Counties, cities need tax flexibility

A property tax cap set more than a decade ago made sense to Washington voters. They approved two citizen initiatives – each thrown out by courts – to cap yearly increases in property tax collections by local governments.

Bowing to voters’ twice-stated wishes, the Legislature then re-imposed the 1 percent cap. Over 14 years, the cap has proved effective in holding down yearly tax collections by local governments, putting brakes on what had been escalating tax bills issued by cities, counties, port districts and other jurisdictions that set tax rates without going to voters first for approval.

Fast forward to 2015, and there is a good argument for giving local governments a slight bit of relief from the 1 percent lid, but not going back to the old 6 percent yearly increases that governments often took for granted.

The 1 percent cap is proving too tight for counties like Thurston and many cities. As costs for police and court services keep going up, the tax revenue is not growing as quickly. And because counties and cities have fewer tax options than the state, the result is reduced services – including slower sheriff’s deputy response times locally and higher caseloads for prosecutors in the case of Thurston County.

A bipartisan proposal from Republican Rep. Larry Haler of Richland and Democratic Rep. Ross Hunter of Medina would give cities and the state’s 39 counties the flexibility they need to raise a little more revenue and maintain services.

House Bill 2255 adds inflation and population growth factors to the 1 percent cap on increased property tax collections.

Tim Eyman, the professional initiative sponsor who led campaigns to win the original caps, isn’t happy about any tampering with his brainchild.

If passed, HB 2255 would not guarantee higher tax collections, according to Josh Weiss, director of policy and legislative relations for WSAC.

In fact, Thurston County Commissioner Bud Blake, a political independent elected last fall to serve with two Democrats, told our editorial board he is unsure that he would support a higher tax collection. But Blake said the county needs the flexibility of HB 2255 in future years knowing that its slow-growing tax base is not keeping up with costs.

The Washington State Association of Counties estimates that under current inflation and population growth conditions, the new law would allow tax increases of about 3 percent – without resorting to temporary, six-year levy lifts, which some fire districts have done. If inflation or population growth surges, HB 2255 retains a 5 percent absolute cap on yearly increases.

Taxes for cities, counties, ports and the state could go up faster than today under HB 2255. But WSAC’s analysis shows that the owner of a median-value home in Olympia ($212,400) would pay about $7.94 per year with the 1 percent tax increase allowed under current law and just under $24 for a 3 percent increase – even after applying the higher tax rate to city and county tax collections. In Lacey, the owner of a median-value home ($195,900) would pay just $5.05 per year with a 1 percent increase and $15.15 with a 3 percent increase at the city and county level.

Robin Campbell, assistant Thurston County administrator, said a 1 percent increase gives the county about $350,000 in new revenue. So a 3 percent increase would be worth just over $1 million – still a small amount in a general-fund budget of $80 million per year, but enough to restore some personnel cuts or provide modest pay adjustments.

A more flexible tax cap for counties and other local jurisdictions makes sense. Lawmakers should give elected officials in local governments this tool to use at their own risk.