The city of Federal Way is likely headed for a lawsuit with Lakehaven Water and Sewer District after the City Council approved an excise tax on public and private water and sewer utilities in Federal Way at its regular meeting Tuesday.

Despite pleas from a large number of residents opposed to the tax, as well as requests from Lakehaven and Highline Water District officials to try to work it out, the second reading for the ordinance passed 5-2. Just as with the first reading March 6, the lone dissenters were Deputy Mayor Susan Honda and Councilman Jesse Johnson.

The ordinance imposes a 7.75 percent tax on water and sewer utilities not already paying excise taxes to the city. Federal Way already levies a 7.75 percent tax on gas, electric, cable, phone and other utilities. The city anticipates collecting $980,000 from this tax, which will offset a budget shortfall of $854,000. Lakehaven officials have already said the taxing district would sue the city if the ordinance passed.

The council also unanimously approved the second reading of an ordinance that removes the cap on the admission tax charged on tickets sold at venues including the Performing Arts and Event Center, Wild Waves and movie theaters. That is expected to generate an additional $218,000 a year.

In a presentation to the council, Federal Way accounting supervisor Chase Donnelly explained for the audience’s benefit the financial challenges the city faces, such as additional costs the city is facing and temporary cost-saving measures that will help make up for the shortfall. Department heads also spoke to the challenges they are facing now because of inadequate funding, including deferred maintenance, doing more with less staff and losing valuable employees to neighboring cities that pay more. Donnelly concluded by explaining the future implications of not addressing the current shortfall and establishing additional, stable revenue sources.

“We’re not able to control what prior leadership did, but current leadership is responsible for now, and we need to make decisions that can sustain Federal Way,” Donnelly said.

Despite the explanations, only one person, former Deputy Mayor Jeanne Burbidge, spoke out in favor of the excise tax, which would replace the current franchise fee the city collects from Lakehaven.

The remaining speakers commenting on the utility tax , who were mostly senior citizens, talked about how they are already finding it difficult to make ends meet in Federal Way and expressed disgust and disappointment that city officials have been unable maintain their own budget.

“The people today are struggling. They can hardly pay their bills, ” Julie Vance said, adding she has to live within her means and expects the city to do the same. “Do something other than tax the hard-working people who have made Federal Way what it is today.”

A number of residents also urged city officials to forego the utiltiy tax in favor of working with Lakehaven to come up with alternatives.

“If the city has a need for more revenue, then they should bring it to the voters,” David Seatz said. “I see this as an effort to avoid that accountability. Shame on you guys.”

Seatz also said the utility tax ordinance does not specify what the money will be spent for, if it will be capped or if there is a sunset clause.

Peter Townsend said he worried how the utitlity tax would affect not only senior citizens or people with low incomes but also entities like the schools or existing businesses.

“You haven’t thought about what businesses might not come here or might move away from here because of what you’re doing here,” he said, adding the utility tax may also give people living in unincorporated King County another reason to not incorporate.

Nate Barton said it is already expensive to live in Federal Way, and the tax would only push more people out of the city.

“Our problem is not too little money,” he said. “It’s too much government, too much taxation and too much regulation.”

With the exception of Johnson and Honda, who recommended the council postpone its vote to consider all options before adding a tax, the remaining council members said, while they were sympathetic to residents’ concerns, they were concerned about the impacts of not passing the ordinance now.

Councilman Hoang Tran pointed out that Federal Way Police Chief Andy Hwang told the council that the average response time to a call two years ago was 15 minutes, but now it is 19 minutes. Tran said he does not want the response time to increase to 25 or 30 minutes in an emergency.

“With this revenue, we will be able to maintain this level of service in many departments, including our police,” he said.

Councilman Mark Koppang said the council has been working hard to look at all the city’s options, and city staff have been open and transparent about its budget problems and have shared all that information with residents in public meetings, as well as online. He said he understood residents’ concerns, but he had to weigh all the different factors when coming up with the best solution.

“I’m not here to take your money,” Koppang said. “I’m not here to screw you out of anything that you want in life. What I’m trying to do is create an outcome that serves the city the best possible way that meets our needs: police, roads, parks, having services so that we can actually grow this economy.”

Koppang also said seniors adversely affected by any Lakehaven rate increases also have the opportunity to apply for help through a utility rebate program for seniors the city is offering. Honda, however, requested a “friendly amendment” to open the rebate program to low-income residents, in addition to seniors, which was unanimously approved. The council will define what constitutes low income when it next meets.

Jack Sharlock, who spoke at the meeting, said afterward that he thinks the council members were listening to residents’ concerns but had their own agenda going in, adding the outcome was determined prior to the meeting.

“They don’t want this to go to the vote of the people, so they bamboozled the public because the people probably would have voted no,” he said.

Sharlock said, in his opinion, city officials are compensating for the city’s financial problems with the excise tax, but the problem stems from poor management of operations.

“They’re always right, and the public is always wrong, and they always know best,” he said of city officials.

Sharlock said he wants residents to have their say, however, and would like to start a petition and gather enough signatures so Federal Way residents can ultimately vote on the matter. The ordinance does allow for that possibility through a referendum petition if one is filed with the city clerk within seven days of the measure’s passage. Should that happen, the petitioner only has a certain amount of time to gather the required number of signatures for a measure to be put on a ballot.

Federal Way resident Anne Hatch holds a sign urging city officials to cut spending rather than impose a 7.75 percent excise tax on water and sewer utilities in Federal Way at Tuesday night’s City Council meeting. JESSICA KELLER, the Mirror