The annual computation of property taxes is simple in principle but involves several complex steps. We send our money to King County, and they distribute the taxes to many individual jurisdictions, including the state, school districts, and local cities.
Under existing law, each individual taxing jurisdiction is permitted to raise their property tax collections by 1% annually (although property taxes collected for new construction and property improvements are not included in the 1% ceiling). For example, the City of Clyde Hill has been approving the 1% increase for the last several years: In 2023, Clyde Hill received $1,313,000 in property taxes, which compares to $1,284,000 collected in 2022 – this increase includes a 1% increase due to the ceiling limit, and another 1% due to new construction and property improvements within Clyde Hill.
SB5770 proposes to raise property taxes by allowing for an increase in the annual ceiling limits – from 1% to 3%…
But before you ramble on about SB5770…our overall 2023 property tax bill for my Clyde Hill home increased by 14% when compared 2022 (the average), and I noticed that King County collected 6% more in taxes…so what about this so-called “1% ceiling limit” on increases?
The short answer: our increase in our 2023 tax bills exceeded the 1% limit due to a) our Clyde Hill homes appreciating at a greater rate than the King County average, b) the impact of various voter-approved special levy’s (e,g., Bellevue had one for the school district and King County had one for green initiatives). For example, in 2023 about $2.1 billion went to Bellevue schools, and in 2022 it was $1.9 billion, which is an increase of 11%, a far cry from a 1% “ceiling”.
Said another way, if all the properties appreciated (depreciated) at the same rate, and there were no special levys or new construction etc, then the maximum increase in our tax bill would be 1%.
What is key to remember – each taxing jurisdiction (e.g., King County, Bellevue Schools, The State School entities, Sound Transit, Bellevue Libraries, Clyde Hill) determines what they can legally collect/receive, which usually be the prior year amount plus the allowed 1% increase, the effect of the special levys approved by voters, and receipts from new construction and improvements. They then determine a valuation for each property, and levy rates for each juridisction are computed (property value/amount expected to receive in taxes).
Sounds complicated but what does this SB5770 have to do with the Clyde Hill budget deficit and my property tax bill?
One problem statement for Clyde Hill is that we have a financial deficit. And so do a lot of other cities. The reasons for the deficits vary, but one factor has been the state has passed (and will likely continue to pass) myriad legislation that increases costs to run cities. But the state has been unwilling to provide additional funding from pre-existing sources, or consider substantial relief from new mandates for smaller and/or slow growth cities.
The proper way to solve financial deficits are to challenge costs, optimize revenue, improve processes and the people involved.
The proposed SB5770, if passed, will lift the 1% ceiling to 3%. Assuming the average property tax bill for a Clyde Hill property is $25,000, this would represent a $500 incremental annual increase (note: this assumed that all current items that are part of our tax bill are authorized to request a 1% increase each year – in reality, it is likely some items, such as special levy’s, might have pre-determined amounts each year that exist for the life of the levy – as of the date of this post, I’m seeking to understand which ones are subject to SB5770 – for now I have assumed 100%, as usually politicians “find a way”…). In this example. the City of Clyde Hill would only get a small slice of this $500, which will be about $20. The remaining increase of the $480 is never seen by Clyde Hill, this money goes elsewhere.
The above provides some considerations about property taxes and this proposed SB5770. While I appreciate that regional political action committees (e.g., AWC) are supporting this bill, as they see this as a mechanism to get more funding to local governments, I’m unsure if the entire consequences of the proposal are being communicated. Property taxes are complicated, so in addition to doing your own research of SB5770, I would also encourage each taxpayer consider what sort of benefits might accrue to you by sending additional money to each of the taxing jurisdictions. A reasonable expectation is to be presented with a full analysis from the state, as to what this will mean to tax bills and where does the incremental money get allocated. None of that was on the AWC website (the folks that are endorsing the proposal).
Asking residents for additional tax money is no different than asking your CFO for more budget money. The expectation is that significant time and challenges have been made to existing cost, that people and processes that support the activity are the best possible, radical alternatives have been considered, and the ROI is deemed worth it. Assuming that SB5770 goes beyond providing these increases just to local tax jurisdictions, it will be problematic to assess the public benefit. As noted way earlier in my long winded post, a first prize outcome would for the state to keep (or lower) the current tax burden, but provide additional funding to Clyde Hill (and other small cities) to cover the cost of the dozens and dozens of new legislation that are required (e.g., Land Use) to follow.