November 19, 2001
Smooth ride for Eyman, rough ride for lawmakers
by Jeanette Knutson
According to its ballot title, Tim Eyman's co-sponsored Initiative 747 "require(s) state and local governments to limit property tax levy increases to 1 percent per year, unless an increase greater than this limit is approved by the voters at an election."
Justifying his measure, Eyman said, "... I-747 only limits property-tax levy increases, but governments receive tax revenues from many different sources. Governments receive additional (and substantial) property-tax revenues from new construction and improvements. Governments also receive property-tax revenues from real estate excise taxes. And over and above that, governments receive property-tax revenues from voter-approved excess levies, school levies and bonds. And ... governments will continue to receive tax revenue from sales taxes, business and occupation taxes, utility taxes, excise taxes and other taxes and fees." In short, he called I-747 an incredibly modest approach needed to bring tax relief to overburdened taxpayers.
Opponents of the measure forecast the wheels of government are about to fall off.
Or at least, as Dick Swanson, chairman and chief executive officer of HomeStreet Bank in Seattle and chairman of the Washington Roundtable Fiscal Responsibility Committee, wrote, "... passing new spending bills without a way to pay for them (Swanson is referring to recently passed education initiatives), and then cutting taxes that pay for critical services (I-747), is like trying to keep our economic engine running while continually punching holes in the gas tank."
No doubt the post "747" ride may be bumpier for some than for others. The city of Woodinville, for instance, is fiscally sound.
Said Woodinville Finance Director Jim Katica, "Yes, we are financially healthy. We are blessed with a strong sales-tax base. Fifty-five percent of city operating revenue comes from sales tax. That's the third highest per capita sales tax revenue in King County (behind Issaquah and Tukwila).
But the city saw the Eyman bus coming down the road and scaled back its budget in July. "It's not going to adversely affect the city this year," said Katica. "The city has actually built the 1 percent increase into its six-year revenue/expenditure model, its six-year forecast. The city is assuming that's the way it'll be operating, in the near future anyway."
The Woodinville property tax rate will be approximately $1.51 per $1,000 of assessed valuation. It should yield about $2,345,000 for the city. Katica said the city had the legal right to raise that tax rate to $1.71 because the city "banked" property tax increases in the past, meaning they deferred some increases for potential future use; but the city wasn't planning on exercising that option.
So Woodinville doesn't project a revenue loss due to I-747. The 1 percent property tax increase will not cause staff reductions, hour reductions, parks and recreation reductions, street maintenance cutbacks, training and travel reductions or any other reductions that might be invisible to the public, said Katica.
"To tell you the truth, I'm more concerned about the economic downturn than about I-747 or the reduction in King County services," he said. The city anticipates the economy will turn around in the second half of 2002. But if it doesn't, sales tax revenue could dip, and "the city isn't going to achieve the increase that it has in the past," Katica said.
In the meantime, Woodinville will focus on "visioning," on planning its downtown, he said. There will be few, if any, new programs. Probably no land purchases for parks.
But Katica and King County Assessor Scott Noble, alike, caution residents that their tax bills may still increase by more than 1 percent as a result of what Katica calls "voted debt," the school levies and bonds, the adult day center measure, the Medic One measure, for example.
Sgt. Ken Wardstrom, Chief of Police Services for the city of Woodinville, said, "I don't see any immediate problems."
The city of Woodinville contracts for police services through an interlocal contract with the King County Sheriff's Office, he said. There may be impacts down the line within the Sheriff's Office, but the Woodinville Police Department contract has been established and will be met ... until 2002, at which time it can be extended.
Fire Chief Steve Smith of Woodinville Fire and Life Safety said, "If we did nothing over the next five years, we would lose $2 million. We will have to go out to the voters to lift the (levy) lid to keep the revenue coming."
Pamela Steele, spokesperson for the Northshore School District, said, "There is no direct effect on the school district, but it is way too early to understand all of I-747's ramifications. As the state, as counties and as cities lose money because of the initiative, that could impact partnerships they have formed with the school district. It has a more indirect effect on us. As others lose money, we could also lose. But it's too early in the game to say," she said.
Evergreen Hospital Medical Center, according to interim Chief Executive Officer current Chief Financial Officer David Kiehn, relies on between $10 and $12 million in property taxes each year - roughly 5 percent of its budget.
Kiehn said that technology breakthroughs and a highly skilled work force mean the hospital cannot keep budget increases to 1 percent per year.
Don Julian, managing librarian for the Woodinville Library, said he really couldn't say what the effects of I-747 will be. He does know the county library budget for 2002 will need to be cut by some $3 million. King County, he said, has hosted four public meetings to gather input on how best to deal with less revenue. Neither he nor Julie Wallace, community relations manager for King County Library System (KCLS), could be specific about how the libraries would deal with less money.
There was no mention of cutting hours, programs or the materials budget ... yet. Feedback from the public meetings will be parlayed into a budget, which in turn will have to be approved by the King County Library Board of Trustees, said Wallace.
"Property tax revenue," she said, "provides 96 percent of the KCLS's funding. So this is very devastating. And this is coming at a time when people tend to use the library more.
'It's an interesting dichotomy. You know that it is proven that in economic downturns, library circulation rises. People need the library for help finding a job, for information, for understanding; this year they're coming to e-mail friends and family on the East Coast; they're coming for community," Wallace said.
"Our focus now, however, is on finding ways to make KCLS one of the best systems in the U.S. We're going to try to find ways to do this that will have the least impact on our communities."
Elaine Kraft, spokesperson for King County Executive Ron Sims, said as a result of I-747, an additional $2 million needs to be lopped from the county's 2002 budget. She explained the county would trim services from its general fund: "The general fund provides services like human services, parks and recreation, law, safety, and justice.
"Though it will be unlikely," Kraft said, "that (Sims) marks any more human services for cuts," (already targeted for hefty reductions in his budget request).
County budget cut decisions will be made after this paper has gone to press. Officials are hoping the proposal gets approved before Thanksgiving.