The city might roll back some of the tax increases it imposed last year to balance the budget, but the economy must improve before it happens.

In December the City Council passed $7 million in higher taxes to help fill a $24 million budget shortfall. It included an increase in the business tax from $15.50 to $85 per employee and a jump in utility taxes from four to six percent.

Not long after, some small business owners told the council the higher taxes were creating a burden.

“I understand the need to increase the revenue for the city,” Susan Torngren, owner of Pacific Preschool, said at the time. “I’d like to let you know that a 566 percent increase in the fees per employee with less than 60 days notice is an extreme hardship on a business as small as mine.”

Councilman Ed dos Remedios is now proposing a pair of ordinances that would lower the business and utility taxes once certain financial benchmarks are reached. He said those two taxes were the most regressive.

“We have an opportunity to send a clear message to citizens and businesses of Lynnwood,” dos Remedios said. “They need to know that the council and administration are committed to a fair level of taxation.”

One measure would lower the business tax from $85 to $39 per employee. The other would reduce the utility tax back to four percent.

It would only happen when three conditions are met — when the $3 million loan from the water utility fund to the general fund is repaid, when sales tax collections exceed projections for three months, and when the general fund reserve balance is restored to $4 million.

“My argument is that the only way all three criteria will be met is for the economy to improve. When that occurs, the increase in sales tax revenue will more than offset the difference,” dos Remedios said.

The City Council will begin discussions on the potential tax rollback next week.