Former City Councilman Steve Eugster wants to force Spokane to lower its utility taxes, which are among the highest in the state.
The Spokane City Council will consider his petition to ask voters to cap garbage, sewer and water taxes at whichever is higher: 6 percent or the average charged by the state’s other first-class cities – about 11 percent.
Currently, Spokane’s utility tax equals 20 percent of garbage, sewer and water bills. Although officials call it a 20 percent-tax, it works out to be 25 percent of taxable charges of a bill.
In Washington, Spokane’s utility tax rates for city services top all but a few smaller towns, according to a 2006 survey conducted by the Association of Washington Cities.
The City Council is scheduled to decide tonight whether to put the issue on the ballot or force Eugster to collect enough signatures to force a vote in November 2009.
City Council President Joe Shogan said he expects the council to make Eugster gather the signatures.
“We have left initiatives entirely in the hands of the voters,” Shogan said.
Assistant City Attorney Michael Piccolo said Eugster would have a year to get signatures from about 2,800 Spokane voters. That’s 5 percent of Spokane residents who voted in November 2007. He made a similar attempt in 2006, but did not gather enough signatures to place it on the ballot.
Eugster, representing a group called the Coalition for Tax Fairness, argues that the city’s high utility tax disproportionately hurts the poor and seniors because everyone pays the same rate for services that are essential and required by the city.
“It really hits the person who is on a fixed income very, very hard,” Eugster said. “For years what the City Council has done is just balance its budget by upping the utility tax.”
During last year’s mayoral campaign Mayor Mary Verner and Councilman Al French said they preferred lowering the utility tax instead of letting an increase in property taxes expire. But a majority on the council favored former Mayor Dennis Hession’s plan to let the extra property taxes lapse.
The city expects to collect $21.4 million in utility taxes this year.
Verner said the city now can’t afford to lower the utility tax.
“I would still like to be able to do that over time,” Verner said. “Right now I’m just looking at being able to take our current revenue streams and pay for the costs that are staring at us in 2008.”
But Eugster said if voters decide to force a lower utility tax, the City Council can replace that revenue with a business and occupation tax.
“They pass what would be collected under the B&O tax to the people,” Eugster said.
Spokane is the only city among the state’s five most populous that does not have a business and occupation tax – a tax on businesses’ revenues.
Opponents of the tax argue that it’s unfair because even firms that aren’t earning profits have to pay. In Spokane, business leaders have argued for years that companies would take their jobs to Idaho or elsewhere if the tax were created.
“The residents of this region have always felt we need to stay competitive,” said Rich Hadley, president and CEO of Greater Spokane Inc.
Verner said the tax will be discussed in the coming weeks as the city begins to examine revenue sources in an effort driven in part by Verner’s hope to raise money for better street maintenance.
But the mayor added that the business and occupation tax is “not one that I’m a strong advocate for.”
Eugster said the tax could be crafted in a way that doesn’t affect small businesses. For instance, he said, a company’s first $200,000 of revenue could be exempted.
“A lot of times, a small business is not going to be taxed at all,” Eugster said.
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