Business Community Government

City Council increases utility rates, takes step toward B&O tax

Gig Harbor took a step toward implementing a business and occupation (B&O) tax on Monday, Dec. 9.

The City Council unanimously approved a $23,200 contract with BERK Consulting to review a B&O analysis prepared by city staff earlier this year.

BERK’s review will focus on the methods city staff used to collect data and compare the city’s proposed B&O tax framework with those of other Pierce and Kitsap county cities. BERK will also estimate the potential revenue from the tax.

BERK will also create “clear communication materials” that will “explain the need for the tax, its potential impact and the services it would support.”

Such a tax would help fill a budget gap created by lower-than-expected building permit revenues, increased costs for government services and population growth.

The city initially proposed a property tax increase, but voters rejected that in the spring. They approved a public safety sales tax increase this summer, and the city council added a transportation-related sales tax hike this fall.

City Administrator Katrina Knutson emphasized that approval of the contract does not commit the council to passing B&O tax. BERK will present its findings to the council by March 2025.

Utility rate increase

The council also increased sewer rates 6%, storm water rates 14% and water rates 20% effective Jan. 1, 2025.

In October of 2022, the city was preparing to set new sewer, stormwater and water rates for six years, beginning Jan. 1, 2023. Instead, the council established a single 5% increase across all three utilities and planned to create a tiered utility rate structure effective January 1, 2024. But that was placed on hold, and no rate adjustment was made then.

The new rates are a stop-gap measure that will give the city time to consider future rate adjustments and tiered rates in 2025.

The council will take a holiday break until meeting again on Jan. 13, 2025.