Eugster targets city utilities tax

Former Spokane City Councilman Steve Eugster has filed an initiative that, if approved by voters, would roll back the city’s tax on its own water, sewer and garbage utilities.

The tax was increased in 2006 from 17 percent to 20 percent of the total bill to help city leaders avoid more budget cuts.

Under Eugster’s initiative, the tax rate would be reduced to 6 percent or the average of city utility taxes charged in first-class cities in the state.

Spokane’s Chief Financial Officer Gavin Cooley said the current average rate is 11 percent. If voters approve the measure, the city would lose about $9 million in tax revenue if the rate were trimmed to 11 percent. The city would lose about $14 million if the rate were cut to 6 percent.

Eugster said the tax rate is misleading. It is stated as a percentage of the total bill rather than as an add-on tax. The rate is nearly 25 percent of underlying utility charges.

“The tax is unfair and terribly regressive,” Eugster said in an e-mail. “It is not a tax that is healthy.”

Eugster in the past has called for reducing the utility tax, which is paid by all homeowners and businesses, including those who can least afford it. Instead, the city should levy a business and occupation tax, he said.

But community leaders have opposed a business and occupation tax because it would put the city at a competitive disadvantage with Spokane County, Spokane Valley and North Idaho areas that don’t have such a tax, Cooley said.

Eugster said that the unfairness of the utility tax is best understood by imagining a 25 percent sales tax on food. He said the city’s “sewer, water and garbage services are every bit as necessary as a loaf of bread.”

Cooley said the city’s utility rates, even with the 20 percent tax, are still below the average in other cities in Washington.

He described Eugster’s initiative as a “backdoor attempt to force a business and occupation tax.”

If the city could not replace the money from the sewer and utilities tax, Cooley said, “it would have a dramatic impact on services to the citizens of Spokane.”

Cooley said the economy in Spokane is strong, and any major shift in tax burden or city services could hurt growth. “Why make that change in the midst of a strong economy?” he asked.

Eugster would need about 3,000 signatures to put the measure onto the ballot in November, or at least 5 percent of the ballots cast in the 2005 election for City Council. Under the City Charter, the City Council has a choice of adopting the petition or sending it out for signatures. He succeeded in 1999 in winning an initiative that changed Spokane’s form of government from a council-manager to strong mayor system.