From Pat Cole
It’s time for property valuation and reading some people’s comments shows that the property tax system is not well understood. I know I didn’t get it until I needed it for my time on the city council, and it took a concerted effort to figure out how it actually works. After reading it recently, I’m still not entirely sure I did everything right in each tax district as everyone has a different and sometimes confusing way of explaining what they do.
What is clear, however, is that there is a major misunderstanding; people believe cities get more money when ratings go up. It really doesn’t work that way; the amount that the communities collect does not depend on the ratings, they no longer collect simply because the values increase. The cities tell the appraiser in dollars how much money to collect; they do not set prices (dollars earned per estimated value of $ 1,000). The appraiser takes the amount of money to collect, dividing the total estimated value of the city by that amount to find the rate. When the new valuations come out and rise significantly, as this year, the rate will go down as the amount collected is a fixed amount. So the reviews just split the pie, they don’t add to the total that is collected. See diagram above.
The one percent limit
There are several other pieces to this puzzle. Washington has passed an initiative capping the annual property tax increase to 1% (up from 6% before the initiative), though there is an option for larger increases if voters are asked and agree. This means that the municipalities can only collect 1% more from the properties taxed in the previous tax year. This 1% limit also applies to libraries and the port. Again, this limit applies in dollars, not in the tax rate. Each year the new building is initially taxed at the current rate. These properties are then incorporated into the mix, increasing the overall taxable value and increasing the tax base. In addition, there are additional rules on how exactly they are added and taxed.
School fees are charged in the same way. The school district requests the collection of a dollar amount, and then the price is determined based on the estimated values. There are government-mandated limits on the rate schools can use for the business tax, separate limits for the other tax districts like the library, and we also vote for separate construction and technology taxes. These amounts can be in addition to the operating allowance.
It is admittedly a confusing system. There are other things that the tax districts need to consider, including the port and library. For example, the permitted increase can be reduced by 1% if the national “Implied Price Deflation Factor”, a measure of inflation, is less than 1%. Conversely, if a municipality does not increase its collections by the permitted percentage, then it can “bank” this tax capacity or save it for future use.
The question is still what we, as citizens, want from our government.
The requirements are greater than ever
The demands on the municipalities are greater than ever. Just think about the homeless crisis. Olympia has spent millions of dollars improving everything from sanitation to mental health, from public safety to housing, and is restricted from what they can do by a number of laws. The same goes for the county. These budget expenditures did not exist before. And if we want jurisdictions to spend less, what are we asking them to stop? Less parks? Less road maintenance? Bigger class sizes? Less social benefits? Less public security and police? Fewer library books and fewer hours?
Granted, the way we fund the state is complicated and can certainly be confusing. There are borders, multiple constituencies, an onslaught of demands and no easy solutions. It’s safe to say that each of us would make different budget decisions in some cases, but that is the nature of the system. I remember thinking in the Council that no one would agree with me on all of my votes, and in hindsight I sometimes had my own doubts about what was the right thing to do.
Bottom line: This is the funding system that we have all developed over time. And if we want to change anything, from the way we raise money to how we spend, the first step is to understand the system so we have a starting point to discuss what to do.
PS If you think any of this information is incorrect please let me know. I would like to know, and accuracy is what writing is about.
Pat Cole – [email protected] – is a former member of the City Council of Olympia. As a private citizen, he tries to set positive accents and lead a well-founded discussion about local citizens’ issues.