Senator wants broad look at property tax

By Jeanne Kohl-Welles

Last Thursday, Nov. 29, lawmakers met in Olympia for a one-day special session. With the regular legislative session only six weeks away, many in the public were understandably confused as to why this was necessary. After all, there was no natural disaster, no bridge collapse or other major infrastructure emergency, no immediate threat to the public health or safety.

Instead, lawmakers were called to Olympia to reinstate the 1 percent cap on property tax growth that had been nullified when the state Supreme Court overturned Tim Eyman's 2001's Initiative 747 in early November.

And just like that, within the span of about 12 hours, I-747 - which I believe was offered more as an expression of anger by a demagogue than an attempt at sensible public policy - was back in place. This happened without much consideration of the impact the initiative has had on our local communities, or of alternatives that might be better suited to limit high property tax bills for taxpayers while ensuring sufficient revenue streams for local governments.

Knee-jerk reactions to current events rarely produce good public policy. One of the great values of our legislative process is the consideration of a wide range of solutions to a given policy problem, the opportunity for public input from all sides of an issue, and a thorough, careful decision-making process that accounts for as many potential consequences of a policy solution as can be reasonably anticipated.

While I applaud Gov. Gregoire for wanting to provide for certainty for our taxpayers, I believe lawmakers missed an opportunity for a broader, more substantive look at our property tax structure than the one-day special session provided. And I believe that by reinstating the 1 percent cap - which represents one of the most arbitrary numbers in state statute - we missed an opportunity to undo a real harm.

Property taxes represent local governments' largest source of revenue, and cities, counties, ports, libraries, hospitals and fire districts have definitely struggled under the 1 percent limit. They've been asked to keep services stable with considerably less funds available. Since I-747 went into effect, local jurisdictions have lost over $1.3 billion.

The effect has been real. Because it does not allow local governments' main funding source to track with the actual cost of the services they provide, nor to keep up with population growth and inflation, I-747 has been like a straightjacket on local jurisdictions. Many have been forced to cut police and fire protections, let sewage leaks go unfixed, and eliminated other services outright.

In addition, property taxes account for a sizable portion of local criminal justice services, reported by the associations of counties and cities to be about 80 percent of local government spending. With public demand for increased penalties and major sex offender policy reform recommendations from Gov. Gregoire's task force up for consideration in the 2008 legislative session, now is not the time to create even more funding uncertainty for local governments.

Nobody likes taxes. My husband and I believe our property taxes are too high and we understand the appeal of I-747's 1 percent cap. Yet public services and public safety aren't free. Ultimately, we need a more sensible and sustainable approach to reforming our property tax policy, especially changing it from a regressive structure in which middle- and low-income payers are hurt the most.

One option is to peg property tax growth to the cost of inflation. I proposed this as an amendment to the bill that reinstated the 1 percent cap.

My amendment would have reinstated the 1 percent cap for past periods to avoid confusion and unexpected retroactive tax increases. It would have kept the 1 percent cap for the state levy. But moving forward, it would have set a new more reasonable limit for local governments. The implicit price deflator would have been used to determine the cost of inflation, and that rate would have served as the cap - with a 3 percent ceiling. In 2006, the implicit price deflator was 2.8 percent, and is projected to be 2.3 percent in 2007.

This would have allowed local governments to keep their revenue streams most closely aligned with the growing cost of services, and would have given them more flexibility to meet the needs of their citizens.

My amendment was not adopted - largely because of the perception that lawmakers needed to respect the "will of the people" as expressed in I-747. But I believe this to be a canard.

In the 36th legislative district, voters overwhelming rejected I-747 with a 66 percent "no" vote. While I-747 was approved statewide by 58 percent, it was approved in an off-election year, with fewer than 45 percent of registered voters having voted. Of total registered voters statewide, only 25 percent approved I-747 -- hardly a mandate of the people. I continue to believe that the will of the people is for stability in the public services that make our community's places where we want to live, work and rear a family.

Another amendment I supported, proposed by Sen. Eric Oemig, D-Kirkland, which was also not adopted, would have allowed a one-year cap of 1 percent, with the Legislature creating an alternate approach to be placed with the 1 percent cap on next November's ballot.

While the special session was a missed opportunity, lawmakers can still return to the issue of property taxes in 2008.

Besides considering options such as that offered in my amendment to ensure stable funding for local governments, we will also explore options to ease some of the pressure property tax bill place on our household finances. Likely options will include a homestead exemption, which would allow exempting a portion of your home's value from the calculation of your property taxes, and a circuit breaker, which would cap your tax bill at a percentage of your household income.

It's my hope that the special session was the beginning, not the end, of a broader discussion about real property tax reform.

Jeanne Kohl-Welles is a Democrat in the Washington State Senate and represents the 36th District covering Ballard. She may be reached at kohl-welles.jeanne@leg.wa.gov or 360.786.7670.