Caught in a budget vise, Tacoma city leaders are looking everywhere for money – including nonprofit organizations.
A proposal gathering momentum at City Hall would shave a fraction – or a chunk – off a decades-old business tax exemption for nonprofit health care providers.
The idea paints a big target on two of Tacoma’s largest employers – MultiCare and the Franciscan Health System – as well as other smaller providers. Under current city ordinances, those organizations are 100 percent exempt from the city’s business tax.
The new proposal would cut the exemption to 75 percent, but that number is still moving around. City Council members have discussed a smaller cut – to 85 percent – and bigger options, including ending the exemption entirely.
The 75 percent figure would tax the Franciscans to the tune of $375,000 annually. The same threshold would cost MultiCare $591,645, according to figures provided by representatives for the two entities.
Cutting the exemption entirely (a move openly supported by Councilman Anders Ibsen) would yield a bigger haul of revenue: $2.2 million from MultiCare, $1.5 million from the Franciscans. Neither wants to face the latter option, but the city’s budget woes are so pervasive that health care leaders are fighting from a crouch, hoping to persuade the city to pick a friendlier number.
A separate idea targeting nonprofits would aim at ticket sales for entertainment events at venues such as the Museum of Glass, The Broadway Center for the Performing Arts and the soon-to-open LeMay car museum, among other entities.
The city is proposing a 5 percent admission tax to such events, if the nonprofit organization earns more than $250,000 annually. City analysts reckon that the admissions tax would generate as much as $537,000 over the course of a year.
Both proposals are part of a large-scale search for money. City leaders have scrambled since October to bridge a $33 million budget shortfall, largely created by overly rosy financial projections in previous years.
A series of cuts and accounting maneuvers, including negotiations with the city’s police and fire unions, recently reduced the gap to $12.7 million. But the city is still trying to close what Mayor Marilyn Strickland calls “the alligator’s mouth” – an ominous graph that shows the shortfall growing over time.
The topic of the nonprofit health care exemption drew plenty of attention at Tuesday’s City Council meeting, where the proposal had its first reading. Public comments revealed a division between local activists and residents who support a reduced exemption versus business leaders who oppose it.
The debate coalesced around the idea of fair share and whether the health care entities are sharing the economic burden felt by other sectors.
“They make a lot of money in profit even though they’re not for profit,” said Roberta Burnett, a member of PTE Local 17, a union representing the city’s professional and technical employees.
Other residents spoke of their appreciation of the medical services they’ve received, calling them wonderful or vital – but always, they returned to the fair-share line.
Bud Wagner, speaking for the Franciscan system, answered with philosophy and statistics.
We view paying our fair share as more than simply paying our taxes, he said. He referred to the free care the Franciscan hospitals provide, to the tune of $15 million in 2010. (Following publication of this story, Franciscan spokesman Gale Robinette told The News Tribune the actual amount of free care was $26 million.)
MultiCare provided similar care: $24.9 million, according to internal figures.
Both entities also noted that they pay plenty of taxes in other settings – just not the city’s business tax.
In 2010, MultiCare paid $96.2 million in sales, state business and occupation, payroll and property taxes, according to internal records.
The Franciscan system paid $86.6 million in federal, state and local taxes between July 2010 and June 2011, according to a separate set of figures.
David Schroedel of the Tacoma-Pierce County Chamber compared the city’s proposal with its earlier stance when faced with the prospect of losing Russell Investments, a long-time city employer that departed for Seattle in 2009. At the time, Tacoma leaders, hoping to keep the business in town, cobbled together a package of tax breaks and financial incentives that amounted to $148 million.
“We certainly weren’t telling them, ‘You guys aren’t paying enough taxes,’” Schroedel told council members Tuesday. “You bent over backwards. Instead, we’ve got another home-grown organization, and you’re saying, ‘No, you’re growing too big.’”
That was what the pressure sounded like from the business end, but it met with an equally vocal reaction, typified by Rosa Franklin, former state senator from Tacoma. Franklin, 84, walked slowly to the podium Tuesday, and gave a little speech.
“As all of us know, no one likes taxes,” she said. “However, everyone wants services, and the question is, how do you pay for those services? You’re trying to close a gaping hole. I know how that goes.”
Sean Robinson: 253-597-8486