A second city council has voiced opposition to Tacoma’s Proposition 1, a measure that would raise taxes on utility earnings to pay for street repairs in Tacoma.
Lakewood City Council voted unanimously Monday to oppose Tacoma’s tax proposal. Earlier this month, University Place’s council also unanimously passed a resolution opposing the measure. Tacoma voters will decide Prop. 1 next month, but they might not be the only ones affected. If the Tacoma City Council later allows the city’s power utility to pass along the costs of the tax, people living in other parts of Pierce County could share the expense.
Almost half of Tacoma Power’s customers are located outside of city boundaries, and many of them question why they should pay a higher rate to benefit only Tacoma.
Lakewood Councilman Jason Whalen said Tuesday that his city also struggles to pay for road maintenance.
“It’s very unlikely that this council would look to the cities of Puyallup, DuPont or Tacoma to fund our own residential road issues,” Whalen said.
Mayor Don Anderson said the city would look to renegotiate its franchise agreement with TPU if Tacoma voters pass the tax and the Tacoma council subsequently increases power rates. About one-quarter of Lakewood’s residents and businesses are served by Tacoma Power.
Several communities outside of Tacoma receive electric service under a contract, called a franchise agreement, with Tacoma Power. Under those agreements, Tacoma Power pays some cities a fee to not compete with its service and to not contract with any other power utility.
Some of those franchise agreements state that Tacoma Power will pay more money to cities if Tacoma’s utility tax increases above a certain amount.
Whether Tacoma Power customers in Tacoma and elsewhere could be asked to pay higher rates to underwrite the higher reimbursements to those cities is unknown. Chief Deputy City Attorney Bill Fosbre, who advises Tacoma Public Utilities, said he won’t know until TPU goes through the rate-setting process during which the utility will hire an outside expert.
Mike Brandstetter, Lakewood councilman, said he believes Tacoma’s voters are smart enough to know an unfair situation when they see it.
“I think perhaps the Tacoma City Council has misread their own electorate,” Brandstetter said. “And if they feel disappointed on Election Day, so be it.”
Before the vote, half a dozen Lakewood residents spoke against Tacoma’s utility tax proposal, some calling Tacoma’s Prop. 1 taxation without representation and others saying Lakewood should not pay for Tacoma’s past management mistakes. Tacoma officials estimate they have $800 million in road repair needs.
John Barline, an attorney based in Tacoma, said Tacoma offered raises to its employees during a time when governments nationwide were cutting back.
“Now they find themselves in a budgetary bind,” Barline said. “This is really their fault. It’s not our fault.”
Prop. 1 would raise the utility earnings tax paid by power, telephone and natural gas utilities by 2 percentage points – from 6 to 8 percent. Tacoma Power passes the costs of the 6 percent earnings tax to its power customers, including those outside Tacoma.
That money currently flows to Tacoma’s general fund, which pays for many city services, including police, firefighters and libraries. Utility taxes – from all sources, not just power and natural gas companies – amount to about 20 percent of Tacoma’s revenues each year.
Tacoma Public Utilities officials say the proposed tax increase would eventually lead to increased rates, but City Manager T.C. Broadnax has said he thinks some of the extra cost could be absorbed through cost-cutting.
Fosbre, the city attorney, said public hearings and opportunities for other cities to comment would precede any rate increase.
Kate Martin: 253-597-8542