Does taxing public utilities make sense?

Once again bills are pending in the Legislature which would authorize counties to impose taxes on utilities.

If you can hold two contradictory thoughts in your mind at once without choosing to believe one and not the other, you can perhaps more easily support the concept.

On the one hand, the Growth Man-agement Act is premised on the idea that cities are more efficient than counties in providing services to urbanized areas.

Supposedly, it is more cost-effective to receive services as a city resident.

On the other hand, cities generally impose higher taxes on their residents, making it more expensive to live in a city despite the city’s sales tax revenue from county residents who shop in the city.

If it were really more cost-effective to receive government services from a city rather than a county, wouldn’t the tax burden be lower for city residents?

You must somehow cope with this contradiction in order to accept what is being proposed in the Legislature.

One way city residents pay more is through taxes on the utilities that provide services to them.

Counties aren’t yet authorized to impose these utility taxes.

When annexation into a city is proposed, the affected residents must decide whether it would be a good deal despite the resulting higher taxes.

If counties could impose taxes on utilities so that residents in unincorporated areas had a tax burden that is more like that of city residents, there might be fewer people who resist annexation.

Their taxes would already be similar to those of city residents.

In essence, a typical obstacle in the way of annexation proposals would be removed by raising taxes on people living in unincorporated areas and then sometime later proposing that they be annexed into a city.

House Bill 2749 is the first one to be heard in the House Finance Committee during this session.

Of course, the initial language of the bill could change more than once, but it starts out authorizing counties to impose taxes on utilities and authorizing cities to impose taxes on water-sewer districts.

In South Kitsap, the effect would be to authorize county taxes on all but natural gas utilities (only King County could tax gas utilities).

Anyone living within Port Orchard who receives water or sewer service from West Sound Utility District rather than from the city’s utilities would see a city tax on their bills.

Right now, Port Orchard residents are served by the city’s water and sewer utilities, and the city can already impose taxes on its own utilities.

The bill would remove a potential obstacle to annexation by Port Orchard by adding the city’s tax to bills paid by West Sound Utility District customers after they are annexed into the city — even if West Sound doesn’t transfer ownership of that part of its systems to the city.

One aspect of the bill might need some change, since it appears that everyone would pay the new county utility taxes even if they live in a city or outside any “urban growth area” (UGA).

The county must allow a deduction from the utility’s gross income for services provided to city residents and to residents in unincorporated areas outside any UGA.

The total tax on the utility would be lowered by the deduction, but by what mechanism would the county’s tax be added only to the rates paid by residents of unincorporated areas inside a UGA?

Utilities would figure their income that is subject to the tax after these deductions, then add the tax to the rates their customers pay.

If rates for everyone go up, the bill wouldn’t push residents in a UGA toward annexation into the city.

Of course, if annexation were a good deal, no push would be necessary.

But aside from this contradiction, the Legislature needs to ensure that only the intended targets are hit — people in unincorporated areas that are included in an existing UGA.

Then our own representatives need to figure out how to explain why they did this, if they vote to pass such a bill.

Bob Meadows is a Port Orchard resident.

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