Yakima City Council Mulls Utility Rate Hike on Large Businesses to Bolster Reserve Fund

In an effort to make headway in adding $5 million to the city’s rainy day fund, the Yakima, Washington, City Council is considering increasing taxes on businesses that use large amounts of electricity or natural gas, the Yakima Herald reported on October 25.

Council members aren’t happy about the possible new fees and taxes, which also could include an increase on residents’ bills for city water, sewer, garbage, and storm water services. But those possibilities are considered the least objectionable of a host of options, such as city staff layoffs, or proposing a property tax increase on residents and businesses.

However, the local news outlet stated, the council doesn’t have a choice if it wants to protect the city’s reserve fund — and with it Yakima’s credit rating.

If approved, the fees could raise as much as $1.92 million, which could go a long way in shoring up the depleted account; a rainy day fund used to pay the city’s bills before money comes in or to cover salaries and other expenses in an emergency. The account also is used as an indicator of the city’s credit-worthiness for bonds for capital projects.

And, as the fund shrinks to $6.9 million at the end of this year, city management is worried that Yakima’s rating could take a hit if the account isn’t brought up to the recommended $12 million mark.

At an October 24 council meeting, members focused on removing a tax cap for large businesses using more than $4,000 worth of private utilities – such as electricity, natural gas, or telephone each month.

Closing the loophole would mean companies would no longer enjoy a tax break on bills above $4,000 — resulting in an anticipated $820,000 in additional revenue for the city. Yakima has 108 consumers that use more than $4,000 monthly in electricity.

In addition, members considered imposing a $20 vehicle registration fee — estimated to generate $1.1 million in revenue — as well as increasing the fee for special events from $50 to $200, depending on the event size and occurrence.

But it was removal of the tax cap that generated the most controversy, according to the Yakima Herald report, with Mayor Kathy Coffey arguing the measure could hamper the city of 100,000 residents in its ability to retain existing businesses and attract new ones.

Members Dulce Gutierrez and Avina Gutierrez argued for the change, saying Yakima businesses using large volumes of private utilities now enjoy a “loophole” when paying taxes on their utility bills.