It is time for the Legislature to raise the 1 percent annual limit on property tax increases, the Kent City Council says.
The council asked city staff to add that item to a list of priorities of what Kent officials want from the Legislature, which opens its 2015 session on Jan. 12.
“The 1 percent cap on property tax increases is an artificial limit that doesn’t reflect inflation,” Councilman Dennis Higgins said at a council workshop last month. “I would prefer to see it indexed with inflation which I think honors the spirit of the Tim Eyman initiative that the voters passed. I would like to see it listed because it’s fundamental I think to getting the city budget to be more sustainable.”
Eyman, who has led several initiatives for lower taxes and fees, doesn’t want the measure touched and couldn’t believe the council wants the Legislature to change what voters approved in 2001 and the Legislature upheld in 2007.
“That’s despicable,” Eyman said during a phone interview last week. “The 1 percent initiative in 2001 passed by one of the widest margins of any initiative I’ve done. I think it’s proven over the years to be effective and strikes a reasonable balance.”
A lot of cities and counties are expected to ask the Legislature for the change, said Doug Levy, state lobbyist for Kent, at the workshop.
“I think the point being made is that 1 percent was an adjustment from what had been 6 percent,” Levy said. “So the pendulum swung and I think the concern is maybe it swung so far that all of you who manage budgets on a yearly basis are seeing your costs go up by a few percent and one of your key revenue staples go up by 1 percent.
“So is it now time 13 years later to sort of right size how that works? That is what is being brought to the Legislature.”
Councilman Jim Berrios agreed with Higgins that the council needs to support the lifting of the property tax limit.
“There are other cities and counties looking at this and there’s a reason for that,” Berrios said. “We should stand up and say we want to recognize this.”
The council’s statement about the property tax on its legislative agenda reads:
“Strongly support adjusting the 1 percent annual limit on property tax increases to better reflect the cost of providing critical services: Sustainable funding opportunities that keep up with the rate of inflation and/or growth must be explored so cities can meet their own service needs.”
Cities used to be able to jump property taxes as high as 6 percent each year prior to voters approval of the 1 percent cap.
The Kent City Council recently approved using what’s called banked capacity to get around that limit for 2015 and will raise property taxes by 5.8 percent next year.
State law allows local governments to levy less than the maximum increase in property taxes allowed under law without losing the ability to levy higher taxes later if necessary.
Kent has saved about $7.5 million in banked capacity because the city reduced its property tax levy by $1.00 per $1,000 assessed valuation in 2011 after voters in 2010 approved the formation of the Kent Fire Department Regional Fire Authority (RFA), which levies a property tax of $1.00 per $1,000 assessed valuation, said City Finance Director Aaron BeMiller.
Eyman couldn’t believe the council made that move.
“If they need more revenue they should go to their own voters,” Eyman said. “They disregarded voters and exploited a loophole to go above the 1 percent. It’s very sneaky and underhanded.”
Kent voters earlier this year defeated a proposed city property tax increase to build a new police headquarters. In 2012, voters defeated a property tax increase to pay for street and park improvements.
“They should take a hint from voters who voted two things down,” Eyman said.
• Other key issues city officials plan to take to the Legislature include protecting the streamlined sales tax mitigation program that brings in about $5 million per year to Kent; restoring shared liquor revenues with cities worth about $1.2 million to the city; and approve $600,000 to complete a bicycle trail connection along South 228th Street.
The streamlined sales tax measure passed by the Legislature changed the state in 2008 from an origin-based system for local retail sales tax to a destination-based system. That cost Kent a lot of tax money with so many businesses in the city that ship or deliver goods to other areas of the state. The sales tax is now collected where the buyer purchases merchandise rather than where the product shipped from.
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