The City Council agreed unanimously Tuesday to cancel a tax break for Tacoma’s nonprofit hospitals and charge drivers a $20 license-tab fee to help the financially strapped city government.
“We have made cuts across the entire organization,” Mayor Marilyn Strickland said before the 9-0 vote to charge MultiCare and Franciscan health systems the full 0.4 percent business-and-occupation tax rate. “No one takes joy in raising taxes on anyone. It’s always a lot harder to rescind a tax break than it is to give one. But this is where we are right now as a city.”
The city expects to raise about $5.5 million in 2013-14 by eliminating the tax exemption, which the council already had scaled back in February from a total to a partial break. Smaller health care nonprofits will remain fully exempt, but nonprofits with annual gross income of at least $30 million will pay the full rate, four times what they pay now.
An additional $4.1 million over two years would come from the vehicle license-tab fee, which takes effect in six months.
The council is considering a $397 million budget that would eliminate some 228 jobs and cut services including police and fire to bridge a $66 million shortfall, said City Manager T.C. Broadnax.
Hospitals had pressed the council to find an alternative to repealing the exemption, detailing ways they help the community — employing thousands of people, investing millions of dollars in expansion projects and providing millions more in charity care for the poor, they said.
“This just did not seem to us to be fair, to be taxing us to try to solve their financial problems,” Franciscan spokesman Gale Robinette said Tuesday evening.
Pay for several local hospital executives tops $1 million each, including the MultiCare and Franciscan CEOs.
But Robinette called the tax a short-term fix that doesn’t address the city’s more systemic budget problems. Some council members had similar sentiments Tuesday.
Councilman Jake Fey said Tacoma’s tax structure has broader problems and called for a “comprehensive review,” noting that legal restrictions keep the city from addressing some of the issues.
Fey said hospitals “feel like they’ve been put into a spotlight and it could have easily been, given our tax structure, some other entity that faced the spotlight.” He added, “I’m hopeful we can reach some kind of a resolution that allows for a more careful evaluation of our revenues, and in particular fairness of our business-and-occupation tax.”
The council’s ordinance also adds a tax deduction on health care nonprofits’ income from health programs subsidized by the federal or state governments.
The vehicle fee was approved without dissent on a voice vote by the Tacoma Transportation Benefit District Governing Board, made up of the nine council members.
Strickland said she hopes later decisions will ensure the fee revenue goes to fixing as many residential streets as possible. But she made clear it won’t solve Tacoma’s road problems.
“I want to make sure we are properly managing expectations in the community,” she said, “about what $4 million over two years can really do.”