Same planet; different worlds

Opinion by Paul K. Plummer

Upon receiving my 2010 commercial property tax bill, I was in shock. Between the City and County tax levies, my commercial property tax bill increased by over 30 percent for FY2010-2011.

“How does raising property taxes by over 30 percent, as we recover from the worst recession since the Great Depression, stimulate the creation of a healthy, sustainable tax base (jobs)?”

Interestingly, the estimated 29.6 million small businesses in the United States employ just over half of the country’s private sector workforce (Source: U.S. Small Business Administration Office of Advocacy, September 2009). Read “private sector workforce” as healthy, sustainable tax base.

When our City and County leaders decide to avoid making meaningful budget cuts and instead raise property tax levies, they are consciously choosing to reduce the local private sector workforce (healthy, sustainable tax base). How?

Private sector jobs create the tax base. Overhead is virtually fixed for most small businesses (building/rent) thus leaving payroll as the single largest expense. When our taxing authority lobs 30 percent-plus property “tax grenades,” cutting payroll is the only way most small businesses can offset the large unexpected expenses. Unfortunately, our local unemployment rate is a testament to this fact. The local unemployment rate is running 10.1 percent vs. a national average of approximately 9. 3 percent (Source: U.S. Bureau of Labor Statistics).

The worst of this situation is that people, who don’t work, don’t pay taxes, don’t contribute towards paying for local government services and end up on unemployment. This drives unemployment insurance premiums higher (almost double from last year) again forcing local businesses to make cuts (jobs). Property values further decline because the unemployed cannot afford to buy homes or commercial properties which result in higher property tax levies the next year. This is a vicious cycle that accelerates during tough economic times and is killing our tax base.

So what are our local City and County leaders doing to help local small businesses keep people employed?

 In reviewing the FY2010-2011 City and County Budgets, I had hoped to find a compelling argument to support the huge tax increases. As a small business owner, I was hoping to see the City and County make the same tough decisions we are making on Main Street. Specifically, to suspend all non-essential services, eliminate discretionary spending and make budget cuts across the board, reduce staff and reorganize as required to improve efficiencies and eliminate excess management and/or unnecessary jobs.

Here are some highlights from the FY2010-2011 City and County budgets:

• The County Budget for FY2011 is $72,151,802 – a decrease of $1,262,096 (-1.72%) from FY2010.

• Kootenai County taxpayers will pay $43,890,683 for public employees’ wages + benefits, approximately 60.83% of the total annual budget. Medical and retirement benefits alone account for approximately $9,721,625 (13.5%) of the annual budget.

• Kootenai County will be adding 18.5 new positions in FY2011.

• The City budget for FY10-11 is $77,913,463 – up $4,194,326 (+ 5.69%) from FY09-10.

• The City Capital Projects budget increased by $5,853,000 (+300%) to $7,853,000 for FY10-11.

• City of CDA taxpayers will pay $24,735,001 for public employees’ wages + benefits, approximately 31.75% of the total annual budget. Medical and retirement benefits account for $6,467,393 (8.3%) of the annual budget.

Failing to make meaningful budget cuts, opting for increases in the annual budgets, increasing the size of our government, and raising property tax levies is not a recipe for rebuilding a healthy sustainable tax base. Although local government provides essential services, it is a wealth taking venture not a wealth creating one.

I am all for funding capital projects and expanding public services to enhance our community from both a quality of life and economic perspective. However, just like in the private sector, the time to invest in these projects is during times of economic prosperity or periods of sustained growth, not while we are struggling with ever increasing unemployment and failed local businesses on every block.

To our City and County leaders, step into our world, the world of your host cell. Understand that the local businesses in this community, via tax base creation, afford every public employee the luxury of a stable job, medical and retirement benefits, benefits that we cannot afford for ourselves or our employees in many cases. Your decisions this past budgeting season are undermining local small businesses’ ability to keep people employed. Please challenge the system by finding a way to get back to the table, make some hard decisions and fix the City and County Budgets for FY2010-2011.

Paul K. Plummer is owner of Jacer Enterprises in Coeur d’Alene.