Washington Cities Are Scaling Back Tax Increases in Response to Initiative 747
2002-10
Initiative 747, passed by voters last November, is having a strong effect in getting Washington's major cities to hold back on property tax increases this year.
The measure, which gained 57% of the vote, requires local governments to limit increases in their regular property tax collections to 1% a year, unless voters approve a larger increase. Under certain conditions, local officials can also tap taxing authority they banked in past years to impose larger tax hikes.
Washington Policy Center regularly conducts a statewide survey of all 39 counties and 22 major cities to monitor changes in how local governments are levying property taxes on citizens. This year we decided to see how effective Initiative 747 has been in controlling property tax increases. The findings are in our new Policy Brief, "An Assessment of Initiative 747 Property Tax Limitation." Some of the study results are summarized here.
We found that 19, or 86%, of the 22 cities surveyed limited their 2002 increase in property taxes to 1% or less. Six cities, Bellevue, Everett, Kirkland, Lakewood, Port Townsend and Redmond, did not increase collections at all, while the remaining 13 cities adopted increases of exactly 1%. The survey results for all cities are shown in the bar graph on the reverse.
Three cities, Federal Way, Renton and Seattle, imposed higher increases in 2002.
Officials in Federal Way adopted a 4.8% increase, by combining the 1% allowed under Initiative 747 with 3.8% from previous years. This amount represents the city's total banked capacity, so it will have no ability to exceed the 1% limit next year.
Renton's elected leaders imposed a tax increase of 4.9%, the highest of any city in our survey. Renton has raised property taxes by almost 23% over the last five years. Inflation over the same period was under 9%.
In an effort to deflect criticism over high taxes, Renton city council members say the levy rate of $3.27 per $1,000 of assessed value will not increase compared to last year. This viewpoint is misleading. They know that rising property values will allow the city to increase property taxes by almost 5% while keeping the levy rate unchanged. Had the city held to 1%, property taxes in Renton would have been some $634,000 lower, and the levy rate would have gone down accordingly. Many Renton homeowners would have received a tax cut, as properties with fast-rising values assumed more of the limited tax burden.
Seattle's city council imposed the highest increase it could, 2.8%. While this increase is far above that called for by Initiative 747, it is well below the 6% increase the city usually adopts. The result is significant tax savings to property owners compared to past increases. Also, the city has used all its banked taxing capacity, meaning it will be limited to a 1% increase in 2003.
Our research shows Initiative 747 is working to hold the line on property tax increases. As a limited burden is applied to an expanding tax base, the measure is bringing meaningful tax relief to owners of homes and businesses across the state.
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