New taxes may represent the latest chapter in Liberty Lake’s history of fiscal fitness.
It is a scenario that could include a locally applied transportation district, the first utility tax in the jurisdiction’s history or a parks district to support the city’s flourishing collection of trails and greenspace. According to Council Member Ryan Romney, the funding solution could also be some sort of “hybrid,” a conglomeration of several options discussed during a two-hour budget workshop near the beginning of last week’s City Council meeting.
Liberty Lake is looking at a $700,000 shortfall in 2011 – a gap brought about by a major dip in sales and property tax. In 2009, the city collected 16-percent less in retail revenue over the previous year. At the mid-year point in 2010, receipts are down another 8 percent. Sales and property tax comprise 79 percent of the revenue sources in Liberty Lake’s general fund, according to Jessica Platt, the city’s administrative services manager.
The rate of property tax, meanwhile, has decreased from $2.10 per $1,000 of assessed property value in 2002 to the current rate of $1.55 per $1,000. Going back to the administration of Steve Peterson, Liberty Lake’s inaugural mayor, the city has opted against an annual property tax increase of 1 percent, the maximum allowed by state law since the passage of I-747.
Liberty Lake residents pay an additional $1.50 per $1,000 in assessed property value for fire protection services.
Even after Peterson lost in his 2008 re-election bid, the city has decided against raising property taxes under new Mayor Wendy Van Orman. Among Spokane County jurisdictions, only Deer Park has a lower tax rate.
Doug Smith, Liberty Lake community development director who has been with the city since incorporation in 2001, said the concern over finances represents new territory for Liberty Lake although he did say the city “has been adjusting for the last three years.”
At a recent meeting sponsored by the Association of Washington Cities, Smith noted that Liberty Lake appeared to be the only municipality in the state that did not utilize some form of utility tax. At the Aug. 3, council meeting Platt said a 6-percent utility tax on utilities such as phone, gas, cable and electric services could mean an additional $850,000 for the city in 2011. Any rate above 6 percent would need to be put before a public vote.
The city of Spokane Valley implemented a 6 percent phone tax in January 2009 to provide funds for road maintenance. Last year, the tax accounted for just over $3 million in revenue, according to Ken Thompson, Spokane Valley finance director. Thompson said that prior to the shift, Spokane Valley researched cities such as Federal Way, Yakima and Kent that have generated revenue through tolls on a variety of utilities.
“Most cities tax several utilities,” Thompson said.
Like Spokane Valley, Liberty Lake is looking at keeping ahead of the road maintenance curve, a task that Van Orman has characterized as “spending $1 for upkeep now or $8 to replace a road later.” Liberty Lake currently sets aside 10 percent of its annual sales tax revenue – approximately $170,000 – for road maintenance. Last week, City Engineer Andrew Staples advised the City Council that the total should be closer to $500,000 per year.
Van Orman favors a funding approach called a street utility that has been discussed by the state legislature in recent years, though still waits passage in Olympia. The policy would charge a flat fee to residents for road repair along with a tax on businesses based on the street traffic generated by each location. For instance, a bank or grocery store would pay more into the utility than a storage warehouse.
On other funding fronts, Liberty Lake has been less than enthused about the prospect of a regional transportation district, an idea championed by Spokane Mayor Mary Verner and Spokane County Commissioner Todd Mielke. While the $45 car tab would generate $20 million annually for street care, cities like Liberty Lake and Spokane Valley would be asked to contribute 30 percent of their revenue to regional road projects. In Liberty Lake, that would mean turning over $73,400 of the $245,000 total.
Van Orman said the goal is to have a budget ready for review by the City Council in early October. The state requires that each Washington city establish their respective property tax levy by the end of November and submit a completed municipal budget by the close of December.