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closePuyallup says it can’t transfer taxes
City officials estimate having to trim $5.3 million from budget
Neil Pierson/of The Herald
When the city of Puyallup received final details of a report about the financial impact of a merger with Central Pierce Fire and Rescue in March 2008, officials believed their revenue stream would be $10.6 million richer than it is today.
On the heels of one of the most severe recessions in the nation’s history, Puyallup leaders say their budget shortfalls won’t allow them to transfer more than $5.3 million in tax gains that were supposed to be part of a post-annexation agreement with Central Pierce. As a result, many residents came to the city council’s Nov. 10 meeting to complain about what they feel is a system of double taxation.
“I do understand that in this economy budgets are tight and sacrifices have to be made,” Puyallup resident John Davis told the council. “But to pass on the budget shortfalls onto the backs of the citizens of Puyallup is totally wrong.”
A pro-merger statement in the 2008 voters’ pamphlet read: “This is not a tax increase.”
Last month, some council members complained about Central Pierce’s fire benefit charge, saying there wasn’t proper discussion about the fee during merger discussions and many residents weren’t aware of it. The benefit charge is based on a residential or commercial building’s square footage and is added to the fire district’s regular property tax levy and EMS levy.
Cliff Craig, the city’s finance director, explained that under the Puyallup Fire Department, residents paid for fire service through a mixture of taxes, service charges and fees. The city plans to stop collecting EMS taxes in 2010, saving residents nearly $1.7 million, but roughly $5.3 million in other tax revenues would not be sent to Central Pierce because Puyallup needs that money to balance its budget, Craig said.
“In a sense, our citizens have already taken a tax cut,” Craig said last week. “Property taxes are not the only taxes the city receives. We receive sales taxes, utility taxes, gambling taxes and we also have service charges and fees. So by virtue of spending less, our citizens have taken a tax cut already.”
Financial consultant Peter Moy finalized a study of the possible merger in early 2008. The study concluded that Puyallup could save between $6.4 million and $7.3 million by giving control of fire and EMS services to Central Pierce, but only if projected revenues continued going up.
City Manager Gary McLean said the recession has caused residents to spend less and in turn, the city coffers are suffering.
“One of the things people don’t have is a crystal ball in their hand,” McLean said. “Peter Moy didn’t have one and neither did Cliff Craig.
“If city revenues returned to the levels they were in the Moy study, you bet, I’d be right in here saying, ‘Cut, cut, cut.’ They’re not there. We’re upside down today.”
The council delayed a decision about the allocation of property taxes until its Nov. 17 meeting. Under state law, cities must have a plan in place by the end of November or no tax levies occur the following year.
Multiple council members castigated city officials for reneging on the pre-annexation agreement with Central Pierce.
“I don’t personally think it’s up to Central Pierce to bail the city of Puyallup out of any financial problems,” Councilmember John Knutsen said. “My ethics say we cannot inflict upon the public a double charge for the fire department. You either take the fire department back or give (Central Pierce) the money they’re due.”
Deputy Mayor George Dill said that during a recent discussion of the city’s budget projections, Craig told him there were no “red flags” on the horizon other than a question of whether voters would approve Initiative 1033 and cap government revenues. Voters recently defeated that measure.
“This situation didn’t materialize overnight. So apparently somebody wasn’t paying attention or we weren’t being told the whole story,” Dill said. “If the city didn’t get the funds that they expect then they’re going to have to adjust.”
Mayor Don Malloy asked Craig to analyze the budget and paint a clearer picture of what the city would look like if it gave Central Pierce $5.3 million. Those details were expected to come at the council’s Nov. 17 meeting and were unavailable at press time. Puyallup’s general fund budget was expected to clear $60 million in expenses for 2010, meaning $5.3 million in cuts represents nearly 9 percent of the budget.
“I think we would be faced with two bad options,” Malloy said. “One option is to break the word of the council and the other is to keep the word of the council and devastate the city.”
Central Pierce Chief Jack Andren also spoke at the council’s Nov. 10 meeting. He didn’t address the possible consequences of Puyallup failing to pay its part of the agreement but said, “We have fulfilled our obligation to increase the level of service to the city of Puyallup.”
Andren went on to say that property tax evaluations, which account for 75 percent of Central Pierce’s revenues, decreased by a total of $800 million this year across the district’s 84-square-mile area.
“We have our set taxes and benefit fees that we have not increased for 2010,” he added. “We had to make sacrifices as well, yet we’re still willing to provide a service.”