Quietly, city property taxes keep going up

Probably without intending to do so, the city of Port Orchard has been conducting what amounts to an experiment to determine how high property taxes can be raised without causing a tax revolt.

Property taxes paid to the city by its residents will increase in the coming year by about 24 percent. Will that be enough to get anyone’s attention?

The experiment seems to have begun in the year 2000, when the tax rate was raised substantially. Despite a mere 1.95 percent increase in the total assessed value of property within the city, property tax revenue went up that year by almost 10 percent.

In 2001, the tax rate was raised to the statutory limit, which caused taxes to increase by 7.83 percent while assessed value went up only 5.68 percent.

For the next three years, the city maintained its tax rate at or near the maximum allowed.

Had anyone been paying attention, the effect in 2002 perfectly illustrated how taxes can increase at the same rate as increases in assessed value. Total assessed value of all property in the city went up 3.29 percent, and so did the total tax – because the tax rate was the same as the previous year’s rate.

The tax rate was the same in 2001 and 2002, because it was the maximum rate allowed by law. The city council couldn’t go higher and obviously had no intention of going lower.

The following year was the first in which the annexation of Port Orchard into what was then called Kitsap County Fire District 7 allowed the city to increase its tax revenue faster than the rise in total assessed valuation – and it did.

In 2003, the city’s new statutory maximum tax rate as a result of being annexed into the fire district was $2.16 per $1,000 of assessed value, so the council set the rate at that maximum.

Property taxes paid to the city by its residents went down in 2003, but this was only because the residents began to pay for fire protection directly to the fire district rather than via the city.  Adjusting for this change in payment method, the city’s property taxes went up 17 percent.

The following year, the city raised its tax rate again, but stopped just shy of the maximum. The rate in 2004 was 1.5 cents less than the statutory limit – resulting in a property tax revenue increase of 3.43 percent while total assessed valuation went up only 2.69 percent.

Apparently because of an error, the tax rate in 2005 was allowed to decline from the previous year’s $2.18 per $1,000 to a fraction of a cent less than $1.80.

Having realized the error, the city council has set the rate for taxes to be paid in 2006 at $2.10 per $1,000, which will result in a tax increase of approximately 24 percent compared to 2005.

The annexation into the fire district has made all these increases since 2002 possible, so one might wonder why 84.49 percent of Port Orchard’s voters approved the proposed annexation during the 2001 general election.

A look at the voters’ pamphlet reveals that they were told: “Existing level of property taxes remain the same with no financial increase to either the city of Port Orchard or residents of Kitsap County Fire District 7.”

Strictly speaking, that was true. The annexation made it possible for the city council to increase property taxes at an unusually high rate, but approving the annexation didn’t cause the residents’ property taxes to rise.

The decisions made by their elected city council members caused their property taxes to increase.

Of course, tax increases are always caused by the decisions of elected officials who have the authority to impose those increases.

It’s not the rise in total assessed property valuation that causes a tax increase. It’s the decision to impose higher taxes that does it.

While one taxpayer or another may have more of the total tax burden shifted to his tax bill by the most recent reassessment of his property’s value, the entire group of taxpayers won’t see an increase unless their government officials impose one.

For those of us who live outside the city of Port Orchard, this experiment is fascinating. How long can it continue before the people living within the city notice? 

What will they do if they notice?

The increases can continue for at least another year, until the city finally gets back to the amount of property tax revenue it was collecting before the annexation into the fire district.

At that point, Port Orchard residents will be paying the city as though the city were still providing fire protection with part of that money – meanwhile, they will also be paying the fire district, which is actually providing the protection.

The statutory limit on the city’s tax rate kept the city council from moving more quickly back to that amount of tax revenue, and their own error apparently slowed them down for one year. But they’re back on track for 2006.

Wouldn’t it be amazing if the city could go that far without upsetting its taxpayers?

Robert Meadows is a Port Orchard resident.

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