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Levy lid lift measures are inevitable
The limit on annual increases in regular property tax levies makes it inevitable that taxing districts will eventually ask for “lid lifts” to help match revenue to spending requirements.
When regular levies can only be increased by 1 percent plus the amounts generated by new construction unless voters approve a bigger increase, any rise in costs that exceeds about 2 percent a year will cause a mismatch as spending requirements outpace revenue increases.
Given the previous situation, in which property taxes could be increased by 6 percent plus new construction without voter approval, it is easy to understand why people would want more of a say about property taxes.
Before the limit factor was lowered to 1 percent, many if not most taxing districts were levying amounts that required the maximum allowable tax rate to collect.
Back then, it seemed that taxes went up at essentially the same rate as assessed values, because that is what often happened. When the rate stayed the same (at the maximum) and the assessed value went up, then the tax bill rose right along with the value.
For a decade things have been different, and not just because there was a real estate “bubble” that caused values to soar.
Tax rates for regular levies that weren’t increased by voters went down as values rose by far more than 1 percent a year, since levy amounts could only increase by 1 percent plus new construction each year.
The rates are determined by simple arithmetic. Divide the levy amount by the total assessed value in the taxing district. When values soar, rates sink.
Assessed values rose much faster than the taxes collected by regular levies while the “bubble” was growing.
Then the bubble burst and values began to fall, causing tax rates to rise as levy amounts continued going up 1 percent a year plus new construction.
New construction slowed to a crawl, so the average 4 percent total increase in levy amounts during the bubble dropped to about 2 percent or less.
At the same time new construction went into a slump, sales tax revenue fell — leaving taxing districts like the county and cities with a double hit on revenues.
The inevitable request for voter approval of a property tax increase might happen even without such a double hit on revenues, but the slump in sales tax revenue raises the pressure on our representatives as they attempt to balance the budget.
Unfortunately, the conditions that raise the pressure on local government entities that rely on property tax revenues make it more difficult for taxpayers to agree to a tax increase.
If there is a bad side to the limit on annual increases for regular levies, it is this timing issue. When local government has the greatest need to ask for a tax increase, voters as a group have less ability to pay.
Asking for a voter-approved “lid lift” during a bad economy is like swimming against the current.
Of course, the previous ability of taxing districts to raise their levy amounts by 6 percent without seeking voter approval would not make things better for the taxpayers in a bad economy.
If taxpayers are reluctant to approve an increase because of the economy’s effect on their own budgets, their personal situation wouldn’t be improved by a tax increase that doesn’t require their approval.
While there are people who wish the limit factor for annual property tax increases had never been reduced from 6 percent to 1 percent, it is hard to imagine how we could return to the higher limit.
There are also some who wish no one would put a tax increase measure on the ballot, but reality doesn’t make it possible to grant their wish either.
So, we live with the need for voter approval and wait for the propositions to appear on the ballot when revenues — in good times or bad — fall below spending needs.
When they do appear on the ballot, it is up to the voters to determine whether they are willing and able to pay the proposed increases.
Bob Meadows is a Port Orchard resident