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Housing slump taxes taxing districts
The slump in the housing market after the “bubble” burst is evident in this year’s assessed property value notices.
For taxes due in 2010, the assessed value is the Kitsap County Assessor’s estimation of the market value for each property as of Jan. 1, 2009.
Compared to assessed values for this year’s taxes, the value of most property in Kitsap County declined by 8 to 12 percent. Some property values declined by more and some by less, of course.
The effect on our property tax bills won’t be known for another few months, since the state’s adjustment of assessed values for the state school tax and the amount of new construction placed on the tax rolls in each taxing district aren’t yet known.
Until we know the adjustments made for each county by the state’s Department of Revenue, we can’t know whether some of the state tax burden in 2010 shifts to us or to other counties.
And, until we know what new construction adds to total valuation, we can’t know how much of the slightly higher total tax will be paid by owners whose values increased because of recent improvements.
In this strange situation when values are generally falling, new construction actually pays a little more of the total annual increase in each taxing district’s levy compared to the situation when values were soaring.
New construction raises each taxing district’s allowable total levy by an amount equal to its assessed value multiplied by this year’s tax rate.
When market values were rising and tax rates were falling each year, new construction added more to the total levy amount than was paid by the owners of the improved properties.
The opposite occurs when this year’s tax rate is lower than next year’s, as happens when total assessed valuation declines. Owners of improved property pay more as a group than their new construction adds to the total levy.
The difference is small in either case. When values were rising, owners of existing property paid — as a group — a little more than 1 percent higher taxes each year.
With rates falling, the group’s annual tax increase is slightly less than 1 percent (assuming no voter-approved increases).
Now that new construction has slowed to a crawl, the slump’s effect on the total levy amount collected by each taxing district can be worrisome.
Without substantial amounts of new construction on the tax rolls, the annual increase in revenue is small — perhaps too small to keep up with the costs of government.
Unless a taxing district is already at or near its maximum allowable tax rate, declining property values won’t actually cause a decline in total property tax revenue.
In South Kitsap, only one taxing district is close enough to its maximum tax rate to be affected for taxes due in 2010 — and then only for one of its levies.
If new construction doesn’t add a significant amount to total property valuation within the boundaries of the Port of Bremerton, the additional six-year levy imposed in 2007 to pay for the Bremerton marina will probably go back up to its maximum tax rate in 2010.
And while there may be few who will feel sorrow at the prospect, that “industrial development district” levy for the expanded marina will collect less from us in 2010 at the higher tax rate than it is collecting this year.
The voter-approved emergency medical services levy for South Kitsap Fire and Rescue may face the same situation in the following year, since the voters approved the maximum tax rate for taxes due in 2010.
If assessed values continue falling this year and new construction remains in a slump, SKFR may collect less for EMS in 2011 than in 2010.
Declines in assessed property values aren’t yet a big problem, and even a little longer slump in new construction may be manageable.
But this trend needs to end pretty soon, or we will be facing some unpleasant choices when figuring out how to pay for local government functions.
Bob Meadows is a Port Orchard resident.