Gregoire’s tax measure unlikely to pass quietly

OLYMPIA — Lawmakers are expected Thursday to restore a cap on property tax hikes erased by the state Supreme Court earlier this month.

But it won’t happen without a fight.

On Monday, Democratic Gov. Chris Gregoire set the stage by releasing the bill she wants enacted when legislators gather at 8 a.m. for the special session she ordered.

Her measure re-imposes the 1 percent limit on annual property tax increases levied by cities, counties and special districts that voters put in place when they passed Initiative 747 in 2001.

The legislation re-establishes the taxing rules in place since 2002 when the initiative took effect. The high court threw out those rules when a majority of justices decided I-747 was invalid because it misled voters as to its intent.

“I think people of the state of Washington were clear what they wanted when they passed it,” Gregoire told reporters Monday morning. “We’ve implemented it for five years. We’re used to it.”

Republicans and initiative author Tim Eyman said her bill doesn’t prevent potential double-digit increases by entities that have a stockpile of unused taxing power, known in legislative jargon as banked capacity.

“Everybody says we get it but their bill doesn’t deliver a 1 percent cap. It is 1 percent until local governments want to ignore it,” he said.

Until Initiative 747, cities, counties and special districts could hike property taxes up to 6 percent a year. If an entity decided on only a 5 percent increase one year, they could bank the unused 1 percent for a future year.

It can add up. Today, there are port, library and fire districts in the state that can legally impose increases in excess of 10 percent — and some more than 30 percent.

Eyman said his Initiative 722 passed by voters in 2000 wiped out all the banked capacity. But the state Supreme Court threw out that measure in 2001 and restored all the taxing authority.

Gregoire’s bill does not address the period before I-747. As worded, it allows banking of no more than 1 percent a year from 2002 on into the future.

Rep. Ed Orcutt, R-Kalama, said voters knew what they were voting on with I-722 just as they did I-747 and so it makes sense to carry out their will for both.

Orcutt said he may propose an amendment or separate bill with one of two possible remedies: eliminate the banked capacity through 2002 or require voter approval of any increase above 1 percent.

“We need at least some way to protect taxpayers and to prevent those districts from doing an end-around of what we’re doing in the special session,” Orcutt said.

Though Eyman said he prefers to “wipe the slate clean,” he’d support preserving local governments’ banked capacity if voters must approve its use.

“It does boil down to a compromise,” he said.

Republicans aren’t the only critics of Gregoire’s proposal. Some Democrats have been openly opposed to reinstating the 1 percent limit, arguing it ties the hands of some fiscally-strapped small cities and districts.

“I understand the dilemma,” Gregoire said. She said she’s responding to those residents around the state who are nervous about their ability to keep their homes if taxes rise too much too quickly.

She also said House Speaker Frank Chopp, D-Seattle, and Senate Majority Leader Lisa Brown, D-Spokane, polled their members to ensure there are the votes among Democrats to pass it.

Also Thursday, lawmakers will debate a second bill pushed by Gregoire allowing families with incomes under roughly $57,000 to defer up to 25 percent of their property tax to future years.

Reporter Jerry Cornfield: 360-352-8623 or jcornfield@heraldnet.com.