End to ‘banked’ tax raises urged

OLYMPIA – Do more.

That’s what Olympia’s outnumbered Republican minority wants Democrats to do today, when the Legislature convenes for one day to pass two property tax relief bills.

Weeks after the state Supreme Court threw out a six-year-old property tax limit, lawmakers will likely restore it. They may also vote to let some property owners postpone half their tax payments.

The tax limit stems from anti-tax activist Tim Eyman’s 2001 Initiative 747.

The measure limited cities, counties, fire districts and other taxing districts to an additional 1 percent increase a year in property taxes, unless voters OK more. (New construction doesn’t count.)

Prior to 2001, governments were allowed to take up to 6 percent a year. And since 1986, those that chose not to take the increase have been allowed to “bank” that unused taxing authority to use – without asking voters – in the future. The point, state revenue director Cindi Holmstrom said, was to encourage districts to be fiscally conservative. By allowing them to retain the taxing authority even if they don’t immediately use it, districts aren’t penalized for making the decision to collect less than they legally could each year.

“This is simply good tax policy,” she said. “They don’t lose it if they don’t use it.”

And that’s where Democratic and Republican leaders part company. Democrats simply want to reinstate the 1 percent limit. Some Republicans, however, are pushing to do something that I-747 never did: Erase those tens of millions of dollars in never-used taxing authority.

Other Republicans argue that spending it should at least require a vote of the public.

“One percent means one percent,” said Rep. Doug Ericksen, R-Bellingham.

A 2000 ballot measure – also by Eyman – erased the slate completely but was then thrown out as unconstitutional. Despite annual ballot measures since then, he hasn’t revisited the issue.

Democrats don’t intend to eliminate it and aren’t inclined to require such a public vote either, Senate Majority Leader Lisa Brown said Wednesday evening. The taxing districts could have tapped the taxes all along; they simply chose not to.

“If it was a huge problem, I think it would have been identified before,” said Brown, D-Spokane.

Also, Brown said, the city, county and other taxing district officials who might choose to use that old taxing authority are all elected and directly accountable to local voters.

There is about $108 million in unused taxing authority statewide, according to the state Department of Revenue. In Spokane County, banked taxing authority now adds up to nearly 11 percent, mostly because of a relatively low county road tax rate.

In some small jurisdictions, it’s far more. Spokane County Fire District 8, for example, could raise its relatively small slice of residents’ property tax bills by up to 240 percent. But that’s not going to happen, said Deputy Chief Dan Blystone.

“I would comfortably say that we’re not going to do that,” he said Wednesday. “It would look bad for the district. That’s a lot of money and would impact the homeowner quite a lot.”

Plus, Fire District 8 doesn’t need to do it. The area – south of Spokane Valley and southeast of Spokane – is growing rapidly, and new construction doesn’t count toward the tax limit. So the district takes its 1 percent more a year, then gets another 1 percent to 3 percent simply from all the new building.

Democrats are also discussing a property tax deferral for households earning under $57,000 a year.

The bill, which has changed since Gov. Chris Gregoire announced it on Monday, would allow people to postpone up to half their taxes until they sell the home. They’d then have to pay the back taxes, plus interest. It would be an option only for people who’ve lived in their homes for at least five years, however.

“It’s just one little tool, one little piece of the safety net,” said Brown. She said that the regular session starting in January will include a thoughtful discussion of broader tax reforms – and would have regardless of the court’s ruling on I-747.

House Republicans are calling for a different plan: a one-time, $400 check mailed to any Washingtonian who paid property tax on their primary residence this year. A similar proposal died earlier this year.

The cost of the plan: $720 million, which proponents say would come out of state savings. The bill would require the checks to all be cut by Christmas. It appeared unlikely Wednesday evening that the checks-for-all bill would even get a hearing today.