Gig Harbor Council may ask voters for property tax increase
On Feb. 12, the Gig Harbor City Council will decide whether to ask voters to “lift the levy lid” to increase property taxes.
If the council approves the request, voters would decide whether to increase their property tax rate from the current rate of 70 cents per $1,000 of assessed property value to $1.10 per $1,000. The question would go to voters on April 23.
If voters approve the increase, the lid lift would help the city overcome a budget shortfall that could be as much as $3 million by 2025.
Projected budget shortfall
City Finance Director Dave Rodenbach told the council during a recent study session that the city faces a $2 million to $3 million general fund shortfall by next year.
The general fund pays for basic government services like police, street maintenance and park and building operations. Property taxes, sales taxes, development fees and other fees collected by the city provide general fund revenues.
A deficit in the fund means those basic services can’t be maintained at current levels. Revenues from those sources have been lower than projected since 2022.
Population outpacing service capacity
Gig Harbor’s population has grown 65% since 2013 – from 7,913 to 13,060 residents – but property tax revenue has only increased by about 8%, according to city figures.
Property tax revenues increased slowly due in part to a 2001 voter-approved ballot initiative that allows city, county and other local governments to increase property taxes by only 1% per year — unless voters agree to lift that lid.
Population growth caused increased demand for services. The city’s workforce grew from 48 to 72 full-time equivalent employees, including a nearly 50% increase in the city police department.
In addition, the city has added new roads, new parks and other new facilities. Consequently, the city says, revenue has not kept pace with expenses.
Rodenbach noted that an increase in property taxes could partially overcome the deficit. The city has not increased property taxes since the 1980s.
Increasing the sales tax is also an option
The council also considered raising property taxes by as much as $1.30 per $1,000 valuation.
But at a Jan. 25 council study session, Councilmember Brenda Lykins suggested that raising the sales tax should also be on the table. That would lessen the burden on homeowners and spread it to people who shop in the city.
One option under consideration is a 0.1 percent sales tax increase, with proceeds devoted to public safety. The council could choose to ask voters for the sales tax hike on the August ballot.
If voters approve, the additional public safety sales tax would bring another $1 million annually into the general fund. That, coupled with the additional money raised from property taxes, could erase the anticipated deficit.
B&O tax also discussed
At study sessions, Councilmember Roger Henderson raised the possibility of imposing a business and occupation tax on larger businesses in the city.
That idea has not yet gained traction from the rest of the council.
What’s been done so far?
Last year, the city opted to not hire for nine vacant positions in the planning and public works departments. (The city did hire several new police officers). That saved $1.4 million, according to city figures.
The city is also applying for more grants to secure funding from outside sources.
Survey results indicate residents don’t think there’s a problem
Last November, 430 people responded to an online city survey about property taxes. Two hundred and four people said the city has no need for additional funds. Another 133 people said there is “some need;” 31 people said there is a “great need” and 62 were “not sure.”
In addition, 229 respondents said that the city should not increase property taxes — or if property taxes were increased, the proceeds should be used to retain and attract local businesses (168 responses) or develop more trails, parks and open spaces (131).
City administrator will discuss levy lid lift
City Administrator Katrina Knutson will answer questions about the proposed property tax increase on Monday, Feb. 5, at a district meeting with councilmember Jeni Woock. The meeting takes place at 3 p.m. at the Brick House next to the BoatShop, 3805 Harborview Drive. Space is limited to 35 people.
City website information
The city has added a frequently asked questions page to its website about the current financial situation, the levy lid lift and other topics. Click here for information.