WALLA WALLA -- The City Council will hold a special session this month to decide if it should raise property taxes as much as 8.18 percent to deal with budget shortfalls for next year.
The increase would be made up of a 1 percent annual tax increase, a .44 percent new construction increase, along with a 6.74 percent increase based on banked levy.
Banked levy is accumulated each year a city chooses to not take increases allowed by law: 1 percent overall and a hike based on new construction. For a number of years the city only took new construction increases but passed on the 1 percent.
The result is the city now has a potential 6.74 percent increase available.
Using the banked levy would amount to $319,410 that combined with allowed increases for this year would total $387,562.
If approved, the owner of a $150,000 home would pay an additional $28.50 per year in property taxes, according to Support Services Director Tim McCarty.
Staff is recommending no property tax increases other than the .44 percent new construction increase, which had Council members debating Wednesday night if it is time to call on the banked levy.
On Nov. 28, the Council will hold a public hearing on using the banked levy, as well as the full 1 percent and new construction increases.
Nov. 28 is the same day the state Legislature convenes its special session to being dealing with a $2 billion budgets gap for 2012.
"I think we can probably look at $250,000 being swept," Council member Jerry Cummins said, who sits on the city's finance committee and has been working with the Legislature to determine how much will be cut. "I think if we sit back and say it is not to be realized or we think we are going to come out of this unscathed, I think it is a very difficult position to be in," Cummins added.
Exacerbating the city's budget conflict is the fact city staff is asking the Council to pass an "unbalanced" budget, with the hope that sales tax and other revenues will come in higher than projections.
Council members questioned and at times criticized City Manager Nabiel Shawa over what he would do if sales tax revenues plunged or if the Legislature cuts close to $300,000 from city funds.
"Our plan B, unfortunately, as you well know, is we are going back to the layoffs," Shawa said. But he also noted the city could rely on reserves or other department cuts if funds were to come up short.
Council member Dominick Elia -- who in the past has been a strong proponent of balanced budgets that don't dip into reserves -- harshly criticized the city manager as to why he was proposing a budget that lacked full funding.
"This budget projects to spend $285,000 more than what we expect to take in, and no provisions for projected state revenue losses," Elia said.
"I have no intention of supporting a budget that is $285,000 out of balance," he said later.
While Council members noted the banked levy and 1 percent increase could be used to offset projected budget shortfalls, some were cautious about turning over excess funds to staff.
At one point, the city manager asked -- if banked levy funds were approved -- the Council allow him the ability to determine where the money should be spent.
"I have a little bit of trouble not being asked to not paint you into a corner," Council member Shane Laib said. Laib suggested the banked levy could be used to fund the library.
"My concern is that if that money gets taken, it gets taken for the library and not anything else," he added.
The city is operating with a tight deadline. All property tax increases must be reported to county officials by Nov. 30 or they cannot take effect for the next year.
But the projected state budget cuts won't be fully know until after that date.
"We have no idea what is going to come out of this special session, so we are going to have to wait and see ... We know it is going to not be positive. We know it is going to have a negative impact. We just don't know how large. The best impact we could have is zero," Elia said.
The hearing will be Nov. 28 at 7 p.m. at City Hall, 15 N. Third Ave. Public testimony will be taken.
Alfred Diaz can be reached at firstname.lastname@example.org or 526-8325.