Puyallup’s rosy financial picture has darkened in 2009, and city officials are looking at ways to save.

But their first move for 2010 is not to lay off staff or slash programs; rather, the city is looking to reduce $7.8 million in tax cuts it promised citizens last year.

That’s how much city officials estimated it cost them to run the Puyallup Fire Department before the department merged with Central Pierce Fire and Rescue at the beginning of 2009.

Before voters approved the merger, the city said it would reduce Puyallup’s taxes by 2010, when Central Pierce would begin taxing Puyallup residents for fire service.

The City Council passed a motion specifying the amount of the promised tax reduction – approximately $7.8 million – in September 2008.

It also told residents in the Pierce County Voters Guide that “there would be no ‘double tax’” if voters approved the proposal, which they did by a 75 percent yes vote.

Then the economy tanked.

Now Puyallup officials want to reduce taxes by less than what they promised, citing declining city revenues.

“These are tight times,” Mayor Don Malloy said at Tuesday night’s council meeting. “These are tight times for governments, and these are tight times for families. I think we have to be responsible for both.”

Puyallup’s initial property tax levy proposal for 2010 would have lowered taxes by only $1.6 million, the value of the city’s current emergency medical services levy.

City officials have since begun reviewing other options, including the most recent council proposal to lower taxes by a total of $6.1 million.

The council preliminarily approved that proposal with a 4-3 vote Tuesday. They’ll have to vote again on it before it’s final; a date has not been set.

According to state law, the city must set its 2010 levy rate by the end of November.

Some council members said they wouldn’t support anything less than a tax reduction of $7.8 million, the full amount the council indicated it would cut last year.

“To keep any of that money would be a double tax burden on the citizens,” said Councilman John Knutsen. “I’m not going to support anything but what we agreed to.”

Councilmen Rick Hansen and George Dill also opposed the $6.1 million tax reduction proposal.

“We made a commitment,” Hansen said. “How can we not follow through with that?”

Some citizens at Tuesday’s meeting said the council was going back on its tax-cut promise.

“We were told we would break even,” Puyallup resident Howard Schick told the council. “It’s plain and simple – that’s what you said, and that’s what I believed.”

Puyallup was one of the only cities in the South Sound that reported saving money last year while neighboring jurisdictions struggled. City Manager Gary McLean predicted the city would end 2008 with a $6 million reserve in its general fund, or about 12 percent of the fund total.

Updated budget numbers, however, show the city brought in about $2.4 million less than expected at the end of 2008 and is projected to bring in $1.7 million less than expected in 2009.

After cutting $1.9 million in expenditures in 2009, the city now believes it will end the year with about $4.2 million in reserves, about $2 million less than originally projected.

The city expects revenues will remain below projections in the coming year, Finance Director Cliff Craig said.

Because of that, some council members said cutting tax collections by the full $7.8 million wouldn’t be responsible right now.

Four of the seven council members said they think about $1 million of the proposed tax cut money could pay for some costs the city incurred as a result of the fire merger. That includes back vacation pay for Puyallup firefighters and increased pension liability costs for retired fire staff.

An additional $768,000 could be used to help increase the city’s dwindling budget reserve, the four council members said.

Councilwoman Kathy Turner said the $7.8 million the city cited last year was bound to change based on expenses associated with the fire merger. She said council members knew that when they voted on it last September. (Turner recused herself from council votes related to the fire merger last year, because her husband is a retired Puyallup firefighter.)

“The $7.8 million was an estimate and a fluid number to be adjusted after we knew the real impact,” Turner said. “We’re not trying to take money from the citizens. We’re doing exactly what we said we were going to do.”

Council members Tami Brouillet and Mike Deal also voted in favor of the proposal to reduce taxes by about $6.1 million. That would bring residents property taxes in 2010 down to about $1.62 per $1,000 of assessed value, compared to the $2.37 per $1,000 property tax rate in 2009.

The other half of the proposed tax cut would come in the form of reduced utility taxes.

Melissa Santos: 253-552-7058

melissa.santos@thenewstribune.com