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Sales tax option for reducing Mill Creek’s budget deficit rejected

Mill Creek City Council rejects sales tax option for reducing budget deficit
Mill Creek City Council rejects sales tax increase

At the June 12th Mill Creek City Council meeting the council decided not to put a public safety sales and use tax on the ballot for voter approval this year. Mayor Mike Todd and Councilmember Terry Ryan reported to the City Council that the Snohomish County Council are also not going forward with a public safety sales and use tax which would have provided additional tax revenue to Mill Creek. This means the Mill Creek City Council will have to find another way to reduce the 2013-2014 budget deficit by $300,000.

In May of this year Snohomish County Executive, Aaron Reardon, proposed a criminal justice sales and use tax to help address a growing Snohomish County budget shortfall. If the Snohomish County Council had agreed with Reardon, the issue would have been placed on November’s ballot. If a majority of Snohomish County voters had approved the tax, cities in Snohomish County would receive 40% of the tax revenue on a per capital basis. Mill Creek’s share of this tax revenue would have been as much as $300,000 for 2013-2014.

Washington State law authorizes cities to impose up to 0.1% sales and use tax if submitted to the voters on a ballot and approved by a majority vote. The same law allows counties to impose up to a 0.3% sales tax if approved by a majority of voters. In both cases, the title of each ballot measure must clearly state the purposes for which the proposed sales and use tax will be used and the monies received are shared between the county and the cities.

During the May 12th City Council retreat, the Mill Creek City Council directed City staff to investigate setting a new 0.1% public safety sales and use tax as an option if Snohomish County didn’t go forward with their sales and use tax. The goal of Mill Creek’s tax was to provide a $300,000 structural budget change.

A public safety sales tax seemed to be a good option for reducing Mill Creek’s projected budget deficit for the following reasons:

  • Mill Creek’s projected 2013-2014 police, fire, and emergency medical services costs are at least $2.3 million higher than the amount spent in 2011-2012. It’s easy to see that the entire $300,000 sales tax revenue would go to public safety services.
  • Mill Creek visitors benefit from Mill Creek public safety services. Unlike property taxes, a sales and use tax burden is not entirely on Mill Creek residents.
  • Sales tax is paid in many small increments and is easier to pay than lump sum property taxes.
  • Mill Creek voters decide whether or not to impose the tax and keep service levels up.

The Mill Creek City Council decided not to go forward with this deficit reduction option because there were too many concerns.

Councilmember Mark Bond said that he is on the record for being anti-tax, but he would support this from the point of view that it gives Mill Creek residents the chance to decide, “The fact is cuts are coming. Service levels will be reduced. There is no way we can avoid it unless we do something that I’m not in favor of which is imposing substantial taxes… Most of the people I’ve talked to don’t want cuts. They like the quality of life. They like the grass, they like the parks, they like the cops, they like the service levels.” In the end he decided not to support putting the measure on the ballot because there are too many questions.

Acting City Manager, Tom Gathmann, is afraid that there is not enough time between now and November for the city to educate the public, “I would hate to do this poorly and have it fail, rather than get our act together. A citizen needs to see what is going to be cut. Very few citizens really know what we are talking about. We are going to cut positions for real. There is huge resistance to taxes… People have to see the value.”

Councilmember Bart Masterson believes that making a decision now to put the sales and use tax on the ballot is putting the cart before the horse. He wants to wait until later in the year when city staff has prepared the 2013-2014 budget in detail. He also doesn’t believe the sales and use tax is adequate to fix the budget deficit, “If we don’t start doing something dramatic we will continue to fall behind. The administration can’t keep cutting and not spending money for services that we are incurring and us not pass it along to our citizens that want that level of service... We’ve got a great town and by God if we don’t pass along the increased costs of running the town, we’re going to be just like a retailer who doesn’t raise their prices in an inflationary spiral. They are going to be out of business.”

Councilmember Kathy Nielsen doesn’t want to only use a property tax increase to address the budget deficit, “How are we going to fix our budget? The only thing we’ve talked about is a 3% property tax, which I would only support if we did other things that people shared who come into our community to shop and eat. Here we are asking the property owners to take the responsibility for the level of service that so many other people benefit from in visiting our fine city.” She wants to wait and talk with her constituents before deciding how to proceed.

Councilmember Donna Michelson believes that voters should be told the situation and be given the choice. She would like to put the measure on the ballot.

Councilmember Terry Ryan believes there are more questions than answers and doesn’t want to put the measure on the ballot at this time, "I can't sell this."

Councilmember Mark Harmsworth didn’t want to go forward with this measure, “I said at the retreat that it’s ok looking at it, but I don’t think this is the right thing to do given our economy.”

Mayor Mike Todd said he didn’t want city staff to spend too much time researching this issue. He closed the discussion at the June 12th city council meeting with the understanding that this deficit reduction option is off the table at this time.