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Port Orchard council keeps excise gas tax at current rate, for now

The Port Orchard city council unanimously approved to establish a new franchise agreement with Cascade Natural Gas Corp. to maintain the current 2 percent excise tax and reserving the right to increase the tax in the future as needed.

Two version of the proposed ordinance were presented to the council for adoption.

The approved version of the ordinance keeps the excise tax at its current 2 percent rate, but included language reserving the council authority to increase the tax at a future date.

The other version included a step-up in excise tax revenue which would have increased to 4 percent on Jan. 1, 2015, then to 6 percent on Jan. 1, 2017.

State law requires five votes of the council to approve a franchise tax agreement, noted City Attorney Greg Jacoby.

Councilman John Clauson asked about the additional funding that would have been used for streets.

“This is not a good time,” said Councilwoman Cindy Lucarelli, who made the motion to approved the agreement. “We had a discussion about stormwater increases next year – which will be substantial – and I can’t see passing this (alternative version). What was discussed when we talked about collecting extra tax is that we wouldn’t have enough to do anything with anyways, for at least a year or two.”

Lucarelli said future councils would not have to uphold that (street repairs) and the revenue could roll into the general fund, which she would not support.

Clauson said he thought the council discussed the funding being used to purchase a pavement management system.

“That was the first expenditure we debated on shooting for, which would allow us to track projects that could be funded in the future,” Clauson said.

Councilman Jeff Cartwright said it is time to make improvement to city streets.

“This is a small tax, but it is the intent of this council to spend the money towards paving,” said Cartwright.

Councilman Bek Ashby suggested the council to go through the budget process and increase it in January.

“I’m not prepared to vote for the increase without going through that part of due diligence,” she said.

Councilman Rob Putaansuu said he supported the approved ordinance because it has the “mechanism” to raise taxes at a future date.

“It’s a revenue and expense issue,” he said. “If we don’t raise more revenue, we have to cut some wheres else. Our streets and sidewalks are in bad shape.”

City Treasure Allan Martin said a 1-percent increase in the excise gas tax generates about $30,000.

“We’re not going to get a lot of street paving for $30,000,” Lucarelli said.

Martin noted that city expenses are increasing.

“The treasurer received and disperses,” said Martin. “We’re talking on the receiving side. On the dispersement side, our expenses are going up about 2 percent on every item. To maintain the status quo, our expenses for every other source – where we’re being charged — is going up. If we don’t keep up, we’ll fall behind.”

Lucarelli said people’s salaries are not increasing.

“It’s an issue and how much are they willing to pay,” she said.

The city and Cascade entered into a franchise agreement in 1962, allowing Cascade to provide natural gas and natural gas services to residents using the city’s rights of way. The original agreement expires next month.

Three people spoke on the excise gas tax during a public hearing.

During the May 27 council meeting, the council approved a resolution that excise tax revenue in excess of 2 percent of Cascade Natural Gas’s gross earnings would help supplement sidewalks and street maintenance and repairs. The tax is paid to the city because of a franchise agreement with Cascade that is necessary because it uses the city-owned rights of way to provide natural gas to customers.

 

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