LA CENTER — Faced with the potential of severe revenue shortfalls in 2017 and beyond, the city of La Center is looking to new property and utility excise taxes to help lessen the blow.
“Currently, we’re in a great spot,” Suzanne Levis, the city’s financial director, told La Center city councilors at their Oct. 12 meeting. “We have high levels of services, great parks, a safe community … great services. But with our 2017 budget, we transition into a new financial reality.”
The “new reality” Levis is talking about is the April 2017 opening of the massive ilani casino-resort on the nearby Cowlitz Indian Reservation. With the casino comes good and bad prospects for the city of La Center and its 3,100 residents.
The good: A potential for La Center to develop more than 250 acres of commercial/light industrial land near its Interstate 5 junction, provide more living wage jobs and attract more development inside the city’s residential areas.
The bad: With the casino’s opening, the future looks grim for the three private card rooms that operate in La Center’s downtown center. Revenues from these three card rooms — the Last Frontier, the Palace and the New Phoenix — provide nearly 75 percent of the city’s revenue sources.
Levis says it’s tough to predict exactly how much the new tribal casino will impact the card rooms, but that city leaders expect the card rooms’ profits will dip once gamblers leave downtown La Center to try their luck at the luxurious ilani casino, which will have thousands of slot machines and dozens of gaming tables, leaving the city with a substantial financial shortfall. Current 2017 city budget projections show a loss of 50 percent of the current card room revenues, or roughly $1.5 million. At that level, the city would be losing half of its overall revenues. If the card rooms were to close completely, the city would lose three-fourths of its $3 million budget revenues.
“I’m not telling you anything that you folks don’t know,” Levis told the city councilors on Oct. 12.
In fact, city leaders have been preparing for this revenue dip for some time. Current Mayor Greg Thornton talked about it during his election campaign in 2015 and said the city would have to diversify its revenues to sustain its services in the long-term.
“There has been a great deal of discussion trying to identify what the actual impact to the city next year will be in terms of diminished revenues,” Thornton told La Center residents on Oct. 12. “We’re in a unique situation in that so much of our revenue is derived from one revenue source.”
To diversify and plug some small holes in the projected revenue gap, La Center leaders are looking at new taxation methods used by many other Clark County cities to fill their general fund coffers. Specifically, the city is looking at property taxes and utility excise taxes. Eventually, the city could also impose a hotel/motel tax if there is, as expected, a hotel built at the city’s Interstate 5 junction across from the new ilani casino.
“This is how most municipalities fund their services,” Levis said of the proposed taxes. “We haven’t been in such a situation that we’ve had to go there.”
Compared to other Clark County cities, La Center and Camas are the only two without utility excise taxes and Camas city councilors are mulling that option for their 2017 budget to help that city also diversify its revenue stream. In La Center, residents pay much lower utility taxes and property taxes than residents of other southwest Washington cities.
In Ridgefield, for instance, 61 percent of that city’s $4.7 million total general fund revenue sources come from taxes, including property, sales and excise taxes. In Chelan, 91 percent of the city’s $2.3 million in revenue sources come from taxes. In La Center, only 27 percent of the city’s $3.1 million general fund revenue sources come from taxes.
As it stands now, Levis told councilors on Oct. 12, the vast majority of collected property taxes in La Center do not go to the city. Instead, they help fund schools and services like the fire department. Of the $3,300 collected in property taxes on a house worth $300,000, only about $400 goes toward city services like police, parks and roads.
City councilors are considering an increase of one percent on property taxes — about $4 for the average homeowner. It’s not a huge number, Levis said, but the city is restricted by state law on how much it can increase property taxes by no more than one percent each year.
Another possible revenue source that could bring an additional $330,000 a year into the city’s general fund, and one that is used by most cities in the area, is imposing an excise tax on various utilities.
“Some utilities are restricted, others are not,” Levis said.
Things like electricity and telephone services cannot be taxed at more than 6 percent without voter approval, but other utilities, such as water and sewer can be taxed as high as a municipality is willing to go. Some cities, including Vancouver, Yacolt and Kelso have excise taxes of 20 percent or more on utilities like sewer, water and garbage. In La Center, the proposal is to impose a 6 percent excise tax on all utilities except sewer, which would have no excise tax.
“It will vary by the size of your house, how much you turn the heat on, use the water, etc.,” Levis said. “But for the average household, it would be about $21 a month.”
If approved, the excise tax on utilities could generate an additional $330,000 in revenue for La Center. It’s a “drop in the bucket” as one resident at the Oct. 12 meeting put it, considering an expected $1.5 million shortfall, but city leaders say it would help to diversify and stabilize the city’s revenue streams.
“2017 will definitely be a year of transition for the city,” Thornton said. “I’m confident at the end of the day that La Center will do just fine and get through this, but it won’t be without some difficulties and challenges.”
The members of the City Council will review the proposed taxes at its next work session on Oct. 18, and will return for a public hearing on the matter at an Oct. 26 regular city council meeting. All La Center City Council meetings are held at 7 p.m. in City Hall, 214 E. 4th St., La Center.