Loading...
12/02/1997 City CouncilEDMONDS CITY COUNCIL APPROVED MINUTES DECEMBER 2, 1997 The Edmonds City Council meeting was called to order at 7:00 p.m. by Mayor Pro Tem Dave Earling in the Library Plaza Room, 650 Main Street, followed by the flag salute. ELECTED OFFICIALS PRESENT Dave Earling, Mayor Pro Tem Roger L. Myers, Council President Pro Tem John Nordquist, Councilmember Dick Van Hollebeke, Councilmember Gary Haakenson, Councilmember Thomas A. Miller, Councilmember ABSENT. Barbara Fahey, Mayor Jim White, Councilmember 1. APPROVAL OF AGENDA STAFF PRESENT Robin Hickok, Police Chief Art Housler, Administrative Services Director Noel Miller, Public Works Superintendent Brent Hunter, Human Resources Director Don Fiene, Hydraulic Engineer Scott Snyder, City Attorney Sandy Chase, City Clerk Jeannie Dines, Recorder COUNCIL PRESIDENT PRO TEM MYERS MOVED, SECONDED BY COUNCILMEMBER HAAKENSON, TO APPROVE THE AGENDA AS PUBLISHED. MOTION CARRIED. 2. CONSENT AGENDA ITEMS Council President Pro Tem Myers requested Item F be removed from the Consent Agenda. Councilmember Nordquist requested Items D and E be removed. COUNCILMEMBER HAAKENSON MOVED, SECONDED BY COUNCILMEMBER VAN HOLLEBEKE, FOR APPROVAL OF CONSENT AGENDA ITEMS A, B, AND C. MOTION CARRIED. The agenda items approved,are as follows: (A) ROLL CALL (B) APPROVAL OF CITY COUNCIL MEETING MINUTES OF NOVEMBER 24, 1997 (C) REPORT ON FINAL CONSTRUCTION COSTS FOR THE 1997 STREET SURFACE TREATMENT PROGRAM AND COUNCIL ACCEPTANCE OF PROJECT Item D: Authorization for Mayor to Sign Professional Services Agreement with Jeannie mines for Minute Taking Services., Councilmember Nordquist complimented the minute taker for the quality, accuracy, and promptness of the minutes. Edmonds City Council Approved Minutes December 2, 1997 Page 1 COUNCILMEMBER NORDQUIST MOVED, SECONDED BY COUNCIL PRESIDENT PRO TEM MYERS, FOR APPROVAL OF CONSENT AGENDA ITEM D. MOTION CARRIED. The item Minute- approved is as follows: Taldng Services (D) AUTHORIZATION FOR MAYOR TO SIGN PROFESSIONAL SERVICES AGREEMENT WITH JEANNIE DINES FOR MINUTE-TAHING SERVICES )tem E: Authorization for Three Employees to Travel Out -of -State, Councilmember Nordquist questioned paying the expense for Fire Department employees to inspect the completed fire engine chassis from Travel and Training Fund 008, and suggested it be included in the cost of the equipment. Human Resources Director Brent Hunter advised the travel expense would be paid from Fund 005. Councilmember Nordquist asked if Mr. Hunter's department had the responsibility for CERT training. Mr. Hunter explained he began the CERT Training last year and would like to become an instructor. COUNCILMEMBER NORDQUIST MOVED, SECONDED BY COUNCILMEMBER VAN HOLLEBEKE, FOR APPROVAL OF CONSENT AGENDA ITEM E. MOTION CARRIED. The item approved is as follows: Out -of -State (E) AUTHORIZATION FOR THREE EMPLOYEES TO TRAVEL OUT-OF-STATE Travel ItemF: Proposed Ordinance Amending the Provisions of Section -1,15-030 (A)_ of the Edmonds Ci Code Relating to the Appointment of a Municipal Judge to Provide Flexibility in the Confirmation Process while Complying with the Requirements of State Statute for a 4 -Year Appointment of the Muni-cinafJudge,_and--&e-c-on-2.15.060 Judp—es_Pro--Tern to-Pxovide for a Vacancv in the Position of ud e Council President Pro Tem Myers requested the following correction in the ordinance: On page 1, last paragraph, insert the word, "time" between "insufficient" and "remains" so that the sentence reads, "WHEREAS, through no fault of Judge Conroy nor of the City Council, insufficient time remains before..." COUNCIL PRESIDENT PRO TEM MYERS MOVED, SECONDED BY COUNCILMEM 3ER HAAIENSON, FOR APPROVAL OF CONSENT AGENDA ITEM F AS AMENDED. MOTION CARRIED. The item approved is as follows: (F) ORDINANCE NO. 3170 AMENDING THE PROVISIONS OF SECTION 2.15.030 (A) OF Ord. #3170 - THE EDMONDS CITY CODE RELATING TO THE APPOINTMENT OF A MUNICIPAL Municipal Court Judge JUDGE TO PROVIDE FLEXIBILITY IN THE CONFIRMATION PROCESS WHILE COMPLYING WITH THE REQUIREMENTS OF STATE STATUTE FOR A 4 -YEAR APPOINTMENT OF THE MUNICIPAL JUDGE, AND SECTION 2.15.060, JUDGES PRO TEM, TO PROVIDE FOR A VACANCY IN THE POSITION OF JUDGE 3. AUDIENCE Aquatic I Al Rutledge, 7101 Lake Ballinger Way, Edmonds, referred to the $8.2 million aquatic center proposal Center presented to the Council on November 25. Although he was not opposed to the pool, he was opposed to a bond issue for a facility to be built on property the City did not own. He said the bond issue as well as funding for a sports complex will be discussed at a Friends of Athletics meeting on January 22, 1998. Edmonds City Council Approved Minutes December 2, 1997 Page 2 Ll Mayor Pro Tem Earling noted the motion the Council passed last week supported placing the bond issue on the ballot and was not site specific. Lars Eric Olsson, c/o 561 Pine Street, Edmonds, suggested the City divide the court into three sections, one for the municipal court, one for the Washington State court and one for Edmonds Corporate court. This would be more efficient, save money, and be in the best interest of the citizens. 4. FINAL HEARING ON THE 1998 BUDGET Mayor Pro Tem Earling observed there were more people signed up to testify regarding the proposed Business License Square Footage Tax than for the general comments on the 1998 Budget and requested the Council consider taking testimony on the proposed Business License Square Footage Tax first. He noted the proposed Square Footage Tax could have an impact on the budget discussion. COUNCILMEMBER MILLER MOVED, SECONDED BY COUNCILMEMBER VAN HOLLEBEKE, TO DISCUSS THE PROPOSED BUSINESS LICENSE SQUARE FOOTAGE TAX FIRST. MOTION CARRIED. PROPOSED BUSINESS LICENSE_ SOUARE FOOTAGE TAX TO BE LEVIED ON BUSINESSES THAT DO NOT ENGAGE IN RETAIL SALES Administrative Services/Finance Director Art Housler said a memo prepared by the Mayor and provided to the Council in regard to the history behind the square footage tax stated that in 1996, a plan was developed by the Finance Committee to increase business license fees on all businesses to generate some additional revenue. The cost of a business license in Edmonds is significantly lower than most other cities. Since it is the beauty and safety of Edmonds that makes it an attractive place to locate a business, the thought was that the increase would help cover the cost of keeping Edmonds a quality community. This concept was reviewed by the Chamber of Commerce, and they were supportive of an increased fee. When the proposal was reviewed by legal counsel, the City was informed they could not arbitrarily establish a fee. It had to reflect the true cost of providing the service. Any amount over that cost had to be established as an excise tax of some type. Since that time, efforts have been made to consider various possible types of excise tax. After much consideration, the Councilmembers of the Long Range Planning Committee settled on the square footage tax as a viable possibility. It was assumed the Chamber of Commerce would support this since it was an extension of the original plan. The only way to make a decision on this or any tax is by soliciting public comment. After that process is complete, adjustments to the tax or even an alternate tax may be determined. Mayor Fahey's memo pointed out that unless this tax or an alternate type of revenue is established, the maintenance needs for 1998 are not funded. The proposed projects would have to be prioritized and cuts in other parts of the budget would have to be made to implement the most important projects. The rest would have to be put off, and the City would fall even further behind on its maintenance schedule. Mr. Housler explained the premise for the tax, developed at the Council's February retreat, observed that over the past few years 'there has been a slow transition from retail to professional office development. Because of this circumstance, the City's retail sales tax revenue has not kept up with the needs of the major repair and maintenance program. This program has been underfunded for the past few years. Edmonds City Council Approved Minutes December 2, 1997 Page 3 Using that premise, questions were raised such as what could be done in order to generate revenue that would make up the difference between what is needed for the building repair/maintenance program and what is actually received in retail sales tax revenue and how can the professional office development make up the revenue difference? Options were then reviewed such as a special tax that could be imposed on businesses that do not generate retail sales tax revenue. Tax options considered to address the circumstances include a special flat business license excise tax, a special employee FTE (full-time equivalent) worker tax, a special square footage tax, or B & O tax. The minutes of the February retreat indicate the Council was unanimously opposed to a B & O tax; therefore, it was not considered further. Mr. Housler displayed a table showing sales tax as a share of General Fund operating expenses for 1993 through 1998. He pointed out expenses have increased from $12,424,000 in 1993 to $18,883,000 in 1998 and sales tax revenue has increased from $2,475,000 in 1993 to $3,150,000 in 1998. He pointed out one-time sales tax revenues for the construction of the new high school, restoration of the marina, and renovation of Seaview Elementary (a total of $460,000) were not included in the figures. These moneys could not be used for the current repair/maintenance needs as they must be carried over into 1998 to fund daily operations due to the anticipated decreases in sales tax equalization. He explained as sales tax increases, the City's equalization decreases. For 1997, the City received $26 per capita; in 1998, the City will receive $15 per capita—a loss of $400,000. He described the declining percentage of sales tax revenue to expenses: 19.9% in 1993, 18.6% in 1994, 18.2% in 1995, 17.1% in 1996, 16.9% in 1997 and 16.6% projected for 1998. Mr. Housler pointed out a study done ten years ago (which has been updated) evaluated street repairs at $5,600,000, an amount that remains unfunded. In addition, there are also building and maintenance needs in the City. He displayed and reviewed a list of program needs for 1998 through 2002 as well as anticipated funding from the square footage tax ($160,000 per year) and the cumulative shortfall. The cumulative shortfall will be $16,300 in 1998 and will increase to $478,500 in 2002 even with the proposed funding from the square footage tax. Mr. Housler reviewed the funding options considered by the Long Range Financial Committee. A Special Flat Business License Excise Tax -- this would be considered as a professional business surcharge which would be imposed by a simple process of identifying the businesses for which it would apply and billing those businesses annually. A tax of $75 per business would generate approximately $130,000. A tax of $92 annually would be required to generate $160,000. The City Attorney advised that the business license amount must cover the actual cost to produce and maintain records for the license. A special Employee FTE Worker Hour Tax was also considered. This would be considered either as a special business surcharge or a variation of a B & O tax. A tax of 2.9 cents per worker hour would generate approximately $330,000. After studying options since 1996, a Special Square Footage Tax was identified as the most viable option. For Councilmember Haakenson„ Mr. Housler advised there are a total of 1,730 businesses in the City, 987 of which do not collect retail sales tax. Mr. Housler explained the Business License Square Footage Tax would apply to those business activities that occur within the City where no gross revenue is directly attributable to such activity, such as accounting or legal services, for example. When a business license application is received, the applicant will also need to complete a special form reporting the square footage of their business and the tax would be paid at the time the license is picked up. The tax would be based upon the prorated share of the year. Edmonds City Council Approved Minutes December 2, 1997 Page 4 The square footage would be measured on the floor area of office space computed to the nearest square foot. When a business license is renewed, the tax amount would be paid at the same time as the license fee. The owner's signature certifying the square footage would also be required. Renewal of business licenses and payment of the square footage tax are due and payable by February 15 of each year. Exemptions from the Business License Square Footage Tax included non -licensed businesses such as public utilities which pay the utility tax rate of 5-3/4% to 6%; cable TV which pays a franchise fee of 5% and the City/Port of Edmonds which generates leasehold excise tax revenues. Other exemptions include nonprofit businesses for which a license is issued but not charged; apartments, real estate brokers who generate the '/z% real estate excise tax; and retail businesses which generate retail sales tax revenues. Mr. Housler displayed a list of businesses impacted (service, wholesale and manufacturing) and the accompanying square footage—a total of 987 businesses and 1,067,400 square feet. The total square footage, 1,067,400 multiplied by $0.15 per square foot would result in revenue of $160,000. Mr. Housler displayed the certification form staff developed which requests business owners review the tax amount due that was computed for the business. The certification form requires the business owner's signature certifying that the statements and information provided are true and complete to the best of their knowledge. Mr. Housler displayed a list of projects that would be funded by the $160,000 generated in 1998. Projects include gym floor refinishing ($15,000), locker room remodel ($20,000), ADA requirements ($8,500), HVAC replacement ($33,000), Meadowdale clubhouse ($15,000), Youth Club steps ($5,850), Theater painting ($2,000), stadium painting ($5,500), museum windows ($60,000), Library Plaza Room ($1,500), and Senior Center annual repairs ($10,000) for a total of $176,300. Councilmember Haakenson noted several people have contacted him asking how the square footage tax would be figured for Home Occupations. Mr. Housler answered the square footage provided on each business license application would be used to generate the certification form. It would be up to the business owner to certify the space used. City Attorney Scott Snyder pointed out a business owner should ensure the amount certified for the City is the same amount that is deducted for federal income tax purposes. Councilmember Van Hollebeke asked how the square footage tax would be calculated for common areas such as hallways, etc. for businesses that share tenant space. Mr. Housler answered the square footage is calculated on the space used for the business, as provided at the time application is made for a business license. For Councilmember Haakenson, Mr. Housler said the City's population in 1993 was 27,750 and was anticipated to be nearly 40,000 in 1998 with the annexations. Mayor Pro Tem Earling indicated the following people submitted letters prior to the Council meeting: Paul Leaver, Marlene Reed, Gail Sarvis, Marian Squibb, Julie Hanson -Lynn, Fred Bell, Dave Railsback, and David Peck, MD, and Seaun Richards. He observed the majority raised questions regarding implementation of the tax. Mr. Snyder indicated letters had also been received from Larry Hoppe of Hoppe & Associates; John A. McDonald of McDonald McGarry Insurance Brokers; Barbara A. Edl, CFP, of IM&R Investment Management & Research, Inc.; and Fred Bell, Guildmark Appraisal & Estate Sales Services. Edmonds City Council Approved Minutes December 2, 1997 Page 5 Mayor Pro Tem Earling opened the public participation portion of the hearing. Phyllis Forister, 230 3rd Avenue S, Edmonds, a resident of Edmonds for 21 years, said she loves Edmonds because of its location. She questioned why businesses were not encouraged to follow the theme of Old Mill Town. She questioned why there were so many empty storefronts and why it was to the owner's benefit for them to remain empty. She pointed out the marina parking in Edmonds occupies one of the most beautiful view locations, an ideal location for a lodging and/or convention center. She was opposed to the tax and would send the City a letter with further comments. Claude McCoy, 18722 88th Avenue W, Edmonds, a 30 year resident of Edmonds, recalled many people have stated the City's Fathers are against business and development because they want to maintain the bedroom nature of the community. He pointed out a City must have revenue which must come from business. He brought his business to Edmonds two years ago and now finds the City wants more taxes from those who are providing services to the community. He expressed concern with some of the businesses exempted from the square footage tax, pointing out a manufacturer with a large square footage would be heavily impacted. He pointed out the City was missing the opportunity to encourage businesses to install victorian fronts which would bring in a great deal of retail business. He was concerned all possibilities had not yet been explored and did not feel the square footage tax was a fair tax. Marian Squibb, 23815 80th Avenue W, Edmonds, owner of a home -owned business, said this would hurt small, home -owned businesses. She pointed out there are likely a lot of home -owned businesses who do not apply for a business license and would not have to pay the square footage tax. She pointed out many service businesses collect sales tax on some items. She reiterated this tax would be difficult for small businesses. Cheryl Tkachyk, 8315 194th Street SW, Edmonds, owner of Rosewood Manor Adult Family Home, questioned whether the square footage tax would be applicable to adult family home providers and group homes which provide services to the disabled and elderly. She also questioned whether the City was in compliance with the way the State views and regulates Adult Family Homes because they are exempt from B & O tax and are considered a residential use. She stressed there are a lot of state -paid clients in the City of Edmonds and many providers' incomes are based on state subsidized revenue. She was opposed to the tax and asked for further clarification. Mr. Snyder advised home care providers are exempt from the tax under the proposed ordinance. That category includes adult family homes, state licensed homes for thehandicapped, state foster care facilities, etc. He said this category was the same as the State B & O tax category. Suzanne Arditty, 7708 195th Street SW, Edmonds, said Mr. Snyder's response answered her question. As a day care provider, she was concerned her entire house would be taxed. She said this would be unfair and drive day care providers from the area. Jan Conner, c/o 120 W Dayton, Edmonds, spoke in opposition to the tax. She represented a leasehold and would therefore be exempt, but felt the tax was discriminatory. ' She said businesses should be encouraged to come to Edmonds and the City should encourage economic development. The implication from the Mayor and the Council that Edmonds is dying because of the City's retail base is incorrect. She pointed out although the percentage of sales tax revenue to expenses is diminishing, sales tax revenues have increased 11.83% according to the State Department of Revenue. Rather than asking service businesses to contribute to revenues, she preferred the City control its expenses. She referred to the Edmonds City Council Approved Minutes December 2, 1997 Page 6 HVAC replacement, remarking this should have been considered when the building was purchased. She suggested other options be considered to accomplish the maintenance items. John Boshart, 724 Cedar Street, Edmonds, was opposed to the tax, primarily because he operates a small nursery. He pointed out a number of citizens have been driven out of Edmonds because they could no long afford the taxes. He retired eight years ago and started the nursery to help pay his property taxes. He said the City should be able to operate within its budget, noting the increasing division of property and construction of more homes results in more property taxes. He referred to the number of City vehicles and suggested the Council consider whether City employees are working as efficiently as possible. Bill MacDonald, 702 Puget Lane, Edmonds, a resident of Edmonds for 17 years and a business and property owner, agreed with the decision not to have a B & O tax. He would support a square footage tax that applied equally to both office and retail because the consumer pays the sales tax. If the square footage tax was collected for both retail and office, the amount required could be reduced to $0.06 per square foot. Marla Brandt, 600 Main Street, Edmonds, said she shares office space with other massage therapists and counselors. She questioned how the square footage tax would be divided among businesses that share office space. She suggested the City research applying the tax to retail businesses as well. Dick Beselin, Harbor Square, 1108 12th Avenue N, Edmonds, observed the City has stated the retail base has been diminished which was also repeated in the Ente1prise. The State of Washington indicated Edmonds' retail sales tax revenues for the calendar year 1996 were 7.7% over the calendar year 1995, ranking #10 of the top 51 cities in the State. For the first quarter of 1997, revenues from Edmonds retail sales were 22.8% over 1996, ranking #3 of the 51 cities in the State of Washington. Through October, 1997, distributions to Edmonds were $2,933,884.51, up $568,000 or 24.04%. After adjustment for annexation, the revenue was still up $316,000 or 13.5%. Projected for 12 months, the total, adjusted for annexations, would be $3,204,000 or approximately a 12% over 1996. He pointed out this did not indicate the retail business core was shrinking nor did it indicate a decrease in sales tax revenue. Rather it points to the City's inability to control increased costs with the revenue provided. Council President Pro Tem Myers asked if the percentage increases cited by Mr. Beselin represented one time revenues as a result of the school construction, etc. Mr. Housler answered yes. He noted an approximate 11% increase for 1997 would be reasonable in view of recent annexations, particularly Aurora Marketplace. Linda Museus, Law Office at 144 Railroad Avenue, Edmonds, an attorney in Edmonds for four years, questioned whether this issue had been examined in a Constitutional/discriminatory manner. She pointed out service businesses are being asked to pay the square footage tax but retail businesses are not. She said generating or collecting the tax from consumers is different than actually having to pay it. She felt this was discriminatory and should be addressed. Mr. Snyder explained this was researched and he offered to provide the Washington State Supreme Court decisions which require, a rational basis for governmental distinctions in levying excise and B & O taxes. He advised the basis was the same used by the Washington State Legislature for a differential B & O tax for retail businesses and service businesses. Edmonds City Council Approved Minutes December 2, 1997 Page 7 Kenneth Peck, read a statement from David F. Peck, MD, stating he felt this tax was short-sighted and not fully thought out as the public pays the tax for retail businesses and likewise individuals using a professional service should bear any tax burden. The practice of medicine did not allow him to adjust his fees to cover such a burden and Medicare has decreed that physicians in his specialty are to be paid 9% less next year. He pointed out his prescriptions for glasses and medications are filled daily in Edmond's businesses, providing a considerable revenue stream that would not be present without him or if he referred his patients outside the City. John Carlin, 8725 242nd Street SW, Edmonds, referred to the City's letter which stated the retail base had diminished and said the City's solution to seek tax revenue from professional businesses was short- sighted because businesses are mobile. He said when a business is considering where to locate, this tax would be a negative factor for Edmonds and would affect future growth in the City. In response to the comment that the square footage certified to the City should match that reported on ones federal income tax, he commented federal tax law did not allow a square footage deduction for part-time businesses. Al Rutledge, 7101 Lake Ballinger Way, Edmonds, referred to the recently enlarged BC zone which was intended to generate additional revenue. He said additional staff time would be required to administer the square footage tax. He recommended that revenue from increased sales tax be set aside for an emergency. Gordon Warren, 8011 180th Place SW, Edmonds, an attorney practicing from his home, said his business license prohibited him from having advertising in his yard and clients could not come to his home. As a result, he goes to his clients. He pointed out the tax was described as a means to repair public structures, however, home businesses do not cause the City any extra expense or maintenance. He was opposed to the tax as he felt it was a disguised second property tax as he was already paying tax on the square footage of his property. He remarked the restrictions the City placed on home businesses, particularly those on his business, were absurd. COUNCILMEMBER HAAKENSON MOVED, SECONDED BY COUNCIL PRESIDENT PRO TEM MYERS, TO EXTEND THE DISCUSSION OF THIS ITEM FOR 30 MINUTES. MOTION CARRIED. Beth Burrows, said she was not aware that non-profit organizations would be exempt from the tax. She provided copies of a letter supporting that exemption. Jeff Larsen, representing Washington State Residential Care Council, an organization of Adult Family Home Operators, said he appreciated the exemption for Adult Family Homes. Lora Petso, 10616 237th, Edmonds, was opposed to the tax. She has discussed the reaction to the tax with various business people with whom she does business and discovered at least 50% are not paying the licensing fee and thus were not concerned with paying the square. footage tax. If the tax was imposed, she preferred it be imposed on all Edmonds businesses equally and not only those who have obtained businesses licenses. She was concerned with the application of this tax to home-based businesses noting by conducting businesses in Edmonds (rather than commuting to another City) they benefit Edmonds by inviting people to do business with them in the City. She encouraged the City to consider ways to reduce the need for new taxes. She questioned whether City staffs salaries included a step raise in addition to a cost of living increase. Edmonds City Council Approved Minutes December 2, 1997 Page 8 Tony. Shaperio, 120 West Dayton, an architect in Edmonds, spoke in opposition to the tax. He suggested the reason for the tax be reconsidered. He observed the City's expenses were increasing 8- 10% each year and questioned how much the City should grow. Regarding annexations, he questioned how the property tax revenue from the annexations was being used. He also questioned the extravagant expense in building the new high school. He agreed he did not see City staff "hustling". Council President Pro Tem Myers.said no City funds were used to construct the new high school. He said the comments regarding City employees were unfair; the City's employees were hard working and he resented criticism of them. Chris Guitton, 1012 Viewland Way, Edmonds, President of the Greater Edmonds Chamber of Commerce, said the Chamber represents 300 businesses in the greater Edmonds area and his statement was made with the endorsement of the Chamber Board of Directors. The Chamber opposed the proposed Business License Square Footage Tax and was concerned with the process by which the tax proposal was introduced. Specifically, the process did not allow the business community to participate in the planning of the proposed tax and did not offer sufficient preparation time for the hearing. The Chamber recommended they be given an opportunity to be represented in an advisory role at the planning stage of any new business taxation. The Chamber urged the Council to oppose the proposed Business License Square Footage Tax because inadequate time was provided to thoroughly discuss the issues and/or alternatives. Sandra Anderson, 600 6th Ave N, #A, Edmonds, said the proposed tax would cause her to abandon her 10 hour per week business which she operates from her home providing in-home assistance for elderly people. She questioned how this tax would affect her business. Gaylynn Beighton, Chiles & Company Commercial Real Estate, 6307 147th Street SW, Edmonds, was opposed to the tax and urged the Council not to impose it if they wanted to encourage a vibrant business community because she felt the tax would cripple economic development in Edmonds. She was concerned with government's attempt to reap benefit from recent momentum in economic development. She pointed out office employees use retail businesses and generate sales tax. She said the City would lose desirable industry because this tax would be another reason to locate in another city. Lars Eric Olsson, c/o 561 Pine Street, Edmonds, pointed out the information provided by Mr. Housler indicated the percentages decreased but the dollars increased. He noted the certification indicated, "please review..." and he suggested business owners could then disregard the certification. He questioned the $60,000 for museum windows. He asked how to have his letters to the Council read into the record and urged citizens who wanted to read his letters to contact him. He referred to the citizen who said taxes were driving him out of town and said perhaps it was because the City had not provided him a City deed to his property. Gail Sarvis, 1101 12th Avenue N, Edmonds, asked how the City would address her service business as it also has some retail activity. She pointed out sales tax was not an out-of-pocket expense for retailers as it is paid by the consumer. She felt the tax was discriminatory to her service business. She asked how the six independent hair stylists who work in her salon would be charged the square footage tax. Jacquelyn Bristol, owner of the Farmers Insurance Agency on Main Street, 2212 208th Street SW, Edmonds, was opposed to the tax as she felt it was discriminatory. She questioned how agents sharing the same office would be charged and how the $0.15 per square foot was developed. Edmonds City Council Approved Minutes December 2, 1997 Page 9 Roger Hertrich, 1020 Puget Drive, Edmonds, questioned whether a B & O tax may be a better way of generating additional income and urged the Council to limit spending. He was concerned that annexations did not provide sufficient retail to support services, and was also concerned with the Council's approval of annexations that did not assume bonded indebtedness. He suggested the Council continue its efforts to identify additional revenue. David Page, 1233 Olympic View Drive, Edmonds, responded to comments made by the audience regarding a theme for the City, pointing out this was a decision made by business people. He pointed out the cost of property .taxes reflected increased property values. Last year he reviewed the budget with Mayor Fahey and discovered there was not a lot of fat in it. He recommended those who were opposed to the tax offer an alternate solution. He pointed out the City has the fewest employees per capita that any other city in the state and provides terrific service. Ray Albano, 20916 76th Avenue W, Edmonds, said he has been a critic of government and the budget during recent years. He said this tax would not solve problems; it would hurt more than it generates. He agreed the Council had done a good job on the budget and it did not have much fat in it. He requested the Council hold their retreats in town to save money. Linda Museus, expressed concern with the continuing shortfall and inquired whether taxes would be increased each year to cover the shortfall. Claude McCoy, said the business owners deserved an answer to the question raised by Ms. Museus— whether taxes would be increased each year to cover the increasing shortfall. Mayor Pro Tem Earling answered a $0.15 Square Footage Tax was proposed for 1998 and did not include future projections. There being no one else present wishing to address the City Council on this issue, Mayor Pro Tem Earling closed the public participation portion of the hearing regarding the Square Footage Tax. COUNCIL PRESIDENT PRO TEM MYERS MOVED, SECONDED BY COUNCILMEMBER HAAKENSON, TO EXTEND THE DISCUSSION OF THIS ITEM FOR AN ADDITIONAL 3.0 MINUTES. MOTION CARRIED. THE 1998 BUDGET - GENERAL COMMENTS Mayor Pro Tem Earling opened the public participation portion of the hearing. Ray Albano, 20916 76th Avenue W, Edmonds, said he attended several budget meetings and did not have a lot of concern with this year's budget. He was concerned with "nuisance taxes" such as the 5% increase for telephone, 14% for water, and 3% on electricity. He suggested the City cut more out of the budget and said the solution was more commercial space in Edmonds. He reiterated his request that the Council hold its retreat in the City. Al Rutledge, 7101 Lake Ballinger Way, Edmonds, pointed out the need for the Police and Fire Department to purchase equipment to address the threat of a chemical bomb attack from Iran. He recommended the Fire Department take over the dive rescue unit and said a back-up pump was needed for the Lake Ballinger area. Edmonds City Council Approved Minutes December 2, 1997 Page 10 Roger Hertrich, 1020 Puget Drive, Edmonds, recommended the City not give away so much money. For example, the City now provides police service for the Taste of Edmonds which was previously paid for by participants. He recommended this be considered before the final budget is passed. There being no one else present wishing to address the City Council on this issue, Mayor Pro Tem Earling closed the public participation portion on the budget and the square footage tax. Councilmember Nordquist stressed there was a lot of planning done for the Council retreats which also requires Councilmembers to be away from their businesses and families. He pointed out the need for increased revenue to address items such as the LEOFF 1 employees which the City must provide in future years. He noted the square footage tax was considered as a way for non -retail businesses to share in the expense of providing police and fire services. He said the original intent for a tax such as the square footage tax was to designate it for one specific use. This had not been accomplished; therefore, he was unable to support it at this time. Mayor Pro Tem Earling observed the Long Range Financial Committee brought the square footage tax forward with good intention; however, public comment had not been included in the process. He pointed out he was not interested in pursuing such a tax but agreed there were some long term financial needs that must be addressed. He recommended the Council reject the tax so the business community was aware that the tax was no longer being considered. At the same time, the Long Range Financial Committee should be asked to identify alternate methods to address revenue needs. He also asked that Mayor Fahey establish a separate task force to include Chamber of Commerce members, property owners, and Councilmembers to work with the business community and property owners to construct a revenue generator that would be acceptable to all. He observed many business owners were open to a practical method. Councilmember Van Hollebeke supported Mayor Pro Tem Earling's statement, stating the business community and property owners should be involved in the process. He agreed criticism of the City's employees was not valid. As a business owner in Edmonds, he considered the impact of the square footage tax on his business, and although it was not an unbearable amount, he did not feel there had been a fair process or that it was equitable to all businesses. He encouraged business and property owners to participate in the process. Councilmember Miller responded to comments that the square footage tax was unfair and discriminatory and discouraged economic development and that the City should control its expenses. He said the City appears to be sending conflicting messages; it speaks to increasing economic development yet is considering increasing taxes on professional businesses in the City. He observed the City should have communicated better with the community regarding this tax. COUNCILMEMBER MILLER MOVED, SECONDED BY COUNCILMEMBER VAN HOLLEBEKE, TO REJECT THE $0.15 TAX FOR SQUARE FOOTAGE ON SERVICE BUSINESSES. Councilmember Haakenson thanked those who came to testify and invited them to return to future Council meetings. He said the Council wanted a solution that was fair and equitable which this tax did not appear to be. He agreed businesses that collect retail sales tax simply collect that tax and would not be impacted by the square footage tax. He also agreed that better communication with the community was necessary prior to a hearing and would strive toward that goal next year. Edmonds City Council Approved Minutes December 2, 1997 Page I I Council President Pro Tem Myers stressed the City did not have adequate money to operate the City the way citizens want. He pointed out part of the cost of living in Edmonds was increasing taxes occasionally. The public has indicated this tax is not acceptable; he encouraged the business community and the Chamber of Commerce to develop other options. The Long Range Financial Committee did not want to increase taxes but increased revenue was necessary to fund City services. Mayor Pro Tem Earling advised Councilmember White faxed him a letter indicating he was "firmly against this item." MOTION CARRIED. Mayor Pro Tem Earling observed that by rejecting this tax, the budget contained approximately $170,000 in unfunded maintenance. He proposed staff make budget adjustments totaling $170,000 so the maintenance program could continue to be funded. Council President Pro Tem Myers supported Mayor Pro Tem Earling's suggestion, noting long term maintenance has been an important issue to him. He pointed out citizens are being asked to fund a bond issue to construct school buildings because school maintenance has been delayed for 30 years. A similar situation will occur in the City if building maintenance is continually delayed and will be passed on to citizens' children and grandchildren. COUNCILMEMBER HAAKENSON MOVED, SECONDED BY COUNCILMEMBER MILLER, TO COME BACK WITH A RECOMMENDATION NEXT WEEK ON HOW TO REDISTRIBUTE THE BUDGET TO ALLOW THE $170,000 IN BUILDING MAINTENANCE TO BE KEPT IN THE BUDGET. MOTION CARRIED. Mayor Pro Tem Earling asked staff to provide a prioritized list of budget adjustments with recommendations for the Council's review. For Mayor Pro Tem Earling, Mr. Housler said staff has been asked to prepare a justification for the staffing requested for the annexations which would be included in Friday's packet. Mayor Pro Tem Earling suggested staff provide priorities for assigning 7-8 new staff members. Mr. Housler suggested this be reviewed with Mayor Fahey upon her return and presented at the December 9 Council meeting. 5. ANNUAL -REPORT FROM MUNICIPAL COURT JUDGE STEPHEN CONROY Judge Stephen Conroy referred to the monthly expenditures and revenues for .the court system, noting Report courts are often under pressure from municipalities to generate revenue, even though the business of the court is administration of justice. He reported the Edmonds court has historically provided court services at a very economical rate. The current cost of filing a case with the District Court is $42 per case. The Edmonds Court processed cases for $28 per case in 1997, $29 in 1996, $28 in 1995, $34 in 1994, $25 in 1993, $21 in 1992, and $19 in 1991. He pointed out this saves the Edmonds tax payers a lot of money. He referred to a list of municipal courts in Western Washington, noting Edmonds pays its judge less than any other city. Judge Conroy reported court filings have leveled off at approximately 8,200 - 8,800 per year but could vary depending on the number of officers writing tickets. He said the court aggressively collects fines and forfeitures including using a collection agency when necessary. He was proud of the way the court has functioned over the past 12 years, noting the clerical staff works hard to ensure justice is Edmonds City Council Approved Minutes December 2, 1997 Page 12 administered. He said this was the best job in town; he has worked hard for the City and has done the job honestly and loyally. Councilmember Haakenson thanked Judge Conroy for the quality, low-cost service he has provided to the City. Councilmember Miller said Judge Conroy's court was not only economical but also provided fair, firm judicial decisions. He pointed out citizens were fortunate to have Judge Conroy as a member of the community as well as the municipal court judge. Councilmember Van Hollebeke said, although the economic issues of the court are important to the City, the way justice is administered is more important. He complimented Judge Conroy on the fair and creative ways he administers justice and expressed his appreciation for what Judge Conroy brings to the community. Mayor Pro Tem Earling thanked Judge Conroy for the work he and the court staff do to operate the court efficiently. 6. INDIVIDUAL COUNCIL REPORTS/UPDATES ON RESPECTIVE BOARD MEETINGS Christmas Councilmember Haakenson reported the Edmonds Daybreaker Rotary Club was sponsoring the Christmas Home Decorating contest. He encouraged those interested in entering the contest to refer to Contest The Edmonds Paper or the Enterprise for further information. Councilmember Miller encouraged citizens to attend the Tree Lighting Ceremony at 5th and Main on eremony Saturday at 5:00 p.m. Councilmember Nordquist, Chair of the Snohomish County Health Board, reported the Health Board's Health Board charter change in January will result in the loss of 7 - 8 boardmembers. He explained the board's vote on the tobacco issue did not indicate the board's support of the tobacco issue; the motion was to delay until the end of July due to a pending court case in Snohomish County. He urged those in need of vaccinations, a health card, etc. to visit their facilities. Councilmember Van Hollebeke, Chair of the Edmonds Alliance for Economic Development (EAED), said in an effort to reach out to the community, a letter and brochure will be sent to all licensed businesses in the City to encourage them to support the EAED and to seek input regarding the best way to accomplish this. He thanked Councilmembers for voting to put a bond issue to fund an aquatic center on the ballot. He encouraged citizens to call the Council Office (771-0248) to make comments or ask Center questions regarding the aquatic center. With no further business, the Council meeting was adjourned at 9:46 p.m. BARBARA S. FAHEY, MAYOR SANDRA S. CHASE, CITY CLERK Edmonds City Council Approved Minutes December 2, 1997 Page 13 AGENDA EDMONDS CITY COUNCIL Plaza Meeting Room - Library Building 650 Main Street 7:00 -10:00 p.m. DECEMBER 2, 1997 7:00 P.M. - CALL TO ORDER FLAG SALUTE 1. APPROVAL OF AGENDA 2. CONSENT AGENDA ITEMS (A) ROLL CALL (B) APPROVAL OF CITY COUNCIL MEETING MINUTES OF NOVEMBER 24, 1997 (C) REPORT ON FINAL CONSTRUCTION COSTS FOR THE 1997 STREET SURFACE TREATMENT PROGRAM AND COUNCIL ACCEPTANCE OF PROJECT (D) AUTHORIZATION FOR MAYOR TO SIGN PROFESSIONAL SERVICES AGREEMENT WITH JEANNIE DINES FOR MINUTE -TAKING SERVICES (E) AUTHORIZATION FOR THREE EMPLOYEES TO TRAVEL OUT-OF-STATE (F) PROPOSED ORDINANCE AMENDING THE PROVISIONS OF SECTION 2.15.030 (A) OF THE EDMONDS CITY CODE RELATING TO THE APPOINTMENT OF A MUNICIPAL JUDGE TO PROVIDE FLEXIBILITY IN THE CONFIRMATION PROCESS WHILE COMPLYING WITH THE REQUIREMENTS OF STATE STATUTE FOR A 4 -YEAR APPOINTMENT OF THE MUNICIPAL JUDGE, AND SECTION 2.15.060, JUDGES PRO TEM, TO PROVIDE FOR A VACANCY IN THE POSITION OF JUDGE 3. AUDIENCE (3 minute limit per person) 4. (60 Min.) FINAL HEARING ON THE 1998 BUDGET. THE HEARING WILL INCLUDE DISCUSSION ON: • THE 1998 BUDGET - GENERAL COMMENTS • PROPOSED BUSINESS LICENSE SQUARE FOOTAGE TAX TO BE LEVIED ON BUSINESSES THAT DO NOT ENGAGE IN RETAIL SALES 5. (20101n.) ANNUAL REPORT FROM MUNICIPAL COURT JUDGE STEPHEN CONROY 6. (95 Min.) INDIVIDUAL COUNCIL REPORTS/UPDATES ON RESPECTIVE BOARD MEETINGS Parking and meeting rooms are accessible for persons with disabilities. Contact the City Clerk at 771-0245 with 24 hours advance notice for special accommodations. The Council Agenda appears on Chambers Cable, Channel 32. Delayed telecast of this meeting appears the following Wednesday, Friday and Monday at noon on Channel 32.