Industry Has Biggest Stake In Referendum 47 Measure Limits Property Tax Hikes To Inflation, Puts Cap On Increases In Assessed Value

The people pushing Referendum 47 would like to say that if property tax reform passes, landowners will see big, big cuts in their tax bills.

They’d like to, but they can’t.

Fact is, few people - if any - will get a tax cut if voters approve the referendum Nov. 4. Instead, they’ll see smaller tax increases in the future.

Put another way, “A ‘no’ vote is for a (bigger) tax increase,” said Sen. Jim West, R-Spokane, a leading proponent of the referendum.

Boeing and Weyerhaeuser are convinced. Those corporate giants, which are among the state’s largest landowners, have donated $57,000 and $50,000, respectively, to the pro-47 campaign.

As of last week, referendum supporters had contributed $501,000 to the Committee for Property Tax Relief Now! Most of it comes from corporate donors and political action committees.

There is no organized opposition group, although some lawmakers and tax assessors are speaking out against the proposal.

The measure would be worth more than $1 million to Boeing but only a few dollars to homeowners, foes say.

About the best the Washington Research Council could say is that the referendum would be only a “modest” change. The business-backed think tank isn’t taking a stand but considers the property tax system fair the way it is.

“There were an awful lot of proposals in the last two years that would have destroyed the system. This is one that doesn’t do that,” said council President Dick Davis.

Like other critics, King County Assessor Scott Noble, insists one of the three key provisions in the referendum would shift the tax burden from prosperous landowners to those who can least afford it. He doesn’t have a problem with the other two provisions.

Here’s what the referendum would do:

Make permanent a 4.7 percent cut in the state’s share of the property tax. The Legislature approved the one-year cut in 1995, then reapproved it for another year in 1996.

If the referendum isn’t approved, the state property tax could increase to its pre-cut level. Or, the Legislature could continue reauthorizing it, year after year.

The cut is worth about $18 annually to the owner of a $110,000 home but much more to owners of higher-priced homes or commercial properties.

Require governing bodies to vote if they want to increase property tax collections by more than the rate of inflation - slightly less than 2 percent this year. As with current law, the year-to-year increase could not top a 6 percent without approval at the ballot box.

The inflation-based cap wouldn’t include any value added by new construction or land subdivisions.

Most taxing districts now automatically increase their collections by 6 percent, regardless of inflation.

Spokane County and all but one of the taxing districts within its boundaries collected the maximum this year, according to the county assessor’s office. Only the city of Spokane stopped short, collecting 4 percent more in 1997 than in 1996.

Reducing the increase from 6 percent to 2 percent would cost the county about $1.2 million in 1998, said budget Director Marshall Farnell. But the county still would collect $1.1 million more than it did this year, he said.

The smallest taxing districts - those with fewer than 10,000 residents - would be exempt from the inflation-based limit.

Officials of larger districts “are real concerned,” said Pat Humphries, chief of Valley Fire District. Humphries worries that pegging tax collections to inflation won’t keep up with expenses in his district, where emergency calls are increasing 10 to 12 percent a year.

Even with the current system, Humphries’ district must put special levies on the ballot every year. He wonders whether voters would continue to approve those levies if they know that district commissioners voted to take the maximum allowable tax - as they’d almost certainly be forced to do.

Set a limit on the amount the assessed value of any property can increase each year. In most cases, the limit is 15 percent.

For instance, if the market value on a $100,000 house increased to $125,000 in one year, assessors could only collect taxes of $115,000. If the market stayed flat after that first year, the assessed value would catch up with the market on the second year.

If the real-estate market stayed hot for more than a year, the assessed value might not catch up for several years.

That assessment cap is the most controversial provision of the referendum. Such limits “destroy property tax equity,” according to a statement from the International Association of Assessing Officers.

Proponents say the referendum will ease explosive tax increases that leave taxpayers stunned.

In nearly all cases, the assessed value will catch up with the market value within four years, said Tom Dooley of the Association of Washington Business. The organization supports the referendum, even though Dooley told legislators in 1995 that caps “unfairly burden” those whose property hasn’t increased in value, or is increasing only slightly.

Noble said referendum backers are playing down the impact of the caps. And a staff report for the Senate Ways & Means Committee noted that some of the tax burden could shift from counties with rapidly increasing property values to those where the real estate market is stagnant.

Noble notes that the referendum would remove the words “true and fair” from portions of state law that describe assessments.

“When you remove ‘true and fair’ from our law, what are you left with?” he asked. “Untrue and unfair.”

, DataTimes MEMO: This sidebar appeared with the story: REFERENDUM 47 WOULD: Limit the increase in property tax collections to the inflation rate unless governing bodies vote to take more. Currently, taxing districts can take up to 6 percent more each year, and most districts do so automatically. Make permanent a 4.7 percent cut in the state property tax. Place a cap on increases in the assessed value of properties even if the increase in actual value is higher.

The following fields overflowed: BYLINE = Dan Hansen Staff writer The Associated Press contributed to this report.