LYNNWOOD — The city of Lynnwood will soon be collecting a new real estate excise tax.
City officials expect the additional quarter of one percent on real estate sales to bring in about $1 million a year, with the money earmarked by state law for future capital projects.
The Lynnwood City Council voted to adopt the real estate excise tax, known as REET 2, on April 10. Collection of the tax will start June 11.
Before the Council vote, Lynnwood and Darrington were the only two cities in Snohomish County that did not collect REET 2. Mayor Don Gough said Lynnwood held out as long as possible.
“This has been around for years,” Gough said. “We have chosen not to because we have not needed to do it. We are in a situation now that makes it appropriate and neccesary to do that.
“There are serious needs for capital projects in the city.”
As an example, Gough said, “We have some serious street building projects that need matching dollars. There are no monies that come to cities to repair streets.”
Lynnwood has lost an advantage in the real estate market, according to Nathan Gorton, government affairs director for the Snohomish County-Camano Association of Realtors.
“It may not seem like much, but that one quarter of one percent is what can mean the difference between a renter becoming a home owner or not,” Gorton said. “We are disappointed that they have decided to implement that one quarter of one percent (increase). We will continue to work with them to find other ways to find affordable housing for the citizens of Lynnwood.”
The tax is collected from a seller when a property is sold. So if a house is sold for $400,000, the additional tax will be roughly $1,000.
In Lynnwood, this new tax is in addition to an existing real estate excise tax, known as REET 1, which is also one quarter of one percent. From REET 1, Lynnwood collected $1.13 million in 2005, about $880,696 in 2004 and $880,853 in 2003.
State law allows counties and cities to collect REET 1 and REET 2 to fund certain capital projects. Such projects include streets, sidewalks, sewer systems, fire stations, law enforcement facilities, libraries and recreation facilities among others.
The tax is supposed to give cities a way to cope with the higher number of residents and workers that the state Growth Management Act (GMA) requires cities to accommodate. State lawmakers adopted the Growth Management Act in 1990 to encourage urban areas to accommodate more development and preserve rural areas.
The city of Mountlake Terrace has collected both REET 1 and REET 2 since 1991, said Scott Hugill, the city’s administrative services director. In 2005, Mountlake Terrace received almost $800,000 from the taxes.
In South Snohomish and North King counties, Brier, Edmonds and Lake Forest Park collect REET 1 and REET 2 to fund capital projects.
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