Butler officials are debating the future of the city’s business privilege tax and are also seeking help from the state Legislature on the matter.

In a letter sent this week to state Sen. Patrick Browne, R-16th, Butler City Council asked him to rethink his proposed Senate Bill 405, which would force the city to lower its business privilege tax.

It requests that the senator instead consider a bill which would allow third-class cities to impose a service fee on properties that are exempt from property tax.

Browne and state Sen. Mary Jo White, R-21st, co-sponsored S.B. 405, which failed in the state House of Representatives this year.

Co-signers of the city letter included Ray Steffler, a representative for White; state Sen. Joe Scarnati, R-25th, and state Rep. Scott Hutchinson, R-64th.

Hutchinson is running unopposed on the Republican ticket to fill White’s seat in the state Senate when she retires this year.

In the letter to Browne, the parties state that while they appreciate his desire to address the “unfairness of taxing non-resident businesses,” a viable means of replacing that funding must be created. The letter indicates an expectation that Browne may sponsor a similar bill later.

The letter asserts that legislation like S.B. 405 would reduce the city’s business privilege tax five to 10 percent, about $50,000 to $100,000 annually, “creating a significant hardship on our city.”

The letter states that alternatives to replace revenue lost by lowering the business privilege tax often “simply shifted the burden from the businesses to the working residents or the property owners ... (and) would adversely impact the city’s efforts to increase its percentage of owner-occupied housing and might drive more residents to the surrounding areas.”

The letter suggests placing a 10-mill service fee on properties that are exempt from property tax, reasoning that tax-exempt properties receive the same fire and police services that taxable properties pay.

“Based on the assessed value of the tax-exempt properties, it appears that the City of Butler could absorb the losses due to SB 405 and potentially reduce its current business privilege tax level by 1 to 2 mills,” the letter reads.

One mill of business privilege tax provides about $157,000 in income for the city.

Last year, a volunteer economic task force estimated that 29 percent of Butler’s 2.7 square miles is tax exempt, an actual value of more than $1 million in tax dollars based on the city’s 41.5 mill property tax rate in 2011. The city’s overall tax rate was lowered to 38.75 mills this year.

That task force estimated that in surrounding municipalities the average amount of land exempt from tax assessment is 15.6 percent.