberty Lake Community Development Director Doug Smith.
Over a month before those numbers came in, spokespersons from a utility tax task force addressed the City Council, expressing concern over the effect of the tax on local businesses. Formed in January and comprised of representatives from Liberty Lake’s commercial sector, the task force held regular meetings and collected feedback from businesses affected by the tax.
Nancy Holmes of Avista, who chairs the task force, told the City Council on July 19 that the utility tax “is having a negative impact on business in Liberty Lake.” Holmes went on to point out that sales and property tax returns had come in higher for the first part of the year than city officials had originally projected.
“The magnitude of the shortfall doesn’t appear to be impending, even without the utility tax,” Holmes said.
Last week, Holmes said there continues to be a lack of consensus among city leaders regarding the future of the utility tax. She and representatives of the task force have met with the municipal finance committee – comprised of Deputy Mayor Dave Crump and Council Members Josh Beckett and Ryan Romney – as well as Mayor Wendy Van Orman, Smith and Council Members Susan Schuler and Cris Kaminskas.
“I think the council is somewhat split,” Holmes said. “There are some who seem to think the tax is just a band-aid, that the city needs more money than this and others who see it as temporary.”
While the City Council has discussed the utility tax within the context of the 2012 budget since July 19, the topic has not appeared as an agenda item other than an ordinance allowing for certain tax exceptions among low-income seniors and disabled residents.
“I think we’re disappointed,” Holmes said. “I thought they were going to discuss it at their Aug. 2 meeting.”
At the Sept. 6 City Council meeting, Crump raised the subject of incorporating the utility tax conversation into talks about next year’s budget cycle. Van Orman, meanwhile, said an evaluation of the tax “is all part of the budget process.”
Schuler, who referred to the tax as “a bridge loan” during last year’s budget meetings, said she was surprised that the topic had not come up formally since the task force presentation back in July.
“If it’s not on the next council agenda, I’m going to bring it up,” Schuler said. “This tax has brought in a lot more funds than the staff projected.”
Schuler said she would support “reducing the tax in half at a minimum, if not repealing it altogether.” The 6-percent tax on utilities is the maximum toll that can be implemented by a city council without a public vote.
Just this week, Liberty Lake welcomed a new finance director who will be assigned the task of reviewing all the numbers going into the 2012 budget, including utility tax revenue. R.J. Stevenson arrives in Liberty Lake after serving as the assistant finance director in Washougal, a town of
“Hopefully, we’ll have better numbers as we move forward,” Van Orman said. “We’ll be able to add in the state forecast in a few weeks.”
The mayor and Smith both confirmed a projected 4-percent increase in the city’s budget for next year. A number of announced cuts to 2011 expenditures were met with criticism from residents last year, including reductions at the municipal library and golf course. Ultimately, most of the service levels remained the same.
Van Orman said that while municipal officials will definitely review the usefulness of the tax, the revenue could also be put toward the city’s debt service, currently hovering around $4 million.
Steve Peterson, who served as mayor of Liberty Lake from 2001 to 2007, has been an outspoken critic of the utility tax since it was introduced last fall. Now campaigning to return to the mayor’s office – he will be opposed by Beckett on the Nov. 8 ballot – Peterson said the key to the city’s financial challenges “is not to tax more but to spend more efficiently.”
“We need more transparency in this process,” Peterson said. “There’s been a lack of leadership here. The current leadership raises money from a tax and puts it in the bank instead of talking in detail about where it’s going to go.”
Beckett, who has voiced support for the utility tax, acknowledged this week that the differences between he and Peterson over the value of the tax “will likely become a campaign issue.”
Like Van Orman and Smith, Beckett said the revenue provides insurance for the city in a still recovering economy and could help reduce the debt service.
“The biggest reward to the Liberty Lake taxpayers is to pay down the city’s debt,” he said.
Beckett said he welcomed the opportunity to review the pros and cons of the tax with local business, representatives of the task force and Liberty Lake residents.
“As a city, we want to return greater value to the citizens,” Beckett said. “I feel it’s important that the city and community have a good discussion about this.”