DuPont City Hall as seen from Center Drive.
The DuPont City Council continued its debate of a potential property tax ballot measure at the July 10 council meeting. While almost all council members agreed that a property tax increase has to be part of any solution to address the city?s budget shortfall, several critical details remain uncertain.
The city is struggling to pay its debt service on its fire, police, and city hall buildings, also known as the Civic Center. In addition, three fire fighter positions will be unfunded to the tune of $300,000 when federal money from a SAFER Grant expires in 2013. The city owes roughly $1.27 million each year until 2039 on the Civic Center, and is facing a shortfall of approximately $750,000 annually on the payment.
The amount of the property tax increase that the council will request has not been decided. The council, which has known about the Civic Center debt shortfall since October of 2010, has to make a decision by the end of July so the proposal can appear on the November ballot.
The mayor and several council members are also evaluating reforms to the city?s Business and Occupation (B&O) tax.? Revenue generated from these other reform proposals would possibly reduce the levy amount submitted to the voters.? Unfortunately, time is running short and a number of complicated moving parts have to be decided.
Councilman John Ehrenreich, who thanked Mayor Michael Grayum for all the work he has put into the issue, began the conversation by stating that he thinks there is a structural imbalance with the services the city offers versus the revenue coming in.
?Our revenue needs to be sustainable, which a property tax allows. In my opinion, REET (real estate excise tax) and B&O taxes are volatile,? he said.
Councilman Larry Wilcox surprised many by stating he is still undecided on a property tax increase after talking to many residents who have offered a number of possible solutions.
?Some have said we need to file for bankruptcy. The problem with that is you lose your credit. Some have suggested the city raise the B&O tax up to two-tenths of a percent. I?m not sure if that?s the right thing to do. I still have more people I want to talk to before making a decision on this,? said Wilcox.
Councilman Roger Westman, who thanked the Community Finance Committee for their work, said he is now willing to include the three fire fighter positions along with the civic center debt payment shortfall amount on a ballot measure. Westman wants to know how much revenue different taxing structures would generate in hopes of using the amount to lower the property tax submitted to the voters.
?Next week, we should have more information from the city?s finance director about how much a B&O square footage tax could generate, or how much the city should be receiving from the B&O extraction tax on gravel and forestry products,? said Westman.
Councilwoman Kathy Trotter said she agrees on B&O reform but is unsure about the city being able to pull all the information together in a week. Councilwoman Linda Jordan agreed.
?The bottom line is, we have to pass the property tax and move forward. We need more time to look at other reforms,? she said.
Councilwoman Penny Coffey was cautious about any reforms that would create problems with the business community and encouraged everyone to look on the Pierce County Assessor-Treasurer?s website to see how much property tax companies, such as Intel, pay.
?They pay a lot of property tax into the city. We?ve lost so many businesses to Lacey, I don?t want to create an even bigger hurdle of bringing businesses into DuPont with our B&O code,? said Coffey.
Mayor Grayum responded saying DuPont?s current B&O tax code is antiquated, and reminded council members that the Community Finance Committee recommended to increase the B&O two-tenths of a percent for all businesses, as allowed by city code.
?We have an opportunity to reform and fix the current tax code so that those businesses that aren?t paying now will be in the future. We need to support both large and small businesses in DuPont.?
Grayum said he has asked the city?s finance director to look at some of the proposed reforms and bring forward a dollar amount that might be used to reduce the property tax rate. This information will be available at the July 17 council meeting.
The B&O reform is focusing on introducing a square footage tax on businesses where the office itself does not generate city business or sales tax. Warehouses fall into this category, as would the Intel and State Farm Insurance buildings. While DuPont?s residential land has been built out, land zoned for future warehouses is not. Another option is for the council to increase the current B&O extraction tax on gravel and forestry products to two-tenths of a percent. This increase would affect CalPortland and any company harvesting timber in DuPont.
During public comment, it was obvious that some residents were disappointed that a majority of the council seemed to be only looking at increasing the property tax and pushing off any reforms until later.
?It is disappointing to see the conversation circle back to a property tax increase. You cannot ask residents to pay extra money into the city. No one has answered the question of why did we pay so much for the Civic Center,? said DuPont resident Elitsa Healy who also served on the Community Finance Committee.
DuPont resident Shawna Gasak reminded the council that she and other members of the Community Finance Committee spent over 288 hours in the council chambers looking at all the data and making recommendations.
?We knew a property tax increase was unavoidable, but we also wanted you to consider increasing the B&O and looking into RGRL (Revenue Generating Regulatory License) reforms. If you want to earn the trust of the community, we need to know the true value of the Civic Center,? said Gasak.
While Healy and Gasak?s comments were critical, none were as harsh as Mike Gorski.
?DuPont is a great community not because of council, but in spite of council,? said the DuPont resident.
?You have had the opportunity to discuss tax reforms for the past six months and do so concurrently when the finance committee was meeting. When you accepted the SAFER Grant for the three firefighters, you knew those positions were temporary and you needed to find funding to keep those positions in 2013. When was your discussion on how to fund those positions,? he asked.
Gorski pointed his finger to the four council members, Westman, Ehrenreich, Coffey and Wilcox, who voted to approve the funding mechanism used for the Civic Center back in 2009, saying ?This property tax increase is nothing more than a bailout. It would be nice to see some contrition on your part.?
The council will have a special meeting on July 17 at 6 p.m. to continue their discussion and possibly vote on the proposed levy. The meeting will be held at DuPont City Hall.
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