September 16, 2014 · Exit133

Fiscal Home Rule for Tacoma?

There's a conversation going on at the City about the ways Tacoma receives revenue. With a significant structural imbalance to address in Tacoma's budget, City staff are considering not only short-term adjustments to fix the budget for the next biennium, they're also looking at ways that long-term imbalances between revenues and expenditures can be addressed.

In a recent conversation Mayor Strickland described one of the challenges for Tacoma, and for other Washington cities, as the challenge of trying to make the most out of available revenue in a regressive tax system that is highly dependent on sales tax dollars. In the current system much of the revenue that is collected by the State (liquor tax money, new money from marijuana sales, etc) stays with the State.

One of the ideas that has come up to address that problem is to push for "fiscal home rule" for Tacoma and other interested cities. The idea came up in the biennial process of revising Tacoma's Legislative Policy Statement. The general idea would be to push for more control over revenue streams at the city level.

It sounds kind of like a no-brainer on the surface, but when you start talking about what that might look like, it gets a little hairier. Fiscal home rule has been a no-go around here in the past, but this time around City staff are proposing something a little different. They're suggesting that in exchange for greater local tax authority, Tacoma give up certain existing State revenue sources.

City staff introduced the idea of adding fiscal home rule as an organizing principle of the City's Legislative Policy Statement at the Council's study session last week. Proposed changes they included in the new draft of the document would include the addition of a bullet point under "Legislative Philosophy" that reads:

"[the City always] Believes it has broad authority to raise revenue and works to reduce restrictions placed on revenue sources that have been specifically authorized by the State."

Further into the 70+ page document, under "General Revenue," a proposed addition lays out the quid pro quo idea more explicitly.

The City believes the best way for both the State and local government to be able to address revenue needs and properly structure basic services to meet the unique needs of each city is to establish fiscal home rule as an option for the cities that are willing and able to utilize it. In return for being granted the increased flexibilitv to raise revenue and spend what is collected as local elected officials determine, a city would agree to forgo receiving any further shared operating budget revenue from the State. Transportation shared revenue and grant programs and capital budget member requests and grant programs are not included in the fiscal home rule equation.

The City supports establishment of fiscal home rule for cities in return for ending receipt of certain operating budget shared revenue.

If this new direction is adopted by the City, it could include actions to increase revenue through removal of rate caps, non-supplant language, and restrictions on how revenue is spent for State-authorized sources like the sales tax tenths (for mental health, criminal justice, etc), property taxes, alcohol taxes, vehicle fees, and gambling taxes.

On the other side of the coin, it could also include the loss of shared revenue streams from the state, which in the 2013-2014 biennium totaled about $7 million from the Criminal Justice Assistance Account and the liquor tax and revolving fund. Not included would be revenue streams like state gas tax dollars, capital budget and transportation grant programs, or the first two cents of the hotel-motel tax.

The idea met with a range of Council reactions, with a lot of questions for staff before they're ready to make a decision. Some seemed more open to the idea than others, at least as a starting point. Councilmember Thoms said he didn't know if it was the right approach, but that he likes the idea of pushing the envelope with discussions of new ideas. Mayor Strickland expressed her support for these changes to the policy statement as a conversation worth having, while not setting anything in stone.

We heard a lot of concern from council members that the gamble of sacrificing State dollars for possible increased local revenue wouldn't pay off, and that it might even backfire by over-burdening Tacoma taxpayers relative to those in other areas. Councilmember Lonergan expressed concern that we don't want to ask for changes that we don't ultimately end up wanting.

It doesn't seem likely that the City will end up with fiscal home rule in the next two years, but staff described the proposed changes as intended to start a discussion - hopefully to break out of the frustrating cycle in which the City keeps asking the same questions, only to keep getting the same answers. This would be an attempt to change the funding conversation by asking a different question.

The City's Legislative Policy Statement doesn't commit the City to any specific legislation, but it does give the City's lobbyist direction on related issues in Olympia, and it gives staff guidance on which issues are important uses of their time. This and other changes to the Legislative Policy would pivot the City's position to something a little more aggressive than it has been. It may all be semantics at this point, but sometimes semantics matter.

Can cities interested in fiscal home rule can forgo State shared revenue streams in exchange for greater flexibility in their remaining revenue streams... can they do that and be better off?

Filed under: City Council, City Government, Budget, Economic Development, Strategic Planning

16 comments

Jesse September 16, 2014

Whew! This is a loaded idea. I mean, are you saying that Tacoma could have freedom to actually govern itself, capitalize on it's strengths, and narrow it's liabilities via tax/rate code? What a concept! Does "rates" also mean adjusting TPU rates inside and outside the city limits?
Bill Johnston September 17, 2014

Would help also if we had a "democratic" city government where the elected official actually ran the city instead of the bureaucrats. Note in your story where all the ideas are coming from....
JDHasty September 17, 2014

Tacoma was one of the primary driving forces behind lessening the restrictions placed on how State Motor Vehicle Fuel Tax revenues could be spent by cities and counties. That is how it came to be that simultaneous to our pavement deteriorating to third world status Mayor Baarsma was tapping that revenue stream to fund the alley behind his residence. Theoretically what is proposed would allow local governments the flexibility to better program their own revenues, but in the real world there are cities like Tacoma that are run by an insider cabal and this proposal would only serve to increase graft and corrupt programming and budgeting of limited revenues in those cities.
Rob September 17, 2014

You would think that someone like Mr. Hasty would get over his years-long diatribes about things like the local improvement district process and actually concentrate on doing his taxpayer funded job when he is supposed to be working, rather than commenting on Exit133. At least he doesn't work in Tacoma.
- JDHasty September 17, 2014
  
  Rob, it impresses me that you would object to responsible programming and budgeting of City revenues because you benefit from the status quo. Tacoma does nto suffer from a revenue shortage, Tacoma suffers from profligacy, waste and graft. You and your buddies don't want to discuss the latter because it leads right back to the usual suspects. What I do on my own time is really none of your business business. My employer understands that it is none of there business what I do on my own time, and if the City of Tacoma wants to interfere with my employment relationship again they better like paying for the privilege.
Xeno September 17, 2014

This issue is about city/state taxation authority and incentivizing the state to give up its powers to the city at the cost of revenue sharing in which the state provides Tacoma something to the tune of 7 million dollars. Effectively the purpose here would to tax something to offset those losses but not be restricted to come up with liquor taxes, going beyond utility tax caps, ect. I think it provides more flexibility to have the City come up with solutions to its problems, but of course the solution is more taxation. Pick your poison.
- JDHasty September 17, 2014
  
  Of course the solution is NOT more taxation, it is to control spending. The statement you make is ludicrous at best, are you aware that analysts at Mint.com report that 60% of NBA players file bankruptcy within five years of retirement. Football players are even worse. More than 78% of NFL stars will file for bankruptcy within five years. Major League Baseball (MLB) players have only mildly better luck, filing for bankruptcy four times more often than the average U.S. citizen. Why don't you also, while you are warmed up and ready to go, make the case to Tacoma residents that the reason professional athletes are going broke is because they don't make enough money?
  - Xeno September 18, 2014
    
    Grandpa, I don't really get your analogy but effectively we're currently siphoning someone, somewhere to the tune of 7 million dollars. Wouldn't you rather have those funds stay at home? I get the idea of home rule where you're promoting the taxation to stay within the community rather than from someone in Walla Walla. We have much to gain to support our own taxes by design rather than by the design of the state. It isn't ludicrous, it is empowering to raise our own taxes at a local level to support local control. We are the best barometers of how much we can be taxed, not the state. Our taxation authority is capped and we are chained to the state legislature rather than our local electeds.
JDHasty September 18, 2014

The point is that this city is no more competent than Detroit to manage anything. If that is not apparent to you then you are not paying attention. They cannot manage to accomplish such mundane chores as preserving our existing pavement infrastructure or picking up garbage on a weekly basis - which by the way were the early indicators that Detroit was entering a death spiral
paolo September 18, 2014

Too many neighborhood folks in Tacoma bash efforts in general at downtown redevelopment. But some are right in this regard: while public places and civic squares can be important and, in the instance on the southern Thea Foss Waterway, have spawned comercial developments that enhances the property tax base, too many surface lots in general remain downtown where private tax-producingcommercial blocks should be built. As an example of a firm left Seattle for new offices, Totem Ocean Trailer Express (a sister firm of Thea Foss' Tacoma-founded company) employees dockworkers in Tacoma but moved its headquarters staff to Federal Way, which does not have a B and O tax. Tacoma cannot sustain a credible vital business community if evidence of its vigor is just ribbon-cuttings for new restaurants along Sixth Avenue. Sure, small business matters but, the general economic health of the city depends on incentives for larger private employers to bring office jobs back to Tacoma. Many such employers moved-out to West Campus in Federal Way forty-plus years ago. For a particular growing firm, one wonders how many staffers have been added in recent years at Columbia Bank's Tacoma headquarters building across the street from investor Ervian Haub's big empty Greyhound block that he'd love to redevelop if a tenant could be found. Private firms also want to know that Tacoma's tax-base resources are well-managed. You cannot talk about tax reform in Tacoma without addressing the business climate. So, regardless of the new museums in Tacoma, why are there so many construction cranes in Seattle and not Tacoma? Advocates claimed the UW-Tacoma would spawn a business boom. What happened? Even the city's job-generating locally-operated hospitals, now saddled with a B & 0 tax, will probably direct future expansion project to satellite facilities in the suburbs, like Federal Way. Overall, it is good for Tacomans to debate the issues of public revenue needs and tax reform.
honeydew slausen September 24, 2014

Tacoma's B&O tax didn't drive TOTE from Tacoma. The overbuilt acres of empty suburban office "parks" that is the soulless city of Federal Way were simply offered at far too attractive a rate. Seattle has B&O tax, high property taxes and high development fees and very expensive parking but none of that prevented Weyerhaeuser from moving there. Tacoma has flailed and failed in downtown redevelopment for years because it kept trying to imitate gawd awful places like Federal Way while denying its urban roots. Tacoma can take advantage of the growing new urbanism thankfully growing in America as long as it always keeps in mind that it is urban but is not Seattle and must still pay attention to development costs and rents and probably offer assistance that isn't necessary in Seattle.
- JDHasty September 25, 2014
  
  Tacoma is a city whose residents have a history of electing politicians that govern using the Detroit model. This not the way to win friends and influence people who are looking to locate, or relocate, their business. It just isn't.
  - honeydew slausen September 25, 2014
    
    Off topic, but thanks for contributing.
    - JDHasty October 3, 2014
      
      Detroit is in receivership after having bankrupted. Go that thy proved to the world that they are not competent to program and budget revenues. Tacoma's politicians have followed the Detroit template and are not immune from the same irrational and incoherent practices and policies. Turning over additional control of how State Motor Vehicle Fuel Tax revenues are spent to cities and counties, something Tacoma lobbied for by the way, resulted in Tacoma politicians siphoning off even a greater percentage of a limited revenue stream and steepening the deterioration curve that was already on an unsustainable trajectory. Turning over additional control to the grifters and charlatans that control local politics in Tacoma/Pierce would only serve to foster even more irresponsibility and outright graft.
      - honeydew slausen October 3, 2014
        
        You know, just because you repeat this "Tacoma follows Detroit" example over and over doesn't really make it so. Cities and counties already have "control" over the motor vehicle fuel tax, better known as the gas tax. The state shares a portion of that tax with cities and counties and they can use it as determined by local elected officials within the confines of the constitutional requirement that it is used for roads. Tacoma and no city or county has ever "lobbied" for changing the constitutional restrictions on the gas tax. But all of this is beside the point of the original story which was about operating budget revenue and not transportation revenue. I get it that you are happy paying taxes locally and letting some politician from Palouse or Bellevue decide how it is spent, but I'd rather let people who actually know Tacoma make those decisions.
        
        JDHasty October 6, 2014
        
        "Tacoma and no city or county has ever “lobbied” for changing the constitutional restrictions on the gas tax." Yes they did. Tacoma lead the effort. The restrictions were lessened. The Mayor subsequently tapped this revenue stream to fund rehabilitation of the alley behind his residence. This revenue stream was also used for such things s a Stadium Banners and Business District Beautification that primarily benefited people like former Councilmen Evans and Phelps. And yes Tacoma is following Detroit's model and Tacoma is also following Detroit into bankruptcy. Both jurisdictions pursued a strategy of "deferring maintenance" on their existing infrastructure, both raided the maintenance budgets of every shop in their respective cities, both focused on building more, bigger, better and more elaborate museums, convention centers etc etc etc ad infinitum and both are on a downward trajectory. Detroit is bankrupt and has had to have the State come in and seize control of their finances, Tacoma' programming and budgeting of revenues is unsustainable and this in NOT from lack of revenues coming in. Detroit was taking in money hand over fist as it sunk, Tacoma has among the highest taxes in a high tax State and Tacoma's revenues on a net basis and on a per-capita basis are among the highest, if of the highest of any comparable size city anywhere int eh country. Tacoma's streets are a disgrace. Tacoma chipped in $1.5M to fund luxury (north of a quarter million per residence) condominiums under the guise of affordable housing for needy families.