Voters in Tacoma may decide whether to tax utility companies to pay for paving roads and fixing potholes. The cost could come back to customers if utilities compensate with rate increases.
The Tacoma City Council is considering a November ballot proposition that would levy a 2 percent earnings tax on gas, phone and electric companies to fund street repairs.
Should the council decide to put the question to voters, a proposition would appear on the Nov. 5 ballot.
The 2 percent tax increase would generate between $10 million and $11 million each year dedicated to road maintenance, said Kurtis Kingsolver, Tacoma’s interim public works director.
The money could be used to fill potholes, repave residential streets, improve school crosswalks and fix sidewalks, according to the draft language of the ballot proposition. It could also fund improved traffic signal timing and bridge repairs, the draft says.
Kingsolver said the 2 percent tax would apply to utility companies’ gross earnings and wouldn’t be a direct tax on utility customers.
If companies were to raise rates to compensate for the new tax, it would cost the average household about $5 more per month, Kingsolver estimated.
A majority of the council said Tuesday that they support a public vote on the tax proposal. Council members must approve the language of the ballot proposition by Aug. 6 for it to appear on the Nov. 5 ballot.
Councilman Ryan Mello said Tacoma has an $800 million backlog in street repair needs, and citizens have been complaining about the condition of the city’s roads for some time.
“My understanding in this community is they really want a sound action plan to tackle our street and road problems in Tacoma,” Mello said. “This is simply being responsive to that.”
Last year, Tacoma officials explored asking voters to approve a property tax increase that was expected to raise $9 million annually for street repairs. Council members abandoned the idea after a sudden dip in property tax assessments meant the plan would have raised only about half that amount.
City officials then unsuccessfully petitioned the Legislature to let them double citywide car tab fees to $40 without a public vote. The Legislature only gives local officials the authority to charge $20 in annual fees without such a vote.
Tacoma began charging the $20 fee June 1.
Tacoma’s proposed utility earnings tax would affect Tacoma Power and Puget Sound Energy, as well as phone companies.
Bill Gaines, the director and CEO of Tacoma Public Utilities, said that if voters approve a 2 percent tax on TPU’s earnings, the utility would be forced to cover its costs by raising consumers’ rates by a similar amount.
A rate increase – which would be subject to approval by the Tacoma City Council — would apply to all TPU customers, Gaines said. Roughly half of the utility’s 180,000 customers live outside the city, he said.
“This isn’t just about taxes in Tacoma – it’s about taxes anywhere that Tacoma Power serves,” Gaines said.
TPU just raised its water and electricity rates in April. According to utility officials, the average power customer’s bill went up by $4 per month, while water rates increased an average of $2 per month for Tacoma residents and $7 per month for those who live outside Tacoma.
Mello said he believes TPU can absorb the 2 percent earnings tax without passing all of it to customers.
“My expectation is they’re going to be able to sharpen their pencils and pull out their erasers to make this neutral to ratepayers,” Mello said.
The Tacoma City Council will discuss the ballot proposition in more depth at its next meeting Tuesday. The council meets at 5 p.m. on the first floor of the Tacoma Municipal Building at 747 Market St.