Most Tacoma City Council members were less than eager Tuesday to slap a new tax on two of the city’s largest employers.
They did it anyway, slicing into a 60-year-old tax exemption that shielded non-profit health-care providers from the city’s business tax. The measure, which will take effect March 5, aims at the MultiCare and Franciscan health systems.
A last-minute amendment by Councilman Ryan Mello tweaked the proposal, ensuring that smaller non-profit health-care agencies, including Sea-Mar Community Health and Community Health Care, would be spared from the new tax. Both agencies serve low-income populations.
The vote was unanimous.
City analysts estimated those smaller entities would generate about $15,000 in new taxes; council members agreed the money wasn’t worth the paperwork it would take to collect.
The health-care exemption dates to 1950, according to city records. It used to be a 100 percent tax-free ticket. The council’s unanimous vote cuts it to 75 percent. That would add an estimated $538,000 to strapped city coffers this year, but council members didn’t cheer the outcome.
“This sucks,” Councilman Marty Campbell said. “None of us want to be here.”
The reduced exemption is one piece of a scramble for money. City leaders have struggled since October to close a $33 million budget shortfall created by overly rosy financial projections in previous years.
Various cuts and accounting maneuvers, including negotiations with the city’s police and fire unions, recently reduced the gap to $12.7 million. The health-care exemption is part of what city leaders call Phase 2 – the last lap.
Human services are also taking hits. Moments before voting to reduce the health-care exemption, council members trimmed $90,000 from money slated for parks programs, the Boys & Girls Clubs of South Puget Sound and Catholic Community Services.
But the health-care exemption drew the biggest crowd and the most noise. During almost two hours of public testimony, 41 people walked to the podium to testify for or against the reduced exemption. Many worked for MultiCare or the Franciscan system, or within programs backed by the two entities.
“I know you don’t have a money tree in City Hall,” said Mark Adams, chief medical officer for the Franciscan system. “We don’t have a money tree in our hospital. We are really looking at the same sort of issues. There definitely is a consequence at this point in time to pulling money out of the health-care system like this. Either some service has to give – we’re business people, too - or there will be jobs lost.”
Other speakers noted the two systems provided a combined $50 million in free or charity care in 2011, and cited examples of medical services that cater to those who have no insurance or limited incomes.
David Schrodel of the Tacoma-Pierce County Chamber of Commerce warned the council that the tax targeted the kind of jobs the city needs.
“These are family-wage jobs,” he said. “Keep these jobs in Tacoma.”
Some speakers were less sympathetic, though they praised the health-care services they receive.
Matt Carlyle, a north Tacoma resident, said he preferred to see the exemption reduced even further, echoing a sentiment shared by many who pointed out that the two health-care systems make big money in spite of the non-profit designation.
“As a husband and a father to family in this town, public safety is my No. 1 concern,” Carlyle said.
At a council meeting a week earlier, Councilman Anders Ibsen had talked of eliminating the exemption entirely, and stated he would sponsor an amendment to that effect. Ibsen didn’t offer his amendment Tuesday, but he restated his support for full repeal of the exemption. He said speakers who talked of reduced health-care services were using “scare tactics.”
Councilman Jake Fey summed up the council’s dilemma.
“There’s no villains here,” he said. “We’ve already asked for sacrifice from our city employees. We’ve had sacrifice from our human services contractors. The reality is, we don’t have very many places to go. This is a very reluctant decision but a necessary decision.”
Sean Robinson: 253-597-8486
Sean.robinson@thenewstribune.com
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