The lingering impact of the Great Recession continues to take a toll on state and local governments. Tax revenues have not increased at the rate some had expected or, at least, hoped.
So as the city of Walla Walla looks at its spending plan for the next year city officials are torn over exactly how optimistic or pessimistic they should be in estimating tax revenue. In addition, they are conflicted over how much to raise local property taxes as a way to balance the city budget.
To the City Council's credit it has set a public hearing on the possible property tax increase for 7 p.m. Nov. 28 at City Hall.
At the hearing the public will have an opportunity to comment on the property tax options facing the City Council -- collect the tax from new construction (about 0.44 percent more revenue), boost the property tax by the 1 percent per year allowed by law or dip into the banked levy capacity.
Going to the banked levy capacity means the Council could raise the property tax 6.74 percent because the city has opted not to impose the full 1 percent in recent years. If all three options were accepted the tax hike would be 8.18 percent or $28.50 per year on a home assessed at $150,000.
City staff is recommending City Council opt against raising the property tax beyond the 0.44 increase that accounts for new construction.
While the economy in Walla Walla appears to be getting better -- or at least not any worse -- a big increase in taxes won't help the situation. The 1 percent increase (combined with the new construction increase), while not ideal, might be palatable given the situation. We aren't ready to endorse the 1 percent boost, but it's worth exploring.
The city's budget might not balance without an infusion of tax revenue. The budget plan being looked at now would only balance if the revenue from the sales tax and other sources come in higher than projected. Essentially the city could approve a budget in the hope that consumer spending would increase and boost tax revenues with it by about $285,000.
"This budget projects to spend $285,000 more than what we expect to take in, and no provisions for projected state revenue losses," Council member Dominick Elia said, adding later, "I have no intention of supporting a budget that is $285,000 out of balance."
Elia is on the mark. While it is tempting to approve a budget on the hope the economy will improve, it's prudent to face the reality of what is likely to happen. The budget approved should be sustainable. It's better to underestimate tax revenue.
But taking the conservative approach to revenue projecting will could mean a reduction in services and, perhaps, the loss of jobs
The city of Walla Walla, like every local government in Washington state, has had to reduce spending and services for the past few years. Another round of reductions will be difficult.
The Council is in a tough spot. The public hearing won't necessarily make the decision easier, but it will give insight into how much of a tax increase citizens are willing to accept to forgo cuts in services.