New utility taxes not a sure thing

Incorporation supporters say it’s the city council’s call

FREELAND — Though supporters of cityhood for Freeland built their budget based partly on utility taxes, organizers of the incorporation effort say it will be up to a future city council to decide if residents will face new fees on their cable, phone and electric bills.

Taxes have been a major issue in the incorporation effort, an idea that may go to voters early next year. Critics of the cityhood effort have repeatedly said incorporation would increase the tax burden for those who live in Freeland.

State law allows cities to levy a 6 percent utility tax on electricity, natural gas, telephone and television services; counties do not have the authority to levy utility taxes.

Supporters say new taxes aren’t a sure thing.

And they point to the number of newly incorporated cities in the state that have not added a utility tax. Those towns include Covington, Edgewood, Liberty Lake, Sammamish and Spokane Valley.

Chet Ross, who authored the feasibility budget for Freeland’s incorporation, said utility taxes are not a given, even though they are included in the feasibility study.

“Six percent is the the maximum allowed on utilities by the state, but that doesn’t mean the city has to add the tax. Ultimately, it will be up to the city council,” Ross said.

In the Freeland feasibility study released last month, utility taxes were included in the estimated budget of $2.1 million for the new town. The study said Freeland could collect $271,200 in utility taxes during the city’s first year of operation and $243,320 in 2012. Those figures were based on larger city boundaries, including the Mutiny Bay and Mutiny Sands areas, that have since been cut from the incorporation effort.

While sizable, utility taxes are a fraction of the revenues that Freeland supporters have pointed to as a way to pay for the operations of the new city. On the revenue side, the big contributors are property taxes (estimated at $680,000 in the first year) and sales tax ($656,000). On the expense side, larger components are the costs of police services ($240,000) and planning ($315,000 to $360,000).

“The utility tax was included in the study because we had to demonstrate all the places the city can get revenue,” Ross said. “We threw the utility tax in the study to make sure we were covering all the bases.”

Freeland residents do not currently pay utility taxes. But that could change once Freeland is incorporated and city leaders decide to approve new taxes.

“It certainly isn’t a given, and it’s not up to us. The city council will make the determination of if there is to be new taxes,” Ross said.

Mike Dolan, chairman of the Vision 2025 committee, the umbrella organization that developed a vision for the future of Freeland, agreed that any new taxes will ultimately be the decision of the newly elected city council.

“The people elect their mayor and council to provide leadership and guidance on issues that face the community,” Dolan said.

“So what it really comes down to is citizen involvement. If the community truly wants to have a say in how Freeland develops, just voting to incorporate isn’t enough,” he said.

In some cases, new cities have adopted a utility tax, but lower than the 6 percent maximum.

“Burien adopted a 3 percent utility tax on natural gas, and electricity, and a 6 percent tax on telephone,” said Sheila Gall, general counsel for the Association of Washington Cities.

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