Letter to the Editor: Shoreline council set the levy rate too high

Thursday, October 13, 2022

To the Editor:

Shoreline’s Proposition 1 on the ballot Nov. 8, 2022, if passed by voters, would increase city property tax by nearly 50%! Prop 1 would also create a $15 million dollar surplus for the City. At the end of 2021, the City already had a surplus of $8.49 million dollars. “Surplus” is money beyond the budgeted items for covering costs for City services. 
 
Please see: www.ShorelineLevy.info for more information. The website is sponsored by Shoreline Citizens for a Fair Levy.
 
The website includes a “No on Prop 1” statement to respond to the Voters Pamphlet. 
 
The City asked a 13 member volunteer citizen Financial Sustainability Advisory Committee in March-May 2022 for input. I served on that committee. 

Committee members did not agree and did not give a proposed levy rate. Committee members raised concerns about increasing city tax costs hurting Shoreline residents if the City Council set the levy lid lift rate too high. The levy rate in combination with property assessments makes Prop 1 nearly a 50% increase in city property tax! 

Unfortunately, City Council did choose to set the levy rate too high at $1.39 with Prop 1. 
 
Shoreline’s current property levy rate of $1.13 per $1,000 assessed valuation is already higher than: Lake Forest Park-$0.84; Kenmore-$0.89; Kirkland-$1.11; Redmond-$0.78; and Woodinville-$0.72. 
 
Voting NO on Prop 1 would allow City Council to submit a new levy proposal with a lower levy rate to Shoreline residents that covers costs for City services and is more affordable. 
 
As a Shoreline resident of over 30 years I care about our community.  I will be voting NO on Prop 1.
 
Lisa Brock
Shoreline


4 comments:

Tan,  October 14, 2022 at 9:52 AM  

The letter starts: "Shoreline’s Proposition 1 on the ballot Nov. 8, 2022, if passed by voters, would increase city property tax by nearly 50%". If the current rate is $1.13, and the proposed rate is $1.39, how does that equate to a "nearly 50%" increase?

There is another sentence later: "The levy rate in combination with property assessments makes Prop 1 nearly a 50% increase in city property tax!"

My question is, is the letter contending that Prop 1 alone accounts for the "50% increase", as the first sentence says, or is it a combination of Prop 1 with other factors not necessarily under the City's control that leads to the "50% increase"?

Jeff October 14, 2022 at 8:52 PM  

Hi Tan,

The way the Levy Lid works is complicated and confusing. It is difficult to explain or to understand in just one or two sentences.

In most years, the Levy Lid imposes a limit on the total tax levy collected for a given jurisdiction. The total tax is limited to a certain factor multiplied by the previous year’s total levy. In Shoreline, for most of the past twelve years, that factor has been the rate of inflation. That is, in most of the past twelve years, the amount we pay in property tax to Shoreline's general fund has increased by the rate of inflation. (In a couple years, it increased a bit more.)

Again, in most years, it's the total levy that is limited. The levy rate (the amount of tax per thousand dollars of assessed value) is adjusted annually to achieve the proper total levy. If property values rise faster than inflation, the Levy Rate is adjusted downward to compensate. Conversely, if assessed values drop (or rise slower than inflation), the Levy Rate increases to keep the total tax collected increasing at the rate of inflation.

For some reason, the first year of a Levy Lid Lift measure works differently. For that year, the Lid Lift measure sets the Levy Rate. The total levy for the next year is the Levy Rate that is set by the Lid Lift measure multiplied by the next year’s assessed value.

So, in the first year of a Levy Lid lift, the levy (the amount of tax we pay) changes proportional to change in Levy Rate multiplied by the change in assessed values.

The King County assessor has issued his reports for all areas of Shoreline. Assessed values in Shoreline are rising by more than 20%. Most have us have received postcards from the assessor in the past couple of months — check how much your assessment increased.

If the Levy Rate increases by 23% (1.39 / 1.13 = 1.23), and the average assessed value increases by 20%, then the total tax increases by 48%. (1.23 x 1.20 = 1.48)

City staff and City Council-members knew all of this when they decided to write the $1.39 Levy Rate into proposition 1. The City, at the same time it passed the ordinance to place proposition 1 on the ballot, was forecasting that Prop 1 would generate a $15 million surplus over the six year lifetime of the measure. (It is also worth noting that the City's general fund is running a considerable surplus for the 2021-2022 biennium. The City is not starved for cash.) The City understood that Proposition 1 would raise the general tax levy by nearly 50%, and the City has not explained what it is going to do with so much extra revenue.

Here are some references which explain the Levy Lid Lift mechanics in more detail:

The MRSC, a non-profit group of mostly lawyers set up to help local governments has written a good explainer on Levy Lid Lifts (Prop 1 is a "Multi-Year Permanent Levy Lid Lift" measure)

https://mrsc.org/Home/Explore-Topics/Finance/Revenues/Levy-Lid-Lift.aspx

And this "No on Prop 1" website explains the effects of Prop 1, and includes references (mostly from the City itself) for the figures quoted in this note.

https://www.shorelinelevy.info/

Tan Mau Wu October 16, 2022 at 11:14 AM  

Thanks Jeff, very helpful. In essence, the old levy might originally have been pegged to the old levy rate and home assessment values at the time the old levy passed, but as time passed the levy amount did not track home value increases, because of the various caps. Now, the new levy would reset based on current home values and the new levy rate, resulting in the 50% increase.

Jeff October 16, 2022 at 5:12 PM  

Hi Tan, Yes, that's exactly right.

To add a bit more context, the previous Levy Lid Lift measure, passed in 2016, also — coincidentally — set the Levy Rate to $1.39 for 2017. At that time, that Levy Rate resulted in a 12.8% increase in tax from 2016 to 2017. The inflation rate that year was about 2.5% so that was an increase of about 10% over the rate of inflation.

For the next five years, 2018-2022, the 2016 Lid Lift measure allowed the City to increase the total levy by the rate of inflation each year. Since the housing market was going crazy, that generally mean that the Levy Rate decreased each year — even though the net amount paid to the City kept pace with inflation. Between 2016 and 2022 the total general levy increased by 39%, while inflation raised the cost of living over that period by 27%.

Due to sky-rocketing assessment values, a $1.39 Levy Rate in 2023 would mean (as noted above) a 48% increase in total general levy in 2023 (from 2022). The Seattle inflation rate is currently 9%, so that increase is 39% above the inflation rate.

The City has not justified the need for such a large (more than $7 million per year) increase. The City just this last week released the first draft of the proposed budget for 2023-2024. The proposed budget contains funding for RADAR 24/7 Mobile Crisis Response Team as well as staffing increases in several departments. It mentions no cuts (other than to programs that are no longer needed.) The City predicts that if Proposition 1 is defeated, the net revenue shortfall would be $358 thousand over the next two years. That's in the noise, considering the entire budget is around $118 million for that period. (The City predicts large surpluses for the next five years should Proposition 1 pass.)

I understand that the City's costs rise with time, but housing prices are not a good index of what those costs are. Inflation (the local consumer price index) is probably the best available index for that. I can accept that the City's cost may sometimes rise faster than the inflation rate, but 39% more than inflation?

If Proposition 1 is defeated, the City will be able to place another Levy Lid Lift measure on the ballot next year — hopefully one with a more reasonable tax increase written into it.

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