City Council Considers Controversial Water Utility Tax

During a recent council meeting, the city of Des Moines discussed a proposed water utility tax aimed at addressing budgetary concerns. Acting City Attorney Matt Hutchins presented draft ordinance 24-083, which seeks to impose a 6% utility tax on water purveyors operating within the city limits.

The proposal stems from a historical context dating back to 2015-2016 when the city faced significant financial challenges. At that time, the idea of a 16% utility tax on water and sewer districts was considered. However, legal disputes arose regarding the city's authority to impose such a tax, as the districts claimed governmental immunity. To resolve this, the city negotiated settlements that allowed for a 6% franchise payment in lieu of a tax, effectively postponing any tax imposition.

Recent rulings from the Washington Supreme Court clarified the city's authority to levy such a tax, confirming that municipalities can impose taxes on water districts acting in a business capacity. Consequently, the new ordinance proposes a 6% tax on water purveyors without existing franchise agreements that exempt them from taxation. Currently, this would primarily affect Water District 54, as other districts have negotiated agreements to avoid the tax.

The anticipated revenue from this tax is projected to be approximately $88,000 annually, with the potential for increased revenue as franchise agreements expire and are not renewed. The council will continue to deliberate on the implications of this ordinance in future meetings.