As we all know, Tacoma is evaluating its budget in the face of a huge hole. The city’s budget conversation should be a community discussion about preparing our city government for today’s new economy; prioritization of essential services, such as police and fire; and ensuring a return on investment for programs and services that the city provides.
In addressing the short-term budget crisis created by closing our eyes to the economy, the Tacoma City Council should cultivate an environment conducive to job creation and economic growth through retention and attraction of new businesses. With unemployment at near highs and tax receipts stagnating, looking at Tacoma’s strengths and potential areas for growth should be the city’s No. 1 priority.
Instead, the majority of City Council members recently voted against supporting a sector with the best prospects for long-term economic growth and new jobs – the health care industry.
Franciscan Health System and MultiCare Health System pay more than $100 million in taxes each year. With margins of less than 3 percent in 2011, they still gave back to the community more than $300 million a year in free health care and $50 million in community programs such as Habitat for Humanity, the Carol Milgard Breast Center and the Polar Plaza. These two organizations alone have generated more than 2,000 new jobs during this very difficult economy.
Earlier this year, the City Council even talked about development of the “medical mile” along Martin Luther King Jr. Way as one of its top priorities. Yet last week, on the same day the city found an unexpected $11 million savings in its medical plan, a majority of council members voted to increase the business and occupation tax on these health care businesses for an additional $6 million for the foreseeable future.
While I could talk for pages about the negative impacts of the business and occupation tax, the important thing here is to compare it with our competition.
Cities such as Spokane, Yakima, Vancouver, Federal Way and Puyallup do not even have a B&O tax. Other cities such as Bremerton, Olympia and Bellevue exempt nonprofits like Multicare and Franciscan. The City of Tacoma should not be increasing its reliance on a tax that puts it at a disadvantage with its peers.
Recently, when a major financial services employer considered leaving the city, the incentive package included a reduced B&O tax category. When another medical services provider recently was looking at leaving, Tacoma again did something similar. Unfortunately, by this time it was too little, too late.
The city’s tendency to repeatedly put additional burdens on businesses, then try to woo them once they are evaluating location options, creates an unfavorable and negative image.
The city’s tendency to undermine relationships with existing businesses for a short-term Band-Aid solution must change if it truly wants to be “open for business.” Otherwise, it’s just words on a sign – but with a locked door.
I believe that the Tacoma City Council should be looking for some middle ground – not going after the hospitals for the maximum B&O tax allowed by law. If the city wants to send a message of support and compromise, put forward a rate of 0.2 percent of revenues. That would give the city an additional $2 million, but still doubles the B&O tax paid today.
Send a message to the business community that Tacoma does care about existing businesses and that it wants them to stay and thrive in Tacoma before it’s too late.
Tom Pierson is president and CEO of the Tacoma-Pierce County Chamber, which represents 1,406 businesses throughout Pierce County.