Taxed, but not asked

The Cheney City Council received feedback at its March 7 meeting on changes it made to how electrical rates are billed — and it wasn’t positive.

Several citizens living outside the city limits showed up and expressed anger at Cheney’s decision to change the way taxes are imposed on their electrical bills. In two separate ordinances, adopted Dec. 8, 2015 and Jan. 12 of this year, the council changed the structure so that taxes are imposed on the utility itself and therefore on the utility’s entire service area.

The Dec. 8 ordinance clarified that citizen-imposed taxes are on the utility’s gross income and therefore apply to consumers inside and outside the city, with the Jan. 12 ordinance further clarifying this point and listing those utilities as “electrical energy, water and sewer services.”

Ordinances require three readings and final passage, which are typically done at separate council meetings. In the case of these two ordinances, the City Council held all three readings and final passage at each meeting, which is allowed by state law, in order to quickly begin billing.

Murphy Road resident Linda Heiydt said that amounted to an extra $30 on her $200 monthly electrical bill. Heiydt said she couldn’t see how it could be legal and felt they shouldn’t have to pay the extra taxes for services they don’t use such as streets and parks and recreation.

“Those don’t even make any sense for someone living out of town,” Heiydt said.

City attorney Stanley Schwartz explained the background to the city’s decision. Schwartz said municipalities are allowed to do so due to a 2006 court decision involving the city of Spokane, and that not only does Spokane follow the practice but other cities such as Bellevue do as well.

According to a Dec. 24, 2015 Cheney Free Press story, of the city’s 5,500 electrical accounts, 250 of those are outside the city limits. Most are along a line that roughly parallels the Cheney-Spokane Road out to Fish Lake, with another running 2-3 miles towards Turnbull National Wildlife Refuge and a shorter one north along Murphy and Paradise roads.

State Route 904 resident Dave Rawson echoed Heiydt’s comments, particularly that the decision to impose the taxes on them amounted to taxation without representation.

“You represent Cheney, you don’t represent me,” Rawson said. “If I need representation, I have to go to the county council (Spokane County Board of Commissioners).”

Several council members tried to address the issue with Rawson and Heiydt. Before comments began, Councilwoman Teresa Overhauser, serving as mayor pro-tem due to Mayor Tom Trulove’s absence on business, apologized repeatedly to those in attendance about the issue, saying the city was just learning about non-residents’ reactions.

Overhauser explained the council’s decision was based on its desire for equity in billing for all customers of Cheney’s services, but acknowledged they didn’t do a good job of informing customers about the changes.

“We will look into it,” Overhauser said. “We just learned about this tonight.”

In an interview Thursday, City Administrator Mark Schuller reiterated the city’s desire for utility billing equity. He added that customers living outside city limits do use some of the city’s services that residents pay for in their electrical bills.

As an example, city residents are taxed 4.75 percent on their electrical bills to support parks and recreation, a tax they voted on themselves in 2003 to restore and fund the department. That tax is imposed on the utility, not the customer, and therefore can be passed on as a cost of doing business.

Schuller said he received a call from an out-of-city individual complaining about the new charges on his bill and accusing the city of being un-American. That individual then made a call to the Parks and Recreation Department to ask if he would now have to pay the non-resident fee to use their services.

Schuller acknowledged they didn’t handle the change correctly by sending out something in customer’s bills explaining what was going on, and took full responsibility for what happened.

“We should have thought through the reaction of those affected,” he said.

John McCallum can be reached at [email protected].