Property Tax Limitation Improving, But some Cities Still Don't Get the Message
2001-16
This November voters across the state will be asked to pass judgment on Initiative 747, a measure to hold annual property tax increases to 1% or less.
As we consider this upcoming proposal, it is important to know how past tax reforms have fared. In 1997, with much fanfare, voters passed Referendum 47. This major tax limitation says elected officials should not increase annual property taxes by more than inflation unless they think they have a "substantial need" to raise taxes higher. This year the inflation rate is 2.61%.
As any manager knows, a policy decision is meaningless without vigorous follow-up. To assess whether elected officials are actually following the decision of the voters, the Washington Policy Center conducted a survey of all 39 counties and 22 major cities and asked whether they had honored the Referendum 47 inflation limit.
Our 2001 survey results for counties are presented in another Policy Note. Here we summarize our results for cities. The full report and analysis can be found at our website, www.washingtonpolicy.org.
In one way the results are encouraging. We found that 17, or 77%, of cities complied with the Referendum 47 limit, the highest number since the measure has been on the books. Six cities chose to impose no increase at all in regular property tax collections, giving their citizens an even higher level of tax relief. The complete results are shown on the reverse.
Still, our research found that not every city gets the tax-limit message. Many continue to impose yearly tax increases well in excess of inflation. Here are two examples.
Seattle imposed a property tax increase of 4.1% in 2001 compared to the previous year. This is well above the inflation limit, but it is the first time the city has taken less than 6%, the most allowed, since Referendum 47 passed. Seattle's yearly tax increases add up to more than 26% over the last four years, a level that is three-and-a-half times the rate of inflation.
Renton claims the questionable honor of imposing the highest tax increase of any city we surveyed, and is the only one that imposed the maximum 6%. The city council said it imposed the maximum in order to preserve the city's future levy capacity, since each year's increase is calculated from how much was collected the year before. Overall the city has raised taxes 17% in four years, while inflation has been less than 7%.
Many cities in our survey, like Bellingham, Redmond and Kirkland, have succeeded in holding their annual property tax increases to the level of inflation or less, proving that it can be done.
The steadily rising property tax burden in many cities is frustrating to voters. Popular discontent accounts for much of the support behind Initiative 747, and it may prove enough to make the measure law in November.
The Referendum 47 Scorecard -
2001
Regular Property Tax Collections by City
Percentage Increase in 2001 over 2000
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