By Brian Kelly
Herald Writer
Despite all the hype, Initiative 747 won’t stop some cities and other government entities from adopting tax increases greater than 1 percent next year.
A 1986 state law allows cities and other taxing districts to set aside, or "bank," unused tax levy capacity for the following year. So cities strapped for 2002 tax revenue are planning to use their banked levy capacity and escape the strict confines of the much-celebrated I-747.
For example, the Stanwood City Council will vote Monday on a 5 percent increase in the property tax rate, a move made possible because the city has traditionally taken less than the previous maximum of 6 percent, said finance director Landy Manuel.
I-747, passed by voters in November, was aimed at limiting cities and other taxing districts to raising property taxes by 1 percent annually, unless the public votes for something higher.
Tim Eyman, the Mukilteo activist who authored I-747, said cities that defy the will of the voters by approving hikes higher than 1 percent will feel the wrath of more tax-limiting initiatives in the future.
"One percent is not 5 percent," Eyman said. "This is such an affront to taxpayers who voted overwhelmingly for 747.
"These guys still aren’t listening. They’re still taking this father-knows-best approach," he said.
So far, Stanwood, Monroe and Langley are planning to use some of their banked levy capacity. Stanwood had enough banked levy capacity to adopt an increase of 10 percent, but went lower.
"It’s a tough year for us because of the slowdown. To hold it down to 5 (percent) was pretty good," Manuel said. "Other than that, we would have been looking at some layoffs here."
The law that allows levy banking, however, is good public policy, said Judy Cox, a finance consultant for Municipal Research &Services Center, a nonprofit organization of local government experts.
"It isn’t a loophole, it’s a good law," Cox said.
The law was adopted because some taxing districts were worried that if they didn’t pass the maximum levy every year, that tax base would be lost— which would hurt if hard times came later when the city or taxing district was in a recession or worse, Cox said.
"It’s also called the ‘You don’t lose it if you don’t use it’ statute,’" she said.
But by banking levy capacity, cities and other taxing districts could give taxpayers a break in their tax rates when economic times were good.
Taxes aren’t retroactive and assessed for the years when the levy rate was not at the maximum allowed, Cox added. Using banked capacity only increases the tax base for upcoming assessments.
Local cities that are using banked levy capacity are making modest increases.
Monroe has enough banked capacity to take a 15 percent increase, but instead will raise property taxes by 4 percent next year.
Langley also will assess more than 1 percent.
How many cities will use banked capacity is not known. Assessors in Island and Snohomish counties have not yet received notice of proposed levies for 2002 from all taxing districts.
Statewide, the picture is also murky. The state Department of Revenue has not tracked which taxing districts have banked levy capacity in earlier years.
A survey done last year by the Association of Washington Cities found that roughly 45 cities out of the 230 polled had extra banked levy capacity.
You can call Herald Writer Brian Kelly at 425-339-3422 or send e-mail to kelly@heraldnet.com.
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