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Committee forwards utility-tax cut to council; staff says Streets Initiative fund will drop ~$10.5M
Summary
The committee voted to send proposed amendments reducing certain utility tax rates from 7.5% to 6% to the full City Council; staff says the change will lower Streets Initiative Fund revenues by about $10.5 million and explained why customers may not see an immediate line-item reduction on bills.
The Government Performance & Finance Committee voted Feb. 3 to forward proposed amendments to Tacoma's municipal tax code that reduce specified utility tax rates from 7.5% to 6% and send the changes to the full City Council for consideration.
Danielle Larson, tax and license manager in the Finance Department, told the committee the amendments update chapters of Tacoma Municipal Code Subtitle 6A after a 10-year, voter-authorized levy sunsets. "The tax rates being amended are spread across 4 different chapters in the tax code, reducing the 7.5% rate to 6%," Larson said, and added the changes do not affect the 8% specification for solid waste, cable, water, rail and wastewater.
Larson said the reduction will lower annual revenues in the Streets Initiative Fund by roughly $10,500,000, an impact that planners have accounted for in the current budget. She also explained the effective dates differ: the city's utility rates change is scheduled to take effect March 1, but the natural-gas use tax change is tied to the state's timing and will take effect July 1.
Committee members asked whether customers will see immediate reductions on monthly bills. Tacoma Power and Finance staff explained that the tax amount is incorporated into a multi-year rate-setting process, not updated in real time. Jean/Jing Liu of Tacoma Power's rates team said the 7.5% gross earnings tax is built into the utility's rates and that changes are reflected through the biennial rate-making cycle. "Once we know for sure what the tax percentage is in our bill, we should reflect the actual tax percentage," Liu said, but cautioned the process spreads costs and revenues through planning and reserves rather than producing an instantaneous line-item drop for customers.
Several committee members urged clearer public communications about the timing and visibility of any customer savings. One member said constituents may feel betrayed if they see a tax reduced while their bills do not change immediately.
A committee member moved and a second was recorded to forward the ordinance language amending the municipal code to the full City Council for consideration; the motion passed by voice vote. Staff told the committee the proposal is scheduled for council first reading on Feb. 10 (as presented by Finance earlier in the meeting packet).
The committee recorded no dissenting roll-call vote during its voice vote to forward the amendments.
