I-747 could change government funding

By Warren Cornwall

Herald Writer

Voters this November will get to decide between slower-growing property tax bills and slower-growing or possibly shrinking government.

For supporters of Initiative 747, the statewide ballot measure will rein in property-tax increases and lessen the strain on homeowners.

"We’re always trying to strike a balance between how much government needs and how much taxpayers can afford. What 747 is trying to do is strike a balance between those two needs," said initiative sponsor and Mukilteo businessman Tim Eyman.

But opponents warn the measure will harm government services that citizens rely on to do everything from borrow library books to put out fires and build roads.

"This initiative, because of the local governments and junior taxing districts that it impacts, is very damaging," said Snohomish County Executive Bob Drewel, who co-chairs the No on I-747 campaign.

The I-747 effort is the latest of three tax-limiting measures by initiative guru Eyman. It is also the simplest.

Past Eyman Initiatives Past Eyman Initiatives 1999 I-695 cut the state car license tax and required a public vote for tax and fee increases. Approved by voters. Overturned by the state Supreme Court. Legislature enacted similar tax cut. 2000 I-722 capped increases in property tax collections and assessments to 2 percent a year. Approved by voters. Overturned by the state Supreme Court. I-745 required 90 percent of transportation funding go to road work. Rejected by voters.

The initiative would let governments increase property tax collections each year by no more than 1 percent or the rate of inflation, whichever is lower. Going above that would take a public vote.

Two previous Eyman initiatives, one slashing the state car license tax and another capping property tax increases, were approved by voters but rejected by the courts, partly because of their complexity.

Eyman said the new initiative’s straightforward wording should ensure that it will pass muster with courts. And he said the promise of tax relief at a time when the state’s economy is slowing should offer relief to property owners.

"On all fronts, the family budget is under assault," he said.

Several critics have agreed the measure appears to be legal. Though simple, they say, it is also severe, and would cost local governments millions of dollars in tax revenues needed to deal with growing demands for services.

At a time when the nation is turning to its public health and law enforcement systems to prepare for possible terrorist attacks, Drewel said, this measure would hamstring their funding.

"I can’t think of a less appropriate time," he said.

Governments can now raise property tax collections each year to match a conservative measure of inflation called the implicit price deflator. They can exceed that limit up to a 6 percent increase if a supermajority of the governing body declares a serious need for it.

Those limits, and the I-747 restrictions, don’t apply to voter-approved tax increases or to new construction added to the tax rolls.

Overall property tax collections in Snohomish County rose by 40 percent between 1996 and 2001, according to Snohomish County Assessor’s Office statistics.

That, however, doesn’t reflect property taxes for an individual homeowner, which can fluctuate according to property values and location. Since 1996, property taxes for an average Snohomish County homeowner have risen by 22 percent, according to the state Department of Revenue. Statewide, property taxes on homes have risen 17 percent on average.

Capping tax increases at 1 percent per year would make it hard for governments to keep pace with the combined pressures of inflation and growth, Drewel said. That limit, he said, falls below the inflation rate.

It would be felt hardest by local governments dependent on property taxes, such as hospital, school, fire and library districts, as well county transportation departments, he said.

Snohomish County’s road fund would miss out on roughly $61 million in taxes and matching state and federal funds in the next six years, according to county finance projections. That assumes the county would otherwise take a 6 percent annual increase in the road construction portion of the property tax, as it has in recent years.

Other local Snohomish County governments including cities and fire districts would miss out on $1.7 million in 2002, with that number increasing in future years, according to county estimates.

Snohomish County Council member Gary Nelson, a Republican, said he opposes the initiative partly out of concern that it would hurt the county’s road construction budget.

"I don’t like it at all," he said.

That’s a split from the state Republican Party, which has endorsed the initiative.

State GOP chairman Chris Vance said the measure is moderate — slowing increases rather than cutting property taxes. Property tax revenues could still exceed inflation, because I-747 doesn’t limit revenues from new construction or voter-approved measures, he said.

"Property taxes are still going to exceed the rate of inflation. It’s just that they’re not going to skyrocket at the same rate as they have been," Eyman said.

It may be misleading to say new construction revenues will make up the difference, said Kriss Sjoblom, vice president for research at the Washington Research Council, a Seattle-based nonprofit public policy group funded largely by business.

Those taxes are meant to compensate for the added demand growth puts on government services, not for inflation, he said.

But Vance, a former King County councilman, said those concerns don’t measure up to people’s private needs.

"I’m less concerned about government’s budget than I am about families’ budgets," he said.

You can call Herald Writer Warren Cornwall at 425-339-3463 or send e-mail to cornwall@heraldnet.com.