Camas considers 3% utility tax to boost revenues

Faced with the stark reality of a structural deficit that is beginning to strain the city’s ability to pay for its most critical operating and facility needs, the Camas City Council is considering various revenue-building options, including a possible 3% tax on the city’s utilities.

“When I came in as mayor, I got hit with a lot of items that were basically identified as failing — key capital and building needs,” Camas Mayor Steve Hogan explained to the Council’s newest member, Councilman John Nohr, during a Council workshop on Monday, Oct. 17. “So, I worked with staff and asked them to focus on critical needs, on things that were failing and needed to be dealt with now.”

The mayor recently put those critical needs — as well as things the city needed to fulfill legal compliance requirements and minimize its risks and more discretionary “wants” — into his proposed 2023-24 budget.

“Now the Council gets to decide what’s in and what’s out,” Hogan said Monday.

One of the most important questions Council members will ask is: “How do we pay for it?”

To that, Hogan has proposed a revenue package that would, if approved by the Council, include a 1% property tax increase — the maximum increase allowed under Washington state law — as well as the use of nearly $7 million in federal COVID-recovery funds from the American Rescue Plan Act of 2021, and a new, 3% tax on the city’s utilities.

The city’s finance director, Cathy Huber Nickerson, presented the Council with an overview of the utility tax during the Monday evening workshop.

“Utility taxes are part of the ‘three-legged stool’ for revenue (property, sales and utility taxes) to fund general operations of a city in Washington state,” Huber Nickerson explained. “Utility taxes are imposed on the utility business and not on individual customers.”

According to Huber Nickerson, if the Council approves the new utility tax on the city’s stormwater, solid waste, water and sewer utilities, it could generate an additional $615,273 for the city: $63,375 from stormwater; $97,992 from solid waste (garbage); $157,906 from water; and $296,000 from sewer.

Huber Nickerson showed charts on Monday that outlined possible scenarios for residential, business and industrial customers if the Council approves the new utility tax.

In those scenarios, a Camas family with an average, bi-monthly city utility bill of $356 for water, sewer, stormwater and garbage, the new tax would add another $10.68 to their utility costs every two months. A downtown Camas business paying an average of $2,225 every two months for city utilities would pay an additional $66.76 on their bi-annual bill; while an industrial user with an average, bi-monthly city utility bill of $95,473 would pay an additional $2,864 every two months.

The city could also offer tax rebates or tax exemptions to low-income and/or disabled residents, Huber Nickerson told Council members on Monday.

The city already imposes a 3% tax on its natural gas utility for residential customers, and could opt to increase that tax to 6% plus impose a 3% natural gas tax for industrial customers.

Some Council members said Monday they were concerned by the city’s structural deficit — a result of the 1% property tax limitations in the face of cost-of-living increases, rising healthcare costs for city employees and the city’s multitude of facility and operations needs — and would likely support diversifying the city’s revenue streams.

“I’m reasonably conservative about asking the public for more money,” said Councilman Don Chaney, “but I can tell you — our former city administrator, Lloyd Halverson, told us about the impending structural deficit years ago … and this year shows us in the red.”

“We can’t afford the service levels we’re providing today,” Chaney said. “And the budget proposed by the mayor goes way beyond (that). … Adding a ‘third leg of the stool’ (could help). We’re in a structural deficit and I’m really concerned about that. It used to be a theory, but it’s a reality today. … We’re too lean. We’re bleeding and that’s not an exaggeration. These are difficult times and require us to step up and make difficult decisions.”

Councilman Greg Anderson said he echoed Chaney’s concerns.

“We also have a lot of deferred maintenance that needs to be done or we’re going to be meeting outside,” Anderson said Monday. “It’s not comfortable for me to say we need money, but we need the money to fix the problems that came from not having enough money.”

Councilman Tim Hein said he would also like to “look at ways to reduce the spend,” and to invest in facilities and projects that would prevent the city from having even larger costs in the future.

Councilwoman Bonnie Carter added that, even with the addition of the 3% utility tax, the city will still need to find revenue to pay for the services Camas residents have come to expect.

“The fact is that we’ve kicked our deferred operations down the road for so long that we are in a state of crisis,” Carter said Monday. “It’s no fun to say that this is needed, but this is needed.”

The Council is expected to discuss the 3% utility tax again during its Nov. 7 workshop.