WA Democrats ditch bill repealing voter-backed cap on property tax hikes

Senate Democrats’ controversial bill allowing local governments in Washington to exceed the 1% cap on annual property tax increases won’t be acted on this session, its author said Friday.

The legislation sought to repeal the voter-backed limit and give cities and counties the ability to levy hikes up to 3%. But it ran into fierce opposition from Republicans and residents across the state who warned the measure would drive up living and housing costs.

“It’s not going to advance this year,” said Sen. Jamie Pedersen, D-Seattle, author of Senate Bill 5770, which was sponsored by 18 of the caucus’ 29 members.

Supporters need to work on better explaining the needs of cities and counties in providing services like public safety, and helping the public better understand the mechanics of property taxes, according to Pedersen.

“We need to do the work and the reality is that given the voter mood and the initiatives we were not ready to fix that policy,” he said, referring to a half-dozen Republican-backed ballot initiatives that are on track to go to voters this November.

Republican senators credited pressure from their caucus and residents for persuading Democrats to abandon the bill.

“This is unexpected and happy news,” said Sen. Keith Wagoner, R-Sedro-Woolley. “We felt the other side would get the message if we and the public pressed hard enough.”

Senate Minority Leader John Braun, R-Centralia, called it a win for those worried they could face higher tax payments as they strain to make ends meet now.

“I’d like to think [Democrats] are starting to pay attention. Voters are having trouble living in the state with all the rising costs.”

Imposing the cap

Voters planted seeds of this debate way back in 2001 when they approved Initiative 747, the handiwork of anti-tax activist Tim Eyman. It limited cities, counties, schools and special districts from increasing property tax collections by more than 1% from one year to the next unless voters approved a larger increase. At the time, the maximum allowable increase was 6%.

The initiative passed but faced an immediate legal challenge. In 2007, a divided state Supreme Court found it unconstitutional. Days later, lawmakers held a one-day special session to chisel the limit into law. Then Gov. Chris Gregoire, a Democrat, signed it.

The revenue growth limit applies to both state levies and all regular local property tax levies but the proposed bill only dealt with the local tax.

In Washington, the revenue growth limit is 101%. This means if a county collects $1 million in taxes from owners of property in its boundaries this year, it would be able to increase it by 1%, or $10,000, the next year. That sum would be spread among all property owners.

Under the bill, the limit would be 100% plus inflation and any unused inflation from prior years – with increases capped at 103%. Using the $1 million example, a local government’s collection could rise 3%, or $30,000.

The changes in the bill would apply for taxes levied for collection starting next year.

Future fights

Erasing the 1% limit has been an ongoing request from city and county leaders who say the cap is starving local governments of enough money to provide public safety, public works and other ongoing services to residents. It has forced them to ponder cutting services or finding other sources of revenue, such as higher fees or sales taxes, to make ends meet.

“Cities are much like the state in that, for some, they have seen revenues increase over time; however, the cost to provide services has continued to outpace revenue increases,” said Candice Bock, director of government relations for the Association of Washington Cities on Thursday. This bill “ just gives the elected city officials a little more flexibility to find the right mix of funding to meet the needs of their residents.”

House Speaker Laurie Jinkins said earlier this week that the bill only provides locally elected officials the option to do what they feel will work in their communities. Too often, she said, foes focus on costs and not benefits.

“Very rarely do people ask what you are losing, what the community doesn’t get if it doesn’t have the resources to provide services,” she said, adding that “it is not us that is going to do that taxation. It’s the local governments.”

Republicans, who had been girding for a fierce floor debate for days, expect they may still have one in the future.

“I’m glad they had second thoughts this session. Watch for the next session because I don’t think they’ve given up,” Wagoner said.