City of Chelan establishes tax district to fund transportation projects

“The citizens will benefit from improved streets and transportation projects without having to fund all of it,” said Wade Farris, Chelan city administrator. “They’ll have tourists and visitors help fund that.”

The city is confined to using property taxes to boost Chelan’s street funds with a limit of raising property taxes by 1% each year. The Six-Year Transportation Improvement Plan (from 2023-2029) is in the ballpark of $6-7 million, according to Farris. The funding mechanism under the district would be in place for a decade before being teed back up to voters, if voter approval is needed.

“We only bring in, in a six-year time frame, only a fraction of that, about $1.5 million, so we can’t really fund it except through grants,” Farris said. “A lot of grants require matching funds and we have a hard time coming up with matching funds. Doing this tax, we think it would bring in about $500,000, $600,000 a year. We could either use that money to leverage grants for our street projects or actually use it on our street or sidewalk projects. Both of which we really need in this town.”

A variety of ways are available for funding to be sourced through a Transportation Benefit District, several of which do not require voter approval. An option for funding is a 0.1% sales tax and this doesn’t require voter approval, only a majority vote from the governing board. Another option for funding that doesn’t require voter approval is to levy a tax or fee on license tabs within city limits, starting at $20 and reaching $40 over time. The added price tag on license tabs is “not a very good option,” Farris said, because it taxes Chelan citizens for roads that tourists are using. An option that does require voter approval is up to a 0.3% sales tax.

“The biggest thing to keep in mind on this is, especially for Chelan, these funds for these sources can only be used on transportation projects,” Farris said. “In Chelan’s case, preliminary data shows that between 65% and 70% of our sales tax comes from outside visitors or tourists.”

A 0.3% sales tax option would be 3 cents on $10, 30 cents on $100 and $3 on $1,000, Farris added.

“A lot of people push back on any additional tax. If you look at what people (residents) spend money on in Chelan, it’s mostly food and other goods that aren’t taxed,” Farris said. “A lot of the shopping is done in Wenatchee, East Wenatchee, where they have the TBD in place, the sales tax in place.”

Of the more than 110 cities in Washington state (as of July 2022) with a Transportation Benefit District, East Wenatchee and Wenatchee both had a Transportation Benefit District. East Wenatchee and Wenatchee are reported to have a 0.1% sales tax, according to the Municipal Research and Services Center of Washington.

“The next step would be next year, they will fold in the board’s responsibility for the Transportation Benefit District into the city council,” Farris said. “Pretty much all of them (Transportation Benefit Districts) reside within city councils. Then after that, the council will debate and have public hearings on what funding method they can use.”

A public hearing for the city taking on the TBD’s obligations as its governing board is set for Jan. 23 at Chelan City Hall, according to city documents.