Op-Ed: Property Taxes: separating myths from facts

Thursday, September 22, 2011

By Janne Kaje
Kaje is a ten-year Shoreline resident, volunteer Planning Commission member since 2008, and co-chair of Friends of Aldercrest, a neighborhood non-profit that helped to forge the agreement on the School District owned Aldercrest property.

Last year, Shoreline residents resoundingly approved “Proposition 1,” a property tax increase to support basic city services. Lake Forest Park voters chose the opposite path, thumping their version of Prop.1 by a wide margin. 
This year, the issue of property taxes is again center stage in LFP, this time in the mayoral race. Unfortunately, much of the rhetoric reflects either a fundamental misunderstanding or an intentional mischaracterization of how property taxes work in Washington State.

A previous writer complained that property values are falling but the LFP city council keeps raising the tax rate, and are considering another increase from the tax year 2011 rate of $1.39 per $1000 to $1.54 for 2012. If property values have gone down 10% this year as the writer suggests, then this increase actually makes perfect sense for a status quo budget. 

Why? Raising the current rate (actually $1.39551) to 1.54 is a slightly more than 10% increase. If your house value decreases by 10% and the tax rate goes up 10%, it is roughly a wash. 

Example: Your home value this year is $400,000, but drops to $360,000 next year. 2011 city taxes = 400 x 1.39551 = $558.20. 2012 city taxes = 360 x 1.54 = $554.40. You just saved about $4.00 despite the higher rate

But not all property values change by the same amount. Using King County iMap and links to property tax records, I took a sample of ten LFP homes from various neighborhoods. 
 As it turns out, in LFP, the biggest percentage drops in assessed value seem to have been on the lowest valued properties, down as much as 20% in just a few years, while the highest value homes along the waterfront have only lost 0-3% on average. Some of those have even appreciated.

So, the owners of higher-end homes are likely to pay more in real dollars if the rate increase goes through, while some other folks may even pay less than they had before. A friend of mine with a modest home on NE 205th would see her bill rise by less than $7.

So what is the city’s track record? Are they really raising taxes every year while residents struggle with tough economic times? Let’s look at the numbers, all of which are easily available from the King County Assessor website, if you do just a little digging in the Data and Reports section

The total value of all real property in LFP dropped 4% from 2010 to 2011, and a whopping 13% from 2009 to 2010. For tax year 2011, it all adds up to just over two billion dollars in total value and about $2.8 million in city property tax collections. That is 0.6% more in taxes than in 2010, which was 1.5% more than in 2009, which was 1.4% more than in 2008. 

Hardly a spending spree when you consider sharply escalating health care costs, fuel costs and contractual increases in employee compensation. Hence the layoffs. Of course the city's other sources of revenue, such as sales tax, are also down, so the overall picture is not even status quo.

Is it likely that the city will raise the rate to $1.54? Not really. The County Assessor's site hasn't posted the total property values for 2012 by city, but based on my quick analysis, I'm guessing that values have dropped by about 6% on average. 

By state law, the city can only raise the total amount it collects via property taxes by 1% annually absent a public vote, except for increases due to new construction. If my estimate is correct, and the city aims for the 1% net increase, then the LFP Council would increase the rate to about $1.50.

The bottom line is that the city tax rate doesn’t tell you anything about whether the city is actually spending more or less than last year. For that, you have to look at the budget itself, and I strongly recommend that residents take the time to go to council meetings and share their views on priorities. During 2011, the average LFP homeowner (average home value is $415,900) pays about $1.59 per day for their city government. Small drip coffee, anyone?


kevingrossman September 22, 2011 at 7:58 AM  

Nice analysis - I hope people take the time to read through it - it's a good illustration of why a casual sound bite can be so far from the truth on things... as a society, we often grab onto the apparent "simple answer" when the reality actually takes some thoughtful understanding to know what's happening - kudos to Janne Kaje for this more detailed overview.

Anonymous,  September 22, 2011 at 8:13 AM  

Both coomments sound as if this were the only tax one had to pay. That is only the City portion, of the Property tax...there is School, Fire, County, etc, plus new car fees, road fees, food prices are going up. How about all government take a 4% cut in salary and pension benefits...after all it is ONLY 4%.

Anonymous,  September 30, 2011 at 2:18 PM  

This also doesn't address spending. The amount of waste that goes into the LFP budget is staggering. Perhaps we should hire an outside consultant to come in and look at it. They can report back in 6 months...

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