“Taxes are going up, and it’s important to understand why, and it’s also important that we begin discussing some of the problems that are emerging with our property tax system.”
— John Wilson, King County Assessor,
In the last two years, Seattle property taxes have risen almost 22 percent. Just last year homeowners on average saw their property tax bill go up by $600.
It may be hard to believe (or remember) but Tim Eyman’s I-747 in 2001 to limit property tax growth to 1% per year was in response to rapidly rising property taxes. That initiative won in a landslide but was overturned a few years later by the courts only to be quickly reinstated legislatively by a Democratic-controlled Olympia.
Of course local governments have been hamstrung by this draconian imposition, and even rural areas that overwhelmingly support such conservative measures are hurting because of it.
But the 1% cap doesn’t apply to new construction, and that is something we have in spades in Seattle and King County.
So the share of Seattle’s tax revenues coming from King County assessed property taxes continue to rise not only from both from an increased property tax base, and its 1% annual kicker, but from an increasing array of voter approved property tax levies.
In the last decade alone voter approved levies have more than doubled to in order to meet a growing list of services and amenities demanded by Seattle citizens that require additional funding. These include:
- parks facilities and some operations,
- roads improvements,
- expanding light rail,
- repairing the downtown seawall,
- preschool education and local school support,
- low income housing,
- Pike Place Market, and
- the Library system.
Just recently Mayor Murray had proposed seeking voter approval for another property tax increase – this time to garner additional monies to address the swelling homelessness problem. But that was quickly dropped for a sales tax increase at the County level. But that tax won’t take place until 2018 while the homeless crisis festers even larger a year and a half into the declared ‘state of emergency’.
Murray has stated that Seattle property taxes are the lowest in the area and among many cities, but in reality are right in the middle of a wide range of County tax rates. But what matters more are home valuations to which the local tax rate applies. And as we know, home prices in Seattle are skyrocketing because explosive tech job growth is far outpacing our already frantic housing development clip. Many people know someone anecdotally whose property taxes have doubled over the last several years.
Murray also says that people are willing to be taxed more. He is now proposing a soda sales tax to fund service for low income and vulnerable children. But to many, his choice to use property taxes and sales taxes are regressive taxing mechanisms that hit lower and fixed income people the hardest.
But consensus is that the use of levies is starting to fatigue many voters. King County Assessor John Wilson has called attention to this as an “unsustainable way to fund government”. “At some point, are we placing at risk one or more critical public services by a levy failure because we asked once too often” says Wilson.
Seattle citizens, most of the City Council (and the Seattle Neighborhood Coalition) have urged the use of development impact fees to help bolster City coffers (to support transportation infrastructure, parks, schools and fire services) as allowed under State law and used by all surrounding municipalities. The Seattle Displacement Coalition has estimated an impact fee for transportation infrastructure alone assessed at rates comparable to surrounding municipalities would have generated well over $300M between 2005 and 2014. City Council last year sought this avenue of revenue, but Mayor Ed Murray has buried that effort in one of his departments.
Another tax incongruity is the Multi Family Tax Exemption (MFTE), which demands 20% of a project be affordable units for a period of 12 years. Affordability varies by unit size (from 65% AMI for a studio to 3BR units at 85% AMI). There are currently about 30,000 ‘rent controlled’ units citywide in the program. The Office of Housing claims that those units in 2017 are projected to save renters $19M in rent (relative to average market rents) – at a cost of $29M of tax burden shifted to homeowners (the average home owner paying $11 more per year in property tax to support the program). More importantly, a significant amount of tax revenue is lost to all layers of government through these tax breaks to for-profit developers. The Seattle Displacement Coalition has estimated this to be $54M in lost revenue to Seattle over the next 12 years. This program is so attractive to developers, the number of MFTE units targeted to be produce by HALA has already been exceeded just a couple of years into the 10 year HALA program.
The SNC is pleased to be joined this month by King County Assessor John Wilson. John will talk with us about these topics as well as cover basics of how property taxes are assessed, whether HALA MHA upzones will affect your property tax bill, and various ideas on how to move to a more stable and equitable property tax system.
Join us for what should be an informative conversation. Details here.