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When is a property tax hike not a hike?
Having raised property taxes in the recent past by more than 1 percent plus the amount generated by new construction, the legislative bodies of the Port of Bremerton and city of Port Orchard have been going through an educational process.
The effect of the economic recession plays a big role, too. The recession eliminated inflation — causing deflation instead — so that even a 1 percent increase for taxes due in 2010 would be a real increase rather than just a greater number of dollars.
When inflation was running at about 3 percent a year, paying 1 percent more in taxes would not be a tax increase if an increase is defined as handing more value to the government than before.
The situation is flipped around now, so that any increase in the number of dollars paid in taxes is a real tax increase.
And the increase would come at a bad time since many taxpayers are either unemployed or earning less than before the recession hit. A 1 percent increase may have seemed insignificant before, but not now.
The port district commissioners began their education in 2007 after taxpayers made known their displeasure about the “industrial development district” property tax to build the new Bremerton marina.
To have any hope of gaining voter approval for a tax increase in the foreseeable future, no matter how desirable a future project may be, the port district has to get out of the doghouse.
For taxes due this year and the next, the port district has forgone the allowable 1 percent increase for its non-IDD levy — making do with the increases that are generated by new construction.
It’s a small thing, but over time it could diminish some of the backlash caused by the additional IDD levy collected from 2007 through 2012.
Besides, forgoing the usual 1 percent annual increase isn’t the same as never being able to levy the increased amounts. The difference between the port district’s levy lid and its actual levy is “banked” for possible later collection.
Banked levy capacity bothers some taxpayers since they know it could be used in some later year, but taxpayers are better off with the little bit more in their own pockets rather than handing it to the port district now.
Members of the Port Orchard City Council didn’t provoke such an obvious reaction from the city’s taxpayers with their tax increases in 2006 and 2007, but the recession and those earlier increases seem to have caused a majority of the council to resist another increase in 2010.
After the city was annexed into the fire district in 2003, residents began paying taxes directly to the fire district rather than having part of their city taxes transferred to the fire district.
The city’s levy lid stayed the same, and soaring property values made it possible to go back up to the lid — which the council did in 2006 and 2007.
Now it takes the votes of five of the seven council members to approve a 1 percent increase in the levy lid for 2010 rather than allow a reduction of less than 1 percent due to deflation, but four voted against it.
Any levy increase in any year above that generated by new construction and increases in the value of state-assessed properties requires approval by the council.
This year is different because of deflation. Rather than one ordinance to increase the levy, it takes two — the second one to find a “substantial need” to avoid the effect of deflation and set a higher levy amount.
They could do as the port district has done, and keep the actual levy on existing property at the same amount while banking the unused levy capacity.
Then, the city would have the additional revenue from annexations and new construction along with banked levy capacity.
These are unusual times, so the council members — those who voted for and those who voted against the proposed increase — need to understand their options before picking one.
Bob Meadows is a Port Orchard resident.