County’s Pocketbook Gets Lighter Every Year

A GENTLE REMINDER
Property taxes payments from Kitsap County residents are due Monday. For information, contact the assessor’s office at (360) 337-7160 or log on to www.kitsapgov.com/assr/.

Monday is the deadline for Kitsap County residents to pay their property taxes.
And as they write their checks — perhaps reeling from the amount — Ben Holland, director of the county’s administrative services, would like them to know that the county has budget woes of its own.
County officials are scrambling to address a budget shortfall they see hitting in 2008.


Kitsap, like other counties and cities in the state, has been experiencing a revenue shortfall as a result of citizen initiatives I-695 and I-747, which passed with overwhelming support in 1999 and 2001.
The initiatives passed, Holland said, because “citizens are demanding efficiency” in government. The effects of these initiatives, which cut costs to citizens, are catching up with the county, and by 2008 there won’t be enough money coming in for the county to meet its general fund obligations. The county’s road fund will be in the red by 2014.
Another factor affecting Kitsap County’s revenue in particular is the presence of federal properties — including Puget Sound Naval Shipyard, Naval Submarine Base Bangor and Keyport Naval Station — which are tax exempt. While the Navy and its local installations contribute significantly to Kitsap’s economy, Holland said, the lack of property tax revenue hurts.
Because of its federal properties, Kitsap relies more heavily on sales tax than other counties in the region and around the state.
Kitsap’s ratio of property tax revenue to sales tax revenue is almost 1 to 1. But Thurston and Pierce counties get $2.60 in property taxes for every dollar in sales tax. King County gets $4.50 in property tax revenue for every dollar of sales tax revenue. The statewide average is $2.80 in property tax revenue for every dollar in sales tax revenue.
County officials are seeking long-term solutions to this long-standing — in fact historic — problem by trying to expand the county’s industrialized tax base. A number of initiatives are under way to attract new business to the area. The Kitsap Sustainable Energy and Economic Development (SEED) Project, a proposed business park where new-energy and clean-technology businesses can find a home, is one example.
In the meantime, the county must deal with the looming effects of I-695 and I-747.
I-695, which went into effect in 2000, fixed license tab fees at $30 per year for all vehicles. The resulting loss of income to the county since that time is $5.8 million.
I-747, which went into effect in 2002, requires state and local governments to limit property tax levy increases to 1 percent per year, unless a larger increase is approved by voters. The effect of I-747 has been a not-so-gradual decrease in property tax rates for the general fund over the past six years. The amount collected per $1,000 of assessed property value has dipped from $1.42 to 89 cents since then, costing the county $18.5 million over the past five years.
Also affecting Kitsap County’s budget — and budgets around the state — are what Holland calls unfunded mandates: state laws placing requirements on the county without accompanying funds. Kitsap is currently subject to 67 unfunded mandates, such as laws requiring mandatory jail time for offenders caught driving under the influence or driving with a suspended license.
Holland, who has given Property Tax 101 presentations around the county with more to come, said one of the biggest misconceptions he hears is that the county gets 100 percent of property tax checks.
True — the check is written to the county assessor. But fire districts, schools and port districts receive the lion’s share. Of taxes paid by property owners in unincorporated Kitsap County, the county receives only 10 percent to 12 percent of most households’ payments.
To address its budget shortfall, the county has enacted a hiring freeze and a mandate for its departments to curtail “nonessential” spending.
The county has created two committees, one focused on short-term fixes to the revenue gap and the other to examine long-term strategic initiatives to ensure the county’s solvency.

6 thoughts on “County’s Pocketbook Gets Lighter Every Year

  1. You know, this is the same type of rhetoric we get from the teachers union in regards to spending on education. They use comparisons with other states to push their “never enough” money issue. Comparisons are just like polls. A result is obtained and then the poll questions are figured out in order to arrive at the desired result. Doesn’t take a rocket scientist to figure it out.
    Now we have the county citing this 1 to 1 ration of sales tax to property tax and comparying it to other counties. I’m sure that they utilized these counties as their examples in order to stress Kitsap county’s predicament. To really prove the point they should show the results of all counties. However, even this would not demonstrate as to why the county is in financial difficulty. The real answer lies in spending more than what is taken in. What was all the money spent on? That, the taxpayers will never really know. As an example, how much money was spent on buying up land and thereby taking it off the tax rolls? The BIG picture will be hidden from prying eyes but the taxpayer and voter will be blamed for the busted budget and will only get a view of the little picture.

  2. Did you ever notice that news articles and government statements about the effect of I-747 never provide the numbers needed to understand the actual effect?

    Children in elementary school (at least by the 3rd grade way back when) learned to multiply one number by another to get the product of that calculation.

    I guess government officials and newspaper editors and reporters missed those years of school, huh? 😉

    Here’s what the article says about the initiative that reduced the amount by which property tax levies can be increased each year:
    “I-747, which went into effect in 2002, requires state and local governments to limit property tax levy increases to 1 percent per year, unless a larger increase is approved by voters. The effect of I-747 has been a not-so-gradual decrease in property tax rates for the general fund over the past six years. The amount collected per $1,000 of assessed property value has dipped from $1.42 to 89 cents since then, costing the county $18.5 million over the past five years.”

    Notice that the effect of I-747 is misstated, as usual — claiming that the annual increases are limited to 1 percent, even though a child could look at the levy dollar amounts and see that they increase each year by far more than 1 percent. (The county’s general fund “current expense” levy has increased by an average annual rate of 4 percent since 2001. Even a liberal arts major ought to be able to figure out that 4 is not 1, and is in fact bigger than 1 — right?)

    And, notice that the two numbers a third grader would look for are missing. The tax rate is multiplied by the total property valuation to produce the total tax. Where is the total property valuation in this article? Not there. Where, then is the product of the multiplication — i.e., the total tax? Not there.

    Instead, the reader is left to believe from the headline (County’s Pocketbook Gets Lighter) and the article (decrease in property tax rates…costing the county $18.5 million…) that the county is receiving less money.

    Not true, so why even imply it?

    That $18.5 million is the difference between raising the levy by about 9 percent a year and raising it by about 4 percent a year.

    Even if I-747 had never been approved by voters, the tax rates would have gone down in 2005, 2006 and 2007 even as the levy amount soared. Would anyone (who didn’t miss the 3rd grade arithmetic sessions) believe that declining tax rates and 9 percent increases in the dollars collected by those rates would be reason to give the county even more money?

    Neither government nor reporters can spend tax rates. They aren’t legal tender.

    We and government spend dollars.

    Why not tell us what has occurred with the numbers of dollars collected by the tax? It’s the dollar amount that is spent, not the tax rate.

    Don’t tell us anything about the tax rate, if you’re short of space.

    Just tell us the number of dollars collected, if you really don’t have room to tell us both — only the dollars matter.

  3. What are we supposed to conclude from what appear to be “factoids” about the relative amounts of property and sales tax revenues in Kitsap and other counties?

    Should we feel bad for those other counties who apparently rely so much more on property tax revenues which cannot be increased more than about 4 percent a year under I-747 without voter approval? [Or, maybe it’s 5 or 6 percent a year under I-747, since Fire District 18 (“Poulsbo Fire Dep’t”) enjoyed a 5.7 percent increase in its levy revenue this year. It really depends on the value of new construction and remodeling and increases in the value of state-assessed property. But, whatever the practical limit on property tax revenue increases under I-747, it’s a heck of a lot more than “1 percent a year.”]

    Should we conclude that having major federal installations in our county which provide their own law enforcement, fire protection and other services along with their own infrastructure, while putting many millions of dollars a year into our local economy is a bad thing for us?

    I looked at a few web sites offered by the state Department of Revenue, Office of Financial Management, and Auditor to see if I could understand why our county government wants us to know about this ratio of property taxes to sales tax revenue. Their data may not be entirely accurate, but it gives some “ballpark figures” for comparison.

    The per capita sales tax revenue in 2006 from the “basic” 1 percent sales tax that goes to cities and counties in each of these counties is as follows:
    Kitsap — $148.23
    Pierce — $163.59
    Snohomish — $165.03
    Thurston — $178.83
    King — $251.60

    And, the per capita property tax from all levies in 2006 in each of those counties is:
    Kitsap — $1017
    Thurston — $1043
    Pierce — $1089
    Snohomish — $1127
    King — $1518

    Here is another “factoid”: the portion of total county population living within incorporated areas in 2006:
    Kitsap – 31 percent
    Thurston – 43 percent
    Snohomish – 53 percent
    Pierce – 54 percent
    King – 80 percent

    So, let’s see – Kitsap has the lowest portion of its population living in incorporated cities, and has the lowest per capita property tax levies being collected, and the lowest per capita sales tax revenue.

    Could it be that being a “bedroom community” means there is less revenue per capita for government?

    Would that fall under the category of “fact of life” which we have to deal with, rather than under the category of “persuasive reason to increase our tax burden”?

    What was Ben Holland’s point, exactly?

  4. Here is an interesting publication from the state Department of Revenue.

    Ben Holland may be onto something: those other counties are worse off, so we should feel sorry for them. They really do rely more heavily on property taxes than we do, because they have lower per capita levels of sales tax revenues.

    Local Sales and Use Tax Distributions to County Governments in 2006:

    Kitsap $30,321,232.18
    Per capita: $124.57

    Thurston $22,584,557.47
    Per capita: $97.73

    Pierce $56,756,512.92
    Per capita: $73.38

    Snohomish $42,801,782.08
    Per capita: $63.71

    King $95,501,753.93
    Per capita: $52.04

    It’s no wonder those other county governments rely more on property taxes than sales taxes. Their incorporated areas have so much more of the sales and use tax revenue that the county governments are much worse off compared to Kitsap County!

    But, why does Holland want us to feel sorry for those other guys? He’s not going to ask us to pay taxes to those other counties to help them out, is he?

  5. Bob,
    Very good statistical analysis. Just can’t bring myself to feel sorry for the county. They knew the effect that Initiatives would have on their income and it certainly appears that they went into denial and just kept spending.

  6. Was this part of the article a statement by someone working for the county government?

    Because of its federal properties, Kitsap relies more heavily on sales tax than other counties in the region and around the state.
    Kitsap’s ratio of property tax revenue to sales tax revenue is almost 1 to 1. But Thurston and Pierce counties get $2.60 in property taxes for every dollar in sales tax. King County gets $4.50 in property tax revenue for every dollar of sales tax revenue. The statewide average is $2.80 in property tax revenue for every dollar in sales tax revenue.

    If so, maybe you should start using words like “allegedly,” “purportedly,” or “according to,” or “claimed by.”

    In what year were those ratios of property tax dollars to sales tax dollars supposedly, allegedly, purportedly the actual numbers?

    The data for 2005 is readily available, and the ratios claimed by someone in the article are not even close to what this data shows.

    Look here for the data at DOR on the sales tax. Table 1 shows the distribution of the sales tax in 2005.

    Look here for the figures for the property tax in 2005.

    From that data, the actual ratios of property tax to sales tax in 2005 for the county general funds were:
    Kitsap: 0.86 to 1
    Thurston: 1.25 to 1
    Pierce: 1.58 to 1
    King: 2.97 to 1

    Where did those claimed, purported, alleged ratios in the article come from?
    And, how long are you going to keep using those alleged, claimed, purported figures along with the claimed, alleged, purported theory which claims to explain the difference among the counties by the presence of federal installations in Kitsap?

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