Woodward and the One Percent Rise

The Local Politics of Washington State Property Taxes

The math is pretty straightforward. Cities in Washington State are limited to a one percent increase in property tax (without engaging in a complicated, lengthy, expensive, and uncertain referendum). Meanwhile, monetary inflation in the current year looks like it will run around eight percent. It doesn’t require a math whiz to see the consequence: if revenues can only expand by one percent and prices rise by eight percent what can be accomplished within that budget will have to shrink (or other sources of revenue must be found). Furthermore, even at the Federal Reserve’s target long term inflation rate of two percent, taking the allowed one percent increase in property still shrinks the buying power of the property tax portion of revenues by a net one percent.

This is a simplification. There are other sources of city revenue, but all of them eventually come out of the pockets of local residents. In addition to property taxes, other major sources of municipal revenue are: retail sales and use taxes; the business and occupation tax (a pass through to the consumer in the form of higher prices); and city utilities charges (see page 13 of the proposed 2023 budget). Nevertheless, if a budget is going to keep up in buying power and one of the sources of its revenue (property taxes) is constrained to one percent per annum increase, then the money is going to have to come from an increase in some other revenue source—or the buying power will, of necessity, shrink. 

In recent weeks articles have appeared in the Spokesman that discuss votes taken by the City of Spokane and the City of Spokane Valley City Councils and the Spokane County Commissioners on the state-law-allowed one percent rise in property taxes for the coming year. The City of Spokane’s City Council passed the one percent increase on a vote of 5-2, with Councilpersons Michael Cathcart and Jonathan Bingle voting “nay”. Five to two is a veto-proof majority. Consequently there is no risk of budgetary consequences for Mayor Nadine Woodward to issue a veto. Her quoted statement on the veto is pure political posing:

“I decided to not include the tax increase to give families a break during an economic climate that has seen prices rise dramatically due to inflation and brought on fears of a recession going into the next year,” she wrote. “As our citizens tighten their budget, now is not the time to ask more of them.”

This is disingenuous bovine excrement, and the Spokesman ought to be ashamed for giving her a prominent platform from which to spew it without calling her out. If Woodward, Bingle, and Cathcart want to claim they’re being kind and offering relief by forgoing the one percent state-authorized property tax rise when we face eight percent inflation, they should explain either 1) what other source of revenue will make up the shortfall or 2) what city service or program they plan to cut in order to balance the budget. 

Consider just one small part of Woodward’s proposed budget as an example of her fiscal nonsense: She wants credit for a veto she knows will be overridden. Meanwhile she plans to fix homelessness by investing in the Trent Shelter while her proposed budget would cut $1.5 million from the funding that has maintained existing shelters. That leaves the City Council to prioritize money to maintain bed numbers. Where else was she going to cut spending if her veto were not overridden?

Keep to the high ground,

Jerry

P.S. The one percent per year limit to the increase in property taxes in the State of Washington was first put up and passed as Initiative 747 in 2001 with nearly 58% of the vote. I-747 was filed by CPAC-lauded, anti-tax advocate Tim Eyman of Mukilteo and Leo and M.J. Fagan of Spokane. In 2007 the Washington State Supreme Court ruled I-747 unconstitutional, saying the ballot language misled voters about the initiative’s substantive effects. However, given the initiative’s prior 58% approval, the limit was soon re-instated by the legislature in a special session

P.P.S. The one percent restriction does NOT guarantee that every individual property tax bill is limited to just a one percent increase year-over-year. Instead, it restricts the growth of total property tax revenues year-to-year. Individual property tax bills are determined by the interplay of assessed value changes AND changes in rate. For a detailed (and clearer) explanation of how this works read this from the Department of Revenue. If you really want to get into the weeds of the complex regulations around property taxes in the State of Washington the best resource is the Municipal Research and Services Center (MRSC). MRSC is a non-profit organization based in Seattle with a mission of “supporting effective local government in Washington through trusted consultation, research, training, and collaboration”. This is the resource used by many local elected officials to help them understand the rules. Read here and here.

P.P.P.S. One fine point: There are two “one percent” limits, which is confusing. The first is a Washington State Constitutional limit (Article VII, section 2) dating from 1972. That one percent cap, as I understand it, limits aggregate property taxes on an individual parcel to no more than one percent of the parcel’s assessed value, e.g. $1,000 on a home and lot assessed at $100,000. The other one percent limit, known as the “Levy Increase Limit” or the “Levy Lid” (RCW 84.55), is the one percent limit on tax increases discussed in this post, the Levy Increase Limit that evolved from Eyman’s I-747 anti-tax effort of 2001.