Inflation is down below zero, but property taxes may go up if the Oak Harbor City Council declares a “finding of substantial need” at its next meeting.

City officials are able to increase property tax revenues by up to 1 percent or whatever the rate of inflation, as set by the Implicit Price Deflator as reported by the Bureau of Economic Analysis.

This year’s measurement, however, reflects deflation at negative 0.848 percent, creating an unusual situation. Never before has the cost of living decreased while the city’s relied on the Implicit Price Deflator.

The city council will consider two ordinances: One to lower the 2010 property tax levy by negative 0.848 percent that will decrease the general fund revenues by $70,149.47. The second option declares a “finding of substantial need” with reasons why the city needs to increase the 2010 property taxes by 1 percent. A majority plus one vote will be needed to pass the second option.

If the council adopts the first option, they’d have to make some cuts to balance the 2010 general fund budget. If they chose the second option, no cuts would be required.

The increase would approximately translate to an additional $3.60 in property taxes on a $180,000 home in 2010, according to Doug Merriman, city finance director.

City staff recommend that the council pass an ordinance to declare a “finding of substantial need,” to approve a 1 percent property tax increase in 2010.

The next Oak Harbor City Council meeting will take place Tuesday, Nov. 17, 6 p.m. at City Hall, 865 SE Barrington Dr.