Centralia residents could see an increase in property tax rates next year after the Centralia City Council approved an ordinance raising the tax to the full banked capacity on Tuesday, Oct. 8.
The council voted for the full banked capacity instead of a 1% increase proposed by the Centralia Finance Committee.
The council also approved a wide range of city fee and permit cost increases that were also proposed by the finance committee. However, the council decided against creating a new business and occupation (B&O) tax that was also proposed.
The measures were passed by the council on first reading, meaning they will need a second vote for passage at the council’s meeting on Tuesday, Oct. 22.
With an estimated $1.1 million budget deficit looming over the next two years, the Centralia Finance Committee had suggested raising both property taxes and city fees along with establishing a B&O tax last month, or risk having to make cuts to the city’s parks, streets and police departments.
For more than an hour and a half during Tuesday’s meeting, members of the public spoke out mostly in opposition of the proposed B&O tax. One of those in opposition was Lionell Anderson, co-owner of Anderson’s Fabrication Inc. in Centralia.
With 26 employees to pay and many of the machines his company uses costing upwards of $75,000 and tens of thousands of dollars more to maintain and upgrade, Lionell was worried about the impact the B&O tax would have on his business, which he said had annual revenues around $5 million.
“All the profits of my company go back into the company, and now you’re going to take some of that away,” Anderson said. “... We’re already taxed to death. I’d like to have a legacy business that I can hand off to my children, but I’m not sure that’s gonna happen. And I know one thing, I would never be able to start this business again. I’ve been doing it for 23 years, but I don’t think I could do it in this environment.”
Centralia City Councilor Norm Chapman also spoke out in opposition to the proposed B&O tax. Since the proposal was announced last month, Chapman said he had been contacted by 37 business owners in the city, with only one supporting the B&O tax.
With inflation still hitting businesses and consumers hard, he felt it was a bad idea to enact a B&O tax as it could scare off potential new businesses eyeing the area.
“I just cannot support the finance committee’s recommendation with currently what is out there,” Chapman said.
Instead, he suggested raising sales tax within the city along with raising property taxes to the maximum banked capacity.
Centralia Deputy Mayor Chris Brewer, who is also a member of the finance committee, still supported the committee’s original revenue recommendations, including the B&O tax. He voted against raising the property tax by the full banked capacity.
“This was a recommendation that came with a lot of work … We all came to the consensus that, yep, we have a deficit staring us in the face and we better do something about it. And taxes are always going to be a difficult pill to swallow,” Brewer said.
Despite inflation increasing business costs, he said the city is at a crossroads as it can no longer continue cutting city staff positions without affecting services.
“We’ve got basically nowhere left to cut at this point. What are we gonna do?” he added.
Utility tax increases were also considered by the finance committee, Brewer added, but they decided against those since they felt a utility tax increase would disproportionately affect low income Centralia residents.
“It may be a burden on some folks, and yeah, we’re asking everybody to share in that burden in one way or another,” Brewer said. “Whether it’s a property tax on real property you own or a cost of doing business tax. if you will.”
Despite the looming deficit, Centralia Mayor Kelly Smith Johnston stood with those in opposition to the B&O tax while still supporting the property tax increase and city fee increases.
“The B&O is fundamentally flawed. It collects on gross (income), not net, so we could potentially collect taxes from some businesses that have no profit, restaurants are an example of that,” Smith Johnston said. “... We can fund our other needs with other taxes right now, and I would prefer as a council that we look at those options before we move to a new tax.”
Smith Johnston added the council could revisit the idea of establishing a B&O tax in the future. Instead, she supported raising property taxes to the full banked capacity. Even with taking this full banked capacity, Centralia property tax rates will still be lower than neighboring municipalities, she said.
“The increase to a median homeowner would probably be a little less than $20 a month. That’s not nothing, everybody is stretched. It’s also not as significant as some of the other decisions,” she said.
She also argued in favor of increasing utility taxes, as there are exemptions available for some lower income residents and seniors.
A motion was made to approve an amended version of the finance committee’s recommendations, which included raising the property tax to the full banked capacity along with raising city fees and permit costs, but to reject the proposed B&O tax. This motion was approved by a vote of 5-2, with Brewer and Councilor Adrianna Garibay opposing it.
Individual ordinances for all three separate finance committee revenue suggestions were also on the council’s agenda.
No motion was made to vote on the ordinance that would have established the B&O tax.
An amended ordinance raising the property tax to the full banked capacity was approved by a vote of 6-1 with Brewer opposing it.
The 2023 Centralia property tax levy totaled $1,067,972.17 and the council has approximately $1.2 million in banked capacity.
For more information on the finance committee’s original revenue recommendations, read The Chronicle’s coverage online at https://bit.ly/4gRvZxY .
The Centralia Finance Committee is still drafting the city’s 2025-2026 biennial budget and while some changes will have to be made to adjust for no B&O tax revenue coming in, Finance Director Bret Brodersen still anticipated having the budget ready for council approval by the beginning of November.
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