The Senate voted overwhelmingly Wednesday to pass a much-ballyhooed property tax cut measure that both backers and critics have blown out of proportion.
The bill, SB 5212, is a watered-down version of an earlier bill that would have vastly reduced the ability of local governments to increase property tax rates and assessments.
The new version requires the governing bodies of all taxing entities with more than 10,000 people to vote by a simple majority to raise the property tax rate, and by a “supermajority” to raise the rate beyond the annual inflation rate, up to a maximum of 6 percent.
As is the case now, a vote of the people would be required to raise the rate above 6 percent.
The measure would also limit assessment increase to 15 percent a year.
Republicans who control both houses of the Legislature heralded the bill as a sweeping change that will save taxpayers bundles of money. Democrats have said the bill hurts local governments. The truth is somewhere in the middle.
Taxpayers will probably still see their property taxes go up. At the most, the bill may deliver a small cut in the increase, depending on what local governments decide.
The bill, combined with a 4.7 percent cut in the state share of the property tax enacted by lawmakers earlier this session, could chop $7.7 million out of Spokane-area property tax revenues collected by all districts in 1998, the first year of implementation.
Owners of a $110,000 home might see their property taxes reduced by $47 in 1998.
But both estimates assume no local governments vote to raise collections over the rate of inflation. Reductions could actually be far lower.
In all cases, the least wealthy taxpayers will reap the least benefit. A provision of the bill that limits spikes in valuation to 15 percent a year works at their expense, by averaging assessment increases.
That shifts a share of the burden to those whose assessments aren’t going up as fast.
Backers of the bill said its biggest benefits play out over the long term.
Over the 30-year life of a mortgage on a $110,000 house, taxpayers might save $15,000 in state and local property taxes. Again it depends on how much values increase and what local governments and voters decide.
At the very least, the bill requires local officials to be more accountable, backers said.
“People can argue it’s not much of a cut,” said Sen. Jim West, R-Spokane, chairman of the Senate Ways and Means Committee.
“But this is real reform. It says the state will collect less money in the future. And we hope local government will too because we are subjecting them to the accountability of taking a vote.”
One measure of the bill’s mild effect was the generally low-key reaction of local government officials Wednesday.
“I don’t think it’s going to hurt us,” said Dave Mandyke of the city of Spokane. The city’s increase in property tax collections is already running at about the rate of inflation.
In Spokane County, reducing collections to the rate of inflation would reduce collections about $1.2 million in 1998, budget officials estimate. The general fund budget is about $240 million.
Michael Wirt of the Spokane County Library District called the bill “a pretty good compromise. It offers some relief, and gives some latitude to the local taxing authorities.”
Library district board members would probably vote to increase collections over inflation, if the need were there, Wirt predicted.
Going any higher is probably “not viable,” he predicted.
“In this time when people are concerned about property taxes I think people would be unwilling to add anything, even for the library, which has a good reputation in the community,” Wirt said.
Jim Graue, assistant chief of Fire District 9, which serves about 32,000 people north of Spokane, said limiting collections to the inflation rate would cost the district about $60,000.
But Graue was certain the loss could be made up - through a vote of the people if the district pursues a special levy.
“This bill doesn’t really change things a great deal when you get right down to it,” he said.
Gov. Gary Locke must now decide whether to sign the bill, veto it, or let it become law without his signature. At a Wednesday press conference, Locke said he was concerned that the tax breaks adopted by the Legislature are too expensive, costing more than $220 million.
In addition, Locke has promised to roll back business and occupation taxes to pre-1993 levels. That would also cost about $200 million.
Locke hinted he might forego the business and occupation tax rollback if lawmakers insist on the tax cuts they’ve passed so far.
Charlene Cooney, Spokane County’s tax assessor, has already fired off a letter to the governor asking him to veto SB 5212, which she said would increase administrative costs in her office by $116,134 the first year.
“This bill will slow tax increases, but will not save homeowners vast sums of money,” Cooney said.
“People in the lower-value properties will see the least break, and I would think they are the very people we are trying to help.”
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