Property, EMS taxes increasing in new year

By Brian Soergel | Dec 08, 2016

A city needs money to provide services to its residents. That’s where you come in.

And so, with that in mind … the Edmonds City Council has decided to ask you to pay more to keep the revenue stream flowing.

So, in 2017, there will be a regular property tax increase of 1 percent and an emergency medical services property tax increase of 5.7 percent. But although utility rates also are going up, taxes on those rates are going down.

Property, EMS taxes

The property tax ordinance councilmembers have agreed on refers to a “substantial need” for the property and EMS increases. The substantial need resolution allows cities to increase the property tax levy by the full 1 percent. Generally, cities are allowed to levy an increase in property taxes by the lesser of 1 percent or the rate of inflation nationally.

(That could change. Edmonds will be lobbying the Legislature to give municipalities a local option to exceed the 1 percent limit on property tax revenue increases and grow with indicators of cost growth/inflation.)

This year, the national rate of inflation is .953 percent, according to the city, but according to the U.S. Department of Labor, the annual inflation rate for the Seattle-Tacoma-Bremerton area as of June 2016 was 1.8 percent.

Without the property tax increase, Finance Director Scott James said, there would be $139,000 less in the 2017 budget, meaning cost reductions would need to be found.

According to Councilmember Adrienne Fraley-Monillas, those who own property in Edmonds have seen the value of their property increase up to 20 percent in the past few years.

The property tax increase will add $100,650 to Edmonds’ coffers.

“In Washington state, we have decided that we will largely fund government services through property taxes,” Councilmember Neil Tibbott said. “Fundamentally, we as citizens have said this is the most equitable way we will pay for the benefits we share as a city. A modest 1 percent rise in property tax – not an assessment on the property value – results in an increase of $100,000 of new city revenues.

“While I personally don't like paying more taxes, I also realize that the cost of running a city goes up incrementally each year. We can and should cut ineffective programs or services on a regular basis, but there still remains a large part of our city expenses that simply cost more each year.

“The council vote is one of the checks we have in our system to protect us all from rampant increases with no connection to what's actually needed. The benefits we receive as citizens is gradual improvement in the livability of our city and maintaining what we cherish most.”

The EMS levy increase will bring the city an additional $38,546 in 2017. But, in addition to the 1 percent increase from taxpayers, the city will make a “banked capacity” increase of 4.7 percent, which will bring in an additional $170,090.

Local governments are allowed to “bank” unused tax capacity from years in which they did not raise property taxes to the maximum allowed. County officials believe governments that earned that capacity with fiscal restraint should be able to keep it for urgent priorities.

“It's important to realize that this year's EMS levy increase brings revenues back up to the range that we were paying back in 2008 when the levy was first approved by voters,” Tibbott said. “In the intervening years, the cost of public safety services has continued to go up. Those costs are both a function of cost-of-living increases for personnel as well as increased services for a growing population.”

For 2017, the city of Edmonds will see $10,229,200 from regular property taxes and $3,934,720 from EMS property taxes.

Utility tax rates

In 2011, the city’s updated comprehensive plan emphasized a need to upgrade its utility lines.

Three years ago, Public Works Director Phil Williams proposed raising the city’s water, sewer and wastewater utility rates over a six-year period as an alternative to action in the recent past: financing bonds, essentially borrowing money to be paid off with interest.

The City Council, in a 4-3 vote, approved a three-year rate increase for water of 8.5 percent a year and 9.5 percent a year for sewer to replace water lines and rehabilitate or replace sewer lines.

Now, the rates are set for 2017, 2018 and 2019.

Water utility rates will increase in 2017, 2018 and 2019 by 9 percent annually. Sewer utility rates will increase in 2017, 2018 and 2019 by 9.5 percent annually. And storm utility rates will increase in 2017, 2018 and 2019 by 10 percent annually.

With those increases, a typical utility bill for a customer in Edmonds would rise from the current $103.28 to $132.25 in 2019, according to Williams.

The rate increases mean the city will not need to acquire bonds for annual maintenance projects or to address inflation and rising operating and maintenance costs. This results in considerable future savings to the city, Williams said.

Edmonds operates a combined utility operation that incorporates potable water, sanitary sewer, and storm and surface water management functions. The city received a combined utility rate study report from the FCS Group, which recommended increases in potable water, sanitary sewer, and storm and surface water management utility rates to address rising operating and maintenance costs.

Those included, but were not limited to, wholesale cost increases for potable water from Alderwood Water and Wastewater District and the replacement of failing water, sewer and storm infrastructure.

But although the rates have increased, there is a plan to rebalance the water utility tax on those rates in conformance with a Supreme Court decision designed to make the general fund revenue neutral.

Confusing? A bit. Williams explains:

“The general fund of the city taxes the city’s utilities,” he said. “Sewer and stormwater rate revenues are taxed at 10 percent. That is, every dollar a homeowner pays for sewer service, they are also taxed 10 percent on top of that, which goes to the city’s general fund instead of to the utility fund.

“For water service, the tax is currently 18.7 percent, but it will be reduced to 10 percent over the next five years. The monthly charge for the service itself is going up over the next three years by approximately 9 percent each year. So the amount a homeowner pays for utilities services will be going up, but the tax on water service will be going down at the same time.

“It does not cancel out, but it will reduce customers’ bills about $5 to $6 per month from what it would have been otherwise.”

Aging infrastructure

“A few years ago, the council decided that our city is best served by paying for our basic infrastructure like water and sewer through usage fees,” Tibbott said. “Those fees, however, were not adequate to care for service and replacement of the infrastructure. I happen to agree with that philosophical shift that is being implemented over six years of gradual increases, rather than one giant hit.

“In Edmonds, we have an aging infrastructure that must be maintained. When all the fees have been adjusted, including a decrease in the water usage fees, the city of Edmonds is still projected to be in the middle range of utility costs compared to our neighbors. That's a testament to the diligent work of our staff and our commitment to the long-term viability of our systems.”

Councilmember Dave Teitzel agrees.

“While the Edmonds City Council is concerned about the cumulative effect of tax increases on Edmonds citizens – especially in view of the recent voter approval of the Sound Transit 3 initiative, which will increase property and sales taxes locally – our residents expect and deserve continued high quality services and well-maintained infrastructure.”

Teitzel said the council carefully considered the proposed Edmonds property tax and EMS rate increases, and a majority concluded those measures were appropriate at this time in view of increasing pressure on our city budget in certain key categories.

In addition, contract negotiations are currently ongoing for Snohomish County Fire District 1 (which serves Edmonds) as well as for the Edmonds Police Department. Both are likely to result in a certain level of pay increases for the members of these unions, Teitzel said.

“One of council's highest priorities is to ensure our residents are safe, and we have an obligation to appropriately fund services to ensure that security while being responsible stewards of taxpayer resources.”

Councilmember Fraley-Monillas said the utility increases are too much.

“I understand that the majority of council has supported a combination of utility taxes that increase taxes by 30 percent in 3 years,” she said. “I need council to remember that taxation on any utility is most destructive on the marginalized in our community. The affected folks include seniors on fixed incomes, disabled on fixed incomes and the working-poor supporting families on minimum wage.”

Those who qualify can request an adjustment of their utility tax rate, Williams said.

But Fraley-Monillas still calls the utility rate increases regressive taxes.

“It really affects those who can afford it least,” she said. “Everyone needs utilities such as water, sewer, phone and lights, and must pay the taxes levied against them. As a low-income person, you just can't say I can't afford lights, water and rent. Those are basics to survive. Unfortunately, (the higher utility taxes) will affect people who rent housing as much as those who own property. We should not be taxing water and warmth anymore than we tax food.”

What Fraley-Monilllas wants to make clear is that funding is certainly needed to replace ancient pipes, some of which need to be replaced after a half-century of neglect.

“Government agencies all over this country, including ours, have been bonding-out projects like this for a hundred years,” she said. “Bonding has been and always will be a primary source for inter-structure replacement, not having the poorest in our city pay for the mistakes of 50 years ago.”

 

 

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