Elected officials mull regular levy increases

Discussions about raising regular property tax levies for taxes due in 2011 may not be as interesting this year as they were last year.

The limit on annual levy increases for property taxes due in 2011 is once again 1 percent, since deflation did not occur.

Measured by the implicit price deflator, inflation from July 2009 to July 2010 was 1.5 percent.

Unless voters approve a bigger increase in the regular levies, the annual increase is the lesser of inflation or 1 percent of the highest prior levy amount — plus the amounts generated by new construction and annexations.

When the city council of Port Orchard held its first public hearing last week to consider projected revenues for 2011, including the possible levy increase, nothing like last year’s discussion occurred.

Rather than considering whether to increase the levy despite the absence of inflation, the council will be looking at a levy increase that is less than inflation.

Last year, the council decided not to increase the levy by the 1 percent that would have been allowed if the council found a “substantial need” to take more despite the lack of inflation.

It doesn’t seem likely they will skip the allowable levy increase this year — at least, none of the council members spoke up about any such inclination.

The economy is still in the doldrums, so that part of the circumstances remains pretty much the same as before.

But when inflation actually occurs, and when the allowable tax increase is less than the rate of inflation, there is a substantial difference compared to raising taxes despite the absence of inflation.

Of course, circumstances could change if city residents make known to the council any significant opposition to raising their property taxes — even by so little as 1 percent.

The Port of Bremerton commissioners have also taken their first look at the projected revenue and budget figures for 2011.

Unlike the revenue figures presented to the Port Orchard city council, which included the 1 percent levy increase, the port district’s preliminary budget includes no such increase.

If they stick with this starting point, the port district could once again give a slight bit of tax relief to its residents while preserving the unused levy authority for possible future use.

While the port district has not been saving funds for a rainy day, or even putting funds aside to pay for capital spending needs that are foreseeable, at least the commissioners have “banked” some of their levy capacity.

Some taxpayers dislike the idea of “banked” levy capacity because of the possibility that it could be used in a future year, which would result in a greater than 1 percent levy increase.

But, when there are only two reasonable options — pay a higher tax now and let the port district save it up for later use, or don’t pay the higher tax and keep the money in your own account — the “banked” levy capacity is the better choice.

At some point almost all taxing districts have large capital spending requirements that have to be met over and above the usual operating expenditures.

Both designated reserve funds and banked levy capacity would be prudent ways to ensure that funds will be available when those capital spending requirements arise.

If the port district can find ways to reduce its reliance on property taxes to pay operating expenses, perhaps it can build up both reserve funds and levy capacity over the next few years.

Some day there may be an economic development opportunity that requires port district funding, whether it’s a new business considering coming to the industrial area or an existing business that needs infrastructure to support expansion.

It would be nice to have a port district that could respond to such an opportunity, especially since local funding is usually needed even when other public funds and private investment are available.

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