Second Reader's question about Shoreline's Prop. 1 and answer

Tuesday, November 22, 2016

A second reader has a question about the recently passed Proposition 1 in Shoreline. (see first article)

Question

Over the last 4 years, property taxes went up by about 25% (in my case from $3600 to over $4500) because of property value increase. This is the result of a high demand for housing in King county that pull the home prices up.

Shouldn't the additional income raised through higher property taxes be enough?

  • In 2012, 12% of my $3600 in property taxes went to the city of Shoreline: $432
  • In 2016, 12% of my $4500 in property taxes went to the city of Shoreline: $540
So in 4 years, the city of Shoreline got a lot more than they used to and on top of that is asking for an additional $64.

Not that $64 is a huge number, but Shoreline already has some of the highest property taxes in King county. It is a bit hard to swallow.

Answer from Sara Lane, Administrative Services Director, City of Shoreline

I understand that your situation makes it seem like the City has been having large property tax increases each year. However, the City is limited in how much they can increase their property tax levy each year. And while in 2010 Shoreline voters approved a Levy Lid Lift which allowed the City to increase their property tax levy by the year to year change in CPI (inflation) instead of the state mandated limit of 1, CPI changes have averaged less than 2% over the past 6 years.

Following is a simplified explanation of how the changes in property tax assessment and valuations work and the impact to individual properties.

In Washington State a City’s property tax levy is generally limited to grow 1% per year plus the value of new construction regardless of the increase in assessed valuation (AV) for the City as a whole. The tables below walk through an example for a City with three houses each valued at $200,000, for a total AV of $600,000. The City set a levy rate of $1.00 per $1,000 AV in the first year. Each house would pay $200 in property tax to the City, resulting in a levy totaling $600.


Home 1
Home 2
Home 3
Total City
Year 1 Assessed Value (AV):
$200,000
$200,000
$200,000
$600,000
Times the Levy Rate (LR):
$1.00
$1.00
$1.00
$1.00
Year 1 Tax Levy (AV*LR/1,000):
$200
$200
$200
$600

Let’s assume that there was no new construction and that the AV for the three houses as a whole increased 15%, resulting in a total assessed valuation of $690,000. In order to limit the growth of the levy to 1%, meaning the City can only levy $606 in year two, the levy rate is lowered to $0.87826 per $1,000 AV.


Home 1
Home 2
Home 3
Total City
Year 2 AV Increase:
10%
20%
15%
15%
For Year 2 the City can increase the total levy by 1% from $600 to $606.
Year 2 AV:
$220,000
$240,000
$230,000
$690,000
Times the LR:
$0.87826
$0.87826
$0.87826

Year 2 Tax Levy (AV*LR/1,000):
$193.22
$210.78
$202.00
$606.00
Change in Tax Paid:
($6.78)
$10.78
$2.00
$6.00

As you can see in the second table above, the 1% limit applies to the total levy but not to property tax increases for individual homes. In the second year, houses that experienced a growth in AV less than the citywide total will pay less in property tax, a house that experienced a growth in AV more than the citywide total will pay more, and a house that experienced a growth in AV equal to the citywide total will experience a 1% growth.

Overall the City is able to increase its levy by $6.00 and the change in the levy rate applied to all properties located in the City ensures that the amount the City collects is limited.

As noted earlier, in 2010 Shoreline voters approved a levy lid lift, which allowed the City to raise taxes by the year to year change in CPI instead of the 1% - but the impact to individual properties is the same.

Based upon the numbers you provided, it appears that your property value has been increasing faster than the average for the City.



1 comments:

Kenrick November 26, 2016 at 8:15 PM  

Thank you, the answer is really helpful to understand the calculation.

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