Camas seeks feedback on utility taxes

With the bulk of the Camas municipal government’s revenue historically coming from property taxes, city officials have proposed implementing a new income source – a tax on a handful of utilities.

During Monday’s City Council workshop, Finance Director Cathy Huber Nickerson laid out a proposal that would add a 1 percent tax on cable television, natural gas, telephone, storm water and solid waste services. It’s a move that would generate an estimated $278,000.

To ease the burden on taxpayers in 2017 and offset that utility tax increase, the City Council would first increase by 1 percent its annual property tax levy, generating approximately $110,000. Then the property tax rate would be lowered by $278,000 — from $3.19 per $1,000 of assessed property value to $3.11.

“This action would reduce the property tax levy for all property owners in the city,” Huber Nickerson said.

The City Council would then vote to bank this $278,000 of taxing capacity for a future tax year, she explained. The banked capacity would continue to grow by 1 percent annually as part of the city’s highest lawful levy and acts as a savings account for the future. The City Council would preserve the right to use any or all by voting to increase property taxes in the future for “substantial need.”

“Washington State law provides local jurisdictions [the ability] to set aside tax capacity for what is called ‘substantial need,'” Huber Nickerson said. “When drawn upon, the City Council would explain what the substantial need is in order to access the taxing capacity. It also would provide a mechanism for future property owners to share in the funding for ‘substantial need’ as a result in growth such as a need for more police officers, parks or streets.”

According to the proposal, in 2018 the city would increase its property tax rate by 1 percent again, but leave utility taxes at 1 percent.

Huber Nickerson said community feedback on the proposal would be sought through an open house and public hearings that will be scheduled later this month and in November.

According to City Administrator Pete Capell, taxing other utilities including water and electricity was ruled out due to the impact it would have on Camas’ largest industries.

“The reason for the decision on electricity, water and sewer is that our major employers, WaferTech and Linear [Technology], who use so much water and so much power for their processes, it was nearly impossible to try and find a balance,” he said. “They were going to be paying considerably more, and we didn’t want to harm the business.”

Utility taxes are levied on the gross operating revenues earned by private utilities within a city, and by the city’s own utilities.

The tax is charged by a municipality to a utility, then passed along to the utility’s residential, commercial and industrial customers.

The proposed 2017-18 budget was created assuming the implementation of the recommended utility tax scenario.

Public utility discussions began in August, and were presented as an option to help diversify the city’s revenue stream.

Property tax revenues currently make up approximately 64 percent of the city general fund taxes collected. Sales tax brings in the other 36 percent.

City officials have said in the long-term the city is facing a structural budget deficit because expenses are projected to outpace revenues.

The Camas population, currently estimated at 21,210, is expected to grow 37 percent during the next decade to reach 35,000 by 2035.

Some of the most significant development during the next two decades will occur north of Lacamas Lake, and in the Green Mountain area bordered by Northeast Ingle and Goodwin roads. Infrastructure investments will be necessary.

“[The utility tax] gives us some tools to be able to address what those future needs might be,” Capell said. “There is nothing that says we would ever take advantage of those, but at least it’s a tool in the tool box that gives us some options that we don’t have today.”

“I personally think [a utility tax] makes sense, but I also respect the council’s decision,” added Mayor Scott Higgins. “If they don’t want to use that tool, we’re good to go.”

Councilwoman Shannon Turk said she is a proponent of the utility tax proposal, but questions whether implementation should be delayed to 2018.

“My only hesitancy is in timing and whether we need to tie it to the [2017] budget,” she said. “The budget process in itself is a very difficult process. If the council is not to the point where they fully understand it, then maybe we should split it and make the decision in January or February and have it impact 2018.”