Editorial: Local governments need fair boost of their tax cap

By The Herald Editorial Board

We workaday citizens aren’t the only ones plugging away under inflation to fit our spending within our household income; the same holds true for the taxing districts — counties, cities, fire districts and more — that provide the services we rely on and expect in return for our tax dollars.

The difference is most of us — whether we can count on a modest pay raise or a cost-of-living increase from Social Security — wouldn’t expect to meet our needs with a 1 percent increase to our household revenue.

That’s the constraint that those local governments have lived with since 2007, when the state Legislature — attempting to shoehorn an initiative into law that was passed by voters but found unconstitutional by the state Supreme Court — capped annual revenue increases for those jurisdictions to a 1 percent increase. Some 15 years later, with cities, counties and others having now pared services to the barest of basics, those local governments continue to see their expenditures increase beyond what they are allowed to assess, without making a special levy request to voters.

That, in turn, has added the term “structural deficit” to the vocabulary of local government.

Legislation, one of two proposals that survived a review of tax reform proposals by the bipartisan and bicameral Tax Support Work Group, would raise the cap to 3 percent from the current 1 percent, providing a fairer and more sustainable share of revenue, while retaining the authority of local governments to set their budgets with the consent of local residents through the annual budget process and public hearings.

House Bill 1670 would allow local governments and junior taxing districts to consider changes in population and inflation in setting annual property tax increases within a 3 percent increase. Just as they do now with the 1 percent cap, those local officials would have to set public hearings on the budget requests and still — if they want to keep their elected seats — justify to voters those revenue requests.

The cap as set by state lawmakers in 2007, while respecting the wishes of voters, didn’t respect the reality of local economies; 1 percent was an arbitrary ceiling, set more to secure votes for Initiative 747 than provide a reasonable and sustainable level of revenue for local governments.

Consider that prior to the law’s passage, state voters a decade earlier set the local taxing districts’ property tax cap at 6 percent or the rate of inflation, whichever was lower.

Under the current cap, property tax revenues on average provide about 22 percent of local governments’ budgets. As that source of funding has limped along, local governments have turned to fees and increases to their share of the sales tax, a more regressive tax that hits lower- and middle-income families harder than higher-income households. And what was saved in lower property tax bills, then, was added to what we pay in higher sales taxes and additional fees. Or it forced cuts in services that residents had previously enjoyed, meaning delayed street maintenance, reduced hours at libraries and senior centers and cutbacks in parks and recreation programs.

And those property tax savings haven’t been that impressive for homeowners.

Snohomish County Council Member Megan Dunn, speaking remotely in favor of the bill at a public hearing before the House finance committee earlier this week, noted that the county used some of its “banked” tax capacity to seek a 2.5 percent increase in 2020. The tax increase for the average homeowner, Dunn said, amounted to $7.39. But with that additional revenue, the county was able to provide pay increases to sheriff’s deputies and make a long-term investment in body cameras.

“When we could increase (revenues) by more than 1 percent our residents saw a return in investments that allowed critical public safety investments and better staffing to provide county services,” Dunn said.

For fire districts, the limits of the 1 percent cap are stark, testified Roy Waugh, commissioner for Snohomish Regional Fire and Rescue.

About 80 percent of the district’s spending goes toward the pay of firefighters, EMTs and other staff, and those labor contracts routinely increase at the rate of inflation.

“This year’s labor contract includes wage increases of 9.5 percent. We cannot cover labor costs with only a 1 percent increase. Our only other option is to ask for levy lid lifts,” Waugh said, a process that is time consuming and carries its own financial costs in seeking approval through frequent elections.

Those elections to approve a lift of the levy result in confusion and frustration among district residents, said Michael McConnell, a deputy chief with Snohomish Regional Fire and Rescue.

Elections make sense, McConnell said, “when we come back to citizens for large capital projects and enhancements in service,” but less so when the election seeks basic operating revenue.

“Making these adjustments will help to sustain service, and keep us from having to continually come back to expend taxpayer dollars for that vote to maintain operations they’ve already approved,” he said.

“We are not asking you to vote to increase taxes,” Waugh told the committee. “We are asking you to support legislation to give local jurisdictions the tools we need to make our taxing decisions.”

More than 15 years ago, lawmakers — attempting to follow the wishes of voters — put the finances of local governments and taxing districts on a 1 percent autopilot. But that autopilot can’t readily respond to the economic realities of the moment and the demand for services expected of counties, cities and other providers.

Voters put local officials at the flight controls of local government; those officials should be given the modest flexibility of up to a 3 percent increase to provide the services that taxpayers expect.