A property taxation equation
As Clark County ponders hike, it sits in middle of pack in U.S.
Monday, December 6, 2010
Property tax increases in the midst of the Great Recession make for a hot topic.
Local municipalities are deciding whether to increase levy amounts by 1 percent, which they can do without a public vote.
Here’s the scorecard so far: Vancouver and Ridgefield will increase their levies and Woodland, Battle Ground and La Center are all expected to increase their levies when they adopt their budgets this week.
As for Camas and Washougal, those cities don’t have the option of increasing their levy amounts, as they are at the statutory limit.
If Clark County commissioners, after four public hearings on the 2011-12 budget, decide this week they need to raise the county’s property tax levy 1 percent, take heart and seek perspective.
Property taxes in Clark County fall in the middle among 792 U.S. counties ranked by the Tax Foundation, a nonpartisan research group in Washington, D.C.
In a 2009 study that ranked counties in terms of percentage of home value that property owners pay in taxes, Clark County ranked 373rd.
Homeowners here pay, on average, 1 percent of their assessed property value in property taxes.
Multnomah County, Ore., ranked 384th, with homeowners paying, on average, .97 percent of their assessed value.
Monroe County, N.Y. (Rochester is the county seat), was ranked No. 1; Tangipahoa Parish, La., ranked last.
To put it in simple terms, my husband and I paid $2,341 in property taxes this year on our $194,100 home in west Hazel Dell.
In Tangipahoa Parish, where homeowners pay, on average, 0.13 percent of the value of their property in taxes, we would have paid $252.
In Monroe County, where homeowners pay, on average, 2.89 percent, we would have paid $5,606.
New York also has a state personal income tax.
Plus a sales tax, which Monroe County residents can’t easily escape with a short drive to another state.
Old laws, new pains
Feeling any better about what we pay in property taxes?
Here’s more perspective: Before voters in Washington approved two property tax-limiting measures, levy amounts in Clark County grew, on average, by 6 percent each year between 1973 and 1997.
This year, county commissioners have been working through the budget process with the mantra of “don’t add to the misery” by raising the property tax levy. They are also facing the fact that property tax revenue isn’t what it used be.
While limitations aren’t new, they have only recently started to sting.
The effects of Referendum 47, which in 1998 limited the annual increase of property taxes to the rate of inflation, and Initiative 747, which limited property tax increases again, this time to 1 percent a year, weren’t felt locally for years because new construction was being added to the tax rolls.
Clark County Deputy Administrator Glenn Olson said new construction was climbing to record heights as the tax limitations were put in place, so until 2008, the impact of the limitations were masked.
New construction did not just inflate property tax revenues, it artificially increased sales and real estate excise tax revenues. New construction accounted for up to one-third of sales taxes as well as the majority of real estate excise taxes, development fees and virtually all the property tax increases over 1 percent since 1998, Olson said.
Ten years ago, new construction was valued at $1 billion annually; it peaked at $1.5 billion in 2007.
As the economy entered the recession in December 2007, the extraordinary revenue increases turned into a downward spiral following the dramatic drop in construction.
County Administrator Bill Barron said the county’s economic forecast calls for new construction to again fall, to $265 million in 2011, followed by modest improvement, to $345 million, in 2012.
All of this has added up to what Barron keeps calling “the new normal,” or adjusting to the reality that, on average, costs will go up 6 percent every year and revenues will increase by 4 percent.
To achieve a balanced budget, commissioners cut general fund costs by $62 million (20 percent) in 2009-10 and are deciding which programs and services to keep.
In 2011-12, they will be working on reconfiguring county services and expenses by looking to further automate or regionalize services. They will also be negotiating with county employee unions to start having employees pay a portion of their health care costs.
The changes will be implemented in 2013-14, Barron said.
Property taxes are the single largest source of revenue for local government.
The Clark County Treasurer’s Office, which collects property taxes and then distributes the revenues to the county’s 40-plus taxing districts, billed out $480,404,812 in taxes for 2010, said Treasurer Doug Lasher. Lasher said the county has a 96 percent collection rate.
While the majority of residents pay their taxes, that doesn’t mean they agree with them.
In a 2009 national survey of 2,002 adults by Harris Interactive for the Tax Foundation, on the subject of the fairness of state and local taxes, property taxes ranked behind the gas tax as “the least fair.” Behind gas and property taxes were motor vehicle taxes, state income taxes (which Washington does not have), retail sales taxes and cigarette, beer and wine taxes.
If county commissioners decide to increase the county’s property tax levy by 1 percent this week, the owner of a $200,000 home will pay an additional $2.85 into the county’s general fund next year, said Jim Dickman, the county’s budget director.
While elected officials in the county and cities are limited in how much they can raise the property tax levy and voters may think property taxes are unfair, voters actually control increases in junior taxing districts, such as school, library and fire districts.
The Fort Vancouver Regional Library District passed a levy this year, meaning the district will collect 50 cents per $1,000 assessed value from all property owners in 2011, its statutory maximum.
That’s an increase of about 8 cents per $1,000, and will cost the owner of a $200,000 home an additional $16.
“Ninety-five percent of our funding comes from one source, and that’s property taxes,” said Bruce Ziegman, executive director of the library district.
He said being in a junior taxing district, as opposed to relying on cities and the county for funding, has benefits.
“We don’t have to compete with other departments,” Ziegman said.
The appeal of putting services into junior taxing districts is also a reason why the city of Vancouver is considering merging its fire department with Clark County Fire District 5.
Under an annexation agreement, Fire District 5 would provide fire and emergency services, removing the obligation from the city’s ailing general fund and placing it on the district’s dedicated levy.
Fire District 5 has a taxation rate of $1.50 per $1,000 of assessed value, while Vancouver puts about $1.39 of its $2.51 per $1,000 of assessed value property tax toward fire protection.
Ziegman said it’s easier to ask voters to fund a specific service, be it fire protection, schools or libraries.
“Single-purpose taxing districts have an advantage, in that their mission is easily explained and demonstrated,” Ziegman said. “(You can tell voters), ‘This tax is specifically for the library and it can’t be used in any other way, and you can interpret for yourself how much you think a library is worth.’ It’s a straight up-or-down vote. It’s easy to explain: We can’t raise your taxes without you.”
Stephanie Rice: 360-735-4508 or email@example.com.