Error made tax change permanent
When state lawmakers tweaked some tax legislation this spring, they got more than they bargained for: It seems that they inadvertently made some normally temporary tax increases permanent.
That’s according to the state Department of Revenue, which recently sent local tax officials a memo about the problem.
“Basically, it’s a law of unintended consequences,” said department spokesman Mike Gowrylow.
Here’s what happened: Under Washington law, fire districts and other small taxing authorities can boost a tax levy on existing property just 1 percent a year. To get more, they’d have to ask voters’ permission, one year at a time.
Since elections are expensive, lawmakers this spring tossed out the one-year-at-a-time rule. Instead, they wanted to allow districts to ask voters to approve a higher levy that lasts as long as six years.
That’s the length of time cities and counties get. Once the time is up – unless voters approve more – the levy “lid” reverts to the old level, plus that 1 percent more a year.
The problem, according to the Department of Revenue’s attorneys: When lawmakers wrote the new law this year, they accidentally made the higher tax permanent. Instead of reverting to the old level after six years, the higher levy stays.
Under the department’s interpretation of the new law, Gowrylow said, “If it (a levy lift) doesn’t say it’s temporary, it’s not.”
Lawmakers say that’s not at all what they intended when they overwhelmingly voted for Senate Bill 5498 last April.
“The whole idea was that we wanted it to be temporary,” said prime sponsor Sen. Debbie Regala, D-Tacoma. “Our discussion, our intent was that it would be temporary.”
Regala and at least one House lawmaker say they’ll try to fix the problem with a new bill when the legislative session begins in January. Otherwise, Rep. Ed Orcutt said, he fears “a rush” by taxing districts to make their levy increases permanent.
“Homeowners are already near the breaking point on the amount of property taxes they pay,” said Orcutt, R-Kalama. If the Revenue Department’s legal interpretation is allowed to stand, he said, voters “may not realize they’re voting on a tax that will never go away.”
State and local officials are scrambling to figure out what the law means for them. Gowrylow said that the Revenue Department is asking the attorney general’s office to research the issue.
“We’re interested in getting clarity on this as much as anybody,” he said.
Locally, two Spokane County fire districts are asking voters to approve levy lid lifts this November. But officials from both say the measures explicitly say they’re temporary. In both cases, the levy would go back down after six years, unless the districts decide to again ask voters for more.
“It’s limited to the six years. It’s not open-ended,” Spokane County Fire District 3 Deputy Chief Kelly Jennings said of his district’s request, which would boost the levy from about $1.38 per $1,000 of assessed value to $1.50 next year. The change would mean about $120,000 more for the district to help with operating expenses such as fuel.
After that first year, the remaining five years’ increases would be limited to the rate of inflation.
Similarly, the Spokane Valley Fire Department is asking voters to raise its tax levy from $1.23 per $1,000 to $1.50 next year. That would work out to $54 more a year for a $200,000 home.
After the first year, fire officials would have the option of increasing the levy by as much as 6 percent a year for the next five years.
“There’s wording in there to make it temporary,” said Fire Chief Mike Thompson. “It was always the intent of the commissioners to do it for six years.”
All told, the Spokane Valley department is hoping for an additional $2 million a year. Its long-term plans call for remodeling and building more stations to accommodate growth and more calls for service.