Earlier this month, the Centralia Finance Committee warned the Centralia City Council of an estimated $1.1 million deficit looming over the 2025-2026 budget, which is currently being drafted and will be up for council approval later this year.
To address this deficit, the finance committee recommended the city council create new budget revenue sources in the form of increased city fees and permit costs, a property tax increase up to 1% and a new business and occupation (B&O) tax during a Sept. 10 council meeting.
Municipalities such as Centralia are required by state law to submit balanced budgets.
While the city has slashed its own departments and combined various positions to balance the budget in past years, city staff say this can no longer be done without affecting critical city services, including the Centralia Police Department and the city’s parks and streets.
On Tuesday, Sept. 24, the Centralia City Council convened prior to its regularly scheduled council meeting for a workshop to further discuss the proposed new budget revenue sources.
While the council has had the option to raise property tax annually by up to 1% but has declined to do so for years, that can no longer be done without affecting critical city services, city officials said.
Centralia City Councilor Chris Brewer — who also serves on the finance committee — said the property tax increase should only need to be done during this budget biennium.
“This puts us in a very good position for now and eliminates the difficult discussions in two years as well,” Brewer said. “This would put us on a brand new baseline for which to collect revenues.”
Currently, Centralia’s property tax rate is at $0.41 per $1,000 assessed property value. Centralia Finance Director Bret Brodersen said residents in unincorporated Lewis County pay $0.90 per $1,000 while for Chehalis residents the rate is $1.26 per $1,000.
In Longview, the property tax rate is $2 per $1,000. Tumwater’s rate is $1.85 per $1,000, Aberdeen’s rate is $1.88 per $1,000, Hoqiuam’s rate is $2.17 per $1,000, Yelm’s rate is $1.04 per $1,000, Port Angeles is at $1.62 per $1,000, Ellensburg’s rate is $1.31 per $1,000 and Anacortes’ rate is $1.34 per $1,000.
“All of them are significantly higher than what the City of Centralia has,” Brodersen said.
The finance committee is recommending the council only raise property tax enough to gain $700,000 in budget revenue, meaning the property tax rate in Centralia will still be cheaper than other comparable cities at around $0.65 per $1,000.
Should the council choose to enact the full 1% property tax increase, Brodersen estimated the property tax rate would be around $0.87 per $1,000.
He added since the amount of budget revenue the city can collect from property tax is capped, the tax rate will go back down on its own as property values continue to rise unless the council manually raises it again. In 2023, the property tax rate in Centralia was higher than it is now at $0.44 per $1,000.
While the proposed property tax increase would generate $700,000, an estimated $400,000 budget deficit still remains. Brodersen said that is where the new B&O tax and fee increases will come into play.
Businesses that would be required to pay it include retail, services, manufacturing and wholesale. Several B&O tax exemption levels were discussed including one exempting the first $100,000 in profit a business makes annually.
With approximately 6,000 businesses — the majority being online-only businesses — currently operating within Centralia, Brodersen expected around 600 of the businesses to actually have to pay the B&O tax with the $100,000 exemption.
He estimated a B&O tax with a $100,000 annual exemption starting next April would generate around $356,000 in additional budget revenue in 2025.
The proposed B&O tax rate is .002% of a business’ gross income over $100,000.
While no other municipalities within Lewis County have a B&O tax, Cowlitz, Grays Harbor, Thurston and Clark counties all have B&O taxes.
As for utility tax rates in Centralia, the finance committee’s recommendation was to leave them at their current levels as those rates will be adjusted later this year using the consumer price index (CPI).
Aside from the proposed property tax increase and new B&O tax, the finance committee is also recommending the city raise a number of fees — many of which haven’t been raised in years and are much lower than fees in neighboring cities, Centralia officials said.
For example, a business license fee will go from $50 to $75, dog license fees will go from $10 to $15 and Fort Borst Park kitchen rental fees will go from $125 per day to $150 per day. Other fee and permitting increases were discussed, and city staff are working with Centralia School District staff to determine field rental rates at Fort Borst Park with new artificial turf.
It was also proposed to establish a master fee schedule to streamline the fee process for city staff along with making fees easier to navigate for residents. An ordinance creating this master fee schedule was approved on first reading during the council meeting following Tuesday’s workshop.
The ordinance’s second reading will take place during the next Centralia City Council meeting on Tuesday, Oct. 8. During the Oct. 8 meeting, first readings for ordinances pertaining to proposed taxes and fee increases will also be held for the Centralia City Council to vote on.
For those who missed Tuesday’s workshop but would still like to watch the discussion, a recording of the workshop can be viewed on the city’s website at https://tinyurl.com/3ve7ztds.
Additionally, city staff are hosting an online question and answer session on Monday, Sept. 30, from 8:30 to 9:30 a.m. on Zoom.
The link to the Zoom meeting along with links to information on the proposed B&O tax and property tax increase being considered are available on the city’s website at https://bit.ly/4d4rTzw .
To view Centralia’s previous budgets, visit the city’s website at https://www.cityofcentralia.com/201/Budget .
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