Where Will The Property Taxes on Cars Go?

greenspun.com : LUSENET : I-695 Thirty Dollar License Tab Initiative : One Thread

The following questions assume cars will be subject to property taxes once I-695 passes.

Which government agencies receive the monies? Does it all go to the state? Or, does it go to the counties? Or is it split up according to some formula? Also, can our representatives spend the monies any way they want?

Will businesses pay a different property tax rate than private individuals? What would be the property tax rates on cars?

Can the legislature legally authorize the Department Of Licensing (DOL) to collect the property tax, and if you don't pay the tax, you don't get your tabs? Or, would this violate I-695?

Finally, if the legislature can authorize the DOL to collect the property tax on cars, can the legislature also authorize the use of the existing valuation of cars? Or, again, would this violate I-695?

If, in fact, cars will be subject to property taxes, then the anti-I-695 folks are "lying" when they claim there will be drastic cuts in government programs. In which case, I-695 is nothing more than an initiative requiring voter approval of all future increases in taxs and fees. Sounds great to me!

-- Matthew M. Warren (mattinsky@msn.com), October 21, 1999

Answers

Actually, they'll never collect any personal property tax on cars. The reasons are obvious if you listen to the anti side of this issue.

They have solemly assured us that the world will, in fact, end on November 3, 1999. There will be no one left alive to collect the tax; no roads to drive the cars; no one to build roads, and all government services will cease.

So why worry?

Westin

"A zebra does not change its spots." - Al Gore, attacking President George Bush in 1992.

-- Westin (86se4sp@my-deja.com), October 21, 1999.


Westin:

ROTFLMAO! Love the post! I guess I'll also have to dig into my Y2K survival stash early too!

I am worried though that people may be getting scared and beliving the ads out there. DON'T LISTEN TO THEM! THEY ARE TRYING TO SCARE YOU! Look over the posts in this site and find out the truths, and if you can't find the answer to your question...post it!

-- Sandy D (sandy_d1@yahoo.com), October 21, 1999.


Get this!!! Each county would have to adopt a property tax on vehicles. And each time someone moves to a different county the property tax rolls would need to be changed. Land and houses always stay in the same county... WOW the resulting fiasco would cost so much money that the government would lose MEGABUX on the scheme

-- maddjak (maddjak@hotmail.com), October 21, 1999.

Again, don't laugh. This initiative would cause the fiasco. Bad law. Vote NO.

-- dbvz (dbvz@wa.freei.net), October 21, 1999.

A serious question deserves a serious reply.

As you correctly assume, voter approval of I-695 (which expressly repeals the only statutory exemption of cars from the application of existing property tax laws and procedures), the Washington Constitution (which requires that all property not made exempt by general legislation be subject to ad valorem taxation), will make cars subject to property tax. You asked: "Which government agencies receive the monies? Also, can our representatives spend the monies any way they want? " All non-exempt property is subject to property tax imposed by each taxing district in which it lies. That includes the schools, county, and any city, fire district, hospital district, library district, irrigation district or other district which is authorized to impose property tax. The sum of the tax levy rates of all of these districts, after reductions to keep them within existing strict constitutional and statutory limitations of both the total dollars each district can levy and the rate to be applied is multiplied times the assessed value of the taxable property (including cars, if I-695 passes). Taxable property is also subject to special levies authorized by voters, which sometimes are specifically earmarked for narrow purposes, such as a bond issue or special purpose levy. The dollars that each taxing district levied is distributed to that district for any lawful expense authorized by statutes applicable to that district or limitations of voter approval. Most taxing districts have only limited purposes for which the money can be spent, and they can't spend it for other purposes, or give it to another government for a higher priority purpose. These taxing districts are not the same government agencies which receive MVET funds which would be repealed by I-695, and even the ones which get both property tax and MVET get them in much different proportions. Most of them could not collect any more property tax from cars, to make up for any loss from MVET, because we already have strict property tax limitations. Will businesses pay a different property tax rate than private individuals? What would be the property tax rates on cars? Unless exempted by general legislation (as cars now are) property of the same class is required by the Washington Constitution to be taxed uniformly, without regard to its ownership. The rates would be the same as the rates applicable to other property, such as your house in the year levied. Can the legislature legally authorize the Department Of Licensing (DOL) to collect the property tax, and if you don't pay the tax, you don't get your tabs? Or, would this violate I-695? If I-695 is approved, the legislature could in the next session require proof that property tax on cars has been paid before tabs are issued, so long as the legislature does not increase the monetary amount of taxes levied on property over those approved prior to January 1, 2000. Current law has a similar requirement that before getting a moving permit for a house or mobile home. Applicants must satisfy issuing authorities that property tax on the item moved has been paid, or the issuing authority must collect that tax before issuing the permit. "Finally, if the legislature can authorize the DOL to collect the property tax on cars, can the legislature also authorize the use of the existing valuation of cars? Or, again, would this violate I-695?" Actually, the legislature doesn't have to, nor can it change the method of valuing cars for property tax purposes. The Washington Constitution requires all property of the same class to be taxed uniformly. Since all property is taxed at the true and fair market value which a willing buyer would pay a willing seller, neither being under any compulsion, that will stay the same as existing property taxation of other kinds of property. It won't be the same as the existing MVET valuation, which is not based on the market, but upon manufacturer's suggested retail price, using a depreciation schedule which depreciates cars over many more years than would be available in the market.

The conclusion which you draw, that anti-695 folks are "lying" when they claim that I-695 will cause drastic cuts in programs is wrong, however, because of I-601 and Referendum 47. Under I-601 and Referendum 47, the total dollars a taxing district can collect is limited to the total dollars it levied previously, plus an adjustment for inflation, to give the number of dollars to provide the same level of service as before (but that is even cut off at 6%), and an adjustment for tax levied on new construction (which will also require new government services). Since the total dollars which can be collected can't increase, if the value of the total taxable property in the district is increasing because of inflation or new improvements, the rate determined by dividing the dollars authorized to be collected by the total valuation in the district, forces tax rates down. Adding cars to the total valuation of each taxing district will simply reduce property tax rates in those circumstances. You will pay for the same tax on your car as on other property, but the rate on both will decrease. The result is that taxing districts will receive NOTHING from the addition of vehicles to property tax rolls by the voters. In addition, if I-695 becomes effective, property tax rates may be reduced even more, because it contains none of the existing exceptions in I-601 and R-47 allowing a taxing district to levy more dollars next year to keep existing levels of service. Though taxing districts will get property tax dollars for vehicles, the amount they get from other property will be reduced by a like amount, and they will lose all MVET, and all tax necessary to preserve existing levels of service when property values increase. Unlike I-601 and R-47, I-695 has no emergency exception for local governments, allowing them to collect increased tax (up to other statutory limits) if an emergency depresses taxable property values. Under I-695, the legislature has a power to increase state tax for up to 1 year for an emergency, if 2/3 of each house approves, but that won't help local governments get by if an earthquake or storm greatly reduces property values.

No one is lying who says that existing programs for local government will be cut by lost MVET dollars voters restricted last year in R-49 largely to local transit, transportation, law enforcement and health programs. In fact, they will also lose property taxes, because I-695 left out any exceptions contained in previous legislation for increased property value and emergencies. Since property taxes are imposed annually, unlike any other tax or fee affected by I-695, just to maintain property taxes to support existing programs would require election costs for every taxing district every year, and voter approval. Some cities lose 30 to 40 percent of their entire budget just from MVET, without counting future increasing property tax cuts which they haven't even estimated. Transit districts will nearly all be reduced by that amount in the first year, and none have considered how much property tax reduction I-695 will cause them. Since I-695 will not only keep them from increasing property tax to pay for any priority programs caused by the MVET loss, but will cut property taxes too, "drastic cuts" is not an unrealistic scare tactic, it is a certainty for cities, counties and districts losing MVET. Since local governments already have tax limitations on all their taxes, they can't even choose the logical method of asking voters to approve an increase in other taxes over those limitations, to pay for priority services everyone believes necessary, if MVET impacts their budget.

All counties would also incur large expenses to set up and administer property taxation of vehicles if I-695 is adopted. It is much more expensive to collect than the existing MVET collected by the state, and most counties will have to create and assess 2000-3000% more personal property tax accounts than they now have. They know how, and their rules are the same, but the extra staff and computer resources to increase their volume by that much adds a large expense to their budgets, for which they lose, rather than gain dollars to perform this additional service. This is the kind of unfunded mandate prior initiatives have told the legislature should not be imposed on limited local governments without additional funds to provide a mandatory service to others.

-- Bob Dick (bdick@harbornet.com), October 22, 1999.



To Bob Dick: Thank you for your most excellent response. I've learned more from you than I have from everybody and everyhthing else put together. I-695 sounds even better, now, as the tax on our homes will go down thanks to people who own expensive cars and businesses which own many vehicles.

I'm not sure I understand, though, why a new car isn't treated as new construction. In any case, if your analysis is correct, people who own real estate will benefit greatly from I-695 at the expense of those who possess a higher proportion of vehicles as opposed to real estate.

So, it sounds like transit agencies will face huge cuts, unless alternative funding can be found. I hope the legislature will be willing to dip into the surplus, until the voters have the chance to decide how much to fund the affected agencies. I would vote in a heartbeat for higher property taxes (especially knowing that it impacts owners of fancy cars!) to fund effective mass transit. However, right now, mass transit is not effective. I-695 will force the transit agencies to be more responsive to the communities. For example, where I live, in Gig Harbor, there is not a single non-stop express bus to anywhere useful. It would really help to cut down the congestion on the Narrows bridge, if there were non-stop express buses from Gig Harbor to major Park'N'Rides along the I-5 and I-405 corridor.

In the case of the ferries, the residents of Kitsap County should be given the opportunity to vote on higher gas taxes as a means of funding the ferries. Again, I hope the legislature is willing to dip into the surplus to provide some level of funding, until the voters of Kitsap County decide whether or not they're willing to pay for a service that the critics of I-695 claim is so important.

I voted against Referendum 49. And, I plan to vote for I-695. Roads and ferries should be paid for by gas taxes and/or tolls, with approval from the affected voters, of course. Referendum 49 is a big boon for the oil companies at the expense of the rest of the economy. It's not surprising, then, that one of the big contributors against I-695 is big oil.

I-695 does seem unfair to Transit Agencies, but they only have themselves to blame. For example, Pierce Transit never opposed the plan to shove tolls down the throats of commuters from Gig Harbor. And, as I previously mentioned, they offer very little in terms of useful bus service out of Gig Harbor.

Obviously, transit agencies can cut late night and weekend bus service with no impact on congestion. But, it seems inhumane to thrust people out of work so suddenly. Still, that's life. I am optimistic that transit will rebound, as they will be forced to pay attention to what people really want.

Thanks again for your excellent response. If you're running for public office, you'll get my vote. You come across as very intelligent and articulate.

-- Matthew M. Warren (mattinsky@msn.com), October 22, 1999.


Mtt:

Given that Gig Harbor lists only 7000 households (http://www.seattle- pi.com/pi/neighbors/gigharbor/numbers.html) and a median family income of $49,000 (in 1990), it really doesn't have much of a market for transit services. You get bus services from the Gig Harbor park n ride to the TCC transit center every half hour (bus 100). These don't usually have very many people on them, even during rush hours. 111/112/113 feed the park n ride bringing people from Peacock Hill, Purdy, Key Center, they travel hourly. Given the fairly low population density of the area, and the fact that the demographics don't predispose to transit dependent people (too high a median family income), you've probably already got more transit service than can be reasonably justified. None of these routes are really heavily traveled, compared to the Tacoma city routes.

-- Craig Carson (craigcar@crosswinds.net), October 22, 1999.


Mtt:

Given that Gig Harbor lists only 7000 households (http://www.seattle- pi.com/pi/neighbors/gigharbor/numbers.html) and a median family income of $49,000 (in 1990), it really doesn't have much of a market for transit services. You get bus services from the Gig Harbor park n ride to the TCC transit center every half hour (bus 100). These don't usually have very many people on them, even during rush hours. 111/112/113 feed the park n ride bringing people from Peacock Hill, Purdy, Key Center, they travel hourly. Given the fairly low population density of the area, and the fact that the demographics don't predispose to transit dependent people (too high a median family income), you've probably already got more transit service than can be reasonably justified. None of these routes are really heavily traveled, compared to the Tacoma city routes. OOPS. Also forgot the 595 Express which goes to Seattle four times a day, in the morning, returning in the afternoon. Dang! Gig Harbor already has an awful lot of transit for a town its size. Must have some serious political clout there.

-- Craig Carson (craigcar@crosswinds.net), October 22, 1999.


Bob Dick:

I also appreciate you thoughtful responses. Please comment on the issue Matt Warren noted, about vehicle value being treated like new construction or annexation value in determining the authorized levy amount of a local government. I have read the Department of Revenue memo to county assessors, dated September 20. It states that the application of the property tax to vehicles seems quite clear. It also concludes that new value may be taxed at the last year rate, and that the additional tax revenue would not be a tax increase imposed by the state. That seems to imply that the added value of vehicles would generate additional revenue for local governments. How do you understand this would work?

If the above is true, a library district (as an example) gets no MVET. The operation of the initiative increases the taxable AV of the library district and they can levy the same rate on that added value; increasing their tax revenue. The expense for determining the value of each vehicle, and where it is registered, and which taxing districts it is in, and collection issues, all falls to the county tax assessors.

The Department of Revenue noted in their memo that it was written with the advice of the AG, but that their interpretation is likely to be challenged and could be overturned in court. I assume property tax assessments will be determined by 1/1/2000, for collection in 2000. The assessors appear to have a few months to either get an injunction against this provision of the initiative, or set up a process for taxing vehicles for collection in 2001. Unless they use another system, which may be needed since vehicle tax bills would go to renters as well as the owners of "real property"; and since something like the system you noted about proof of taxes paid before tabs are issued, may be created.

The problem with unintended consequences like this, are that they are unplanned for, often unworkable, and conflict with the intended consequences. The initiative is poorly written. Bad law. Vote NO.

-- dbvz (dbvz@wa.freei.net), October 22, 1999.


To Craig: That's odd. I could've sworn more than 7000 or even 14000 (assuming both husband and wife commute across the Narrows) vehicles cross the Narrows Bridge every day. But, just goes to show you what I know.

If the citizens of Pierce County vote for an increase in property taxes in order to fund useful mass transit, what business is it of yours? I'm willing to respect the vote of the people.

I merely mentioned in my posting that I am willing to pay increased taxes as long as I perceive the services useful to the greater community (not just Gig Harbor proper). I don't live in the city limits of Gig Harbor, but my mailing address says Gig Harbor.

Why do you waste people's time posting things, when you have nothing to say? The so-called 595 "express" out of Gig Harbor stops twice in Tacoma, and it travels south of Hwy 16 to make the stops. Seattle, by the way, is north of Hwy 16.

You say there is a bus to the TCC. Why would anyone want to go to the TCC? Could you tell us what useful express buses originate from the TCC?

You obviously have no idea of what you're talking about. Have you ever thought about working for the DOT? They're looking for ivory tower clowns, just like you.

-- Matthew M. Warren (mattinsky@msn.com), October 22, 1999.



To Matthew: Be careful what you promise. Since I wanted someone to help my community, I offered to be one of the "damned politicians" that so many on this site seem to feel are solely self-serving. I'm running for election for the first time. The "power" I'll preserve, if I-695 fails, as I believe it should, will be to attend lots of evening meetings after my "real job" and to get reimbursed for $234 of my expenses every month. If you think I make any sense you may actually get to vote for or against me for speaking out. This is just a warning, so that those who turn off their minds when they see that a "politician" is talking can quite reading. Hopefully someone who thinks will run for office and get elected to help reduce taxes and make them more fair than the MVET, which needs to be cured by appropriate changes. I-695 sure won't help them be effective or willing to try. It hamstrings correction of problems.

Your hope that the legislature will dip into the surplus to fund the affected local agencies which will be so heavily cut won't happen, because of our constitution. It requires a 2/3 vote of both houses to agree on emergency measures within two years after Initiaves and Referenda are passed. I-601 makes most of the "surplus" a dedicated "emergency fund" limited to real emergencies, which the Legislature can't reallocate to pay for huge cuts in services Lakewood or other similar cities will suffer directly from MVET loss. That limitation was reenacted last year when we passed Referendum 49, renewing I-601, so the legislature won't be able to use the fund without a 2/3 vote of each house. There is no way the legislature will pass any bills by a 2/3 vote on such a hotly disputed matter as how much "state money" should be reprogrammed for cities, counties, or transit districts special needs cut by I-695. Even if they could, there isn't enough surplus to handle a single year's loss of that magnitude, let alone to keep cities and counties from big cuts in services, in some cases. Gig Harbor is not hit directly by loss of MVET as bad as most cities, but the reduction of property taxes will hit it hard after 2000.

You decry the state of transit from Gig Harbor across the Narrows bridge. Actually there are several express busses from Gig Harbor to places useful to many--Seattle and downtown Tacoma. I'm one of the ones who use it daily, and get to work nearly as fast as if I drove, and faster on the way home. Those busses are nearly full. That service is jeopardized, because Pierce Transit will lose 38% of its funding, and has no other source of funds, so will have to cut 25% of its service. It may be able to cut some local routes to solve your problem, but people who can't drive to a park and ride will be completely cut off. Night and weekend service for Pierce Transit hardly exists now, so I'm guessing that they could save some, but very little, there. These cuts will only add to the gridlock on the Narrows Bridge, and will keep the state from spending money to add new highway lanes to match the new lanes on a new bridge we get to pay for with tolls.

I'm more concerned about getting to the freeway on local streets. Look at the existing gridlock at the Olympic Drive interchange in your town. Loss of the MVET will mean that Gig Harbor will not get road construction grant funds from the state without years of delay on 2 projects planned for Pt Fosdick Rd. and several others elsewhere. This will happen to nearly every city, because most projects require 80% state funds and 20% local funds to get done. I doubt that even you could figure out how to "suck it up" in Gig Harbor, and get any roads built to relieve congestion if the 80% is cut or delayed. Since we are already at property tax maximums to meet other "unfunded mandates" by the state legislature, you won't get a chance to vote for increases to make up the difference. The only result of I-695 in Gig Harbor will be that few of the existing road projects will be built, and lesser reductions will occur in other services indefinitely. If the City fired much of its small staff to free money for construction, there is no way it could reprogram enough to build more than one of the current road projects without the state's 80%. Unfortunately roads construction in Gig Harbor is already years behind the need, as growth inundates us. Most cities share that problem.

Reducing MVET, to make it comparable to property tax, makes sense, but cutting off local governments and giving them more expenses and big revenue losses which the legislature won't fix for years is not responsible. We need to vote NO on I-695, and ask the legislature to take this as a wakeup call, and fix the MVET to remove unfairness. Voters can't even vote to approve enough new taxes to make up service cuts of the size many cities and other local communities will face under I-695, and the cost of voting would eat up much of what they could approve. State-wide votes are not so impossible to raise the right taxes to make up for reducing the wrong ones, but voters in local governments have too few tools to even maintain what they think appropriate. We need to vote NO on I-695, but to demand that the excesses of the MVET be removed. If some of the local programs cut by that reduction are of high priority, we need to tell the legislature, because this initiative says just the opposite. It says that the 25% of MVET dedicated by the voters to local police and health programs needs to be stricken, along with the transportation and transit. If that's not what we want, this initiative sends the wrong message, and keeps the legislature from implementing the right one.

-- Bob Dick (bdick@harbornet.com), October 22, 1999.


dbvz:

The issue you raise about new construction and the Department of Revenue's memo is thorny. If the distinction they express between new construction value and new value caused by inflation being treated differently under I-695 holds up, then that portion of the reduction in service levels I described would not occur, and property tax reductions would only force lower levels of service because inflation is not exempted from the voter approval requirement of I- 695. That would be much more responsible in my view, because property tax reductions for local governments would be forced down less rapidly. At least it would cut off the horrible of having new houses and businesses for which local governments would have to provide service for, but get fewer dollars than they got before the extra problems were created. As you point out, if I-695 passes, we probably won't know which of these positions is correct until after local governments will be required to make decisions for 2001.

Your suggestion that if new construction is not viewed as an increase, then library districts would get actual increases is true in bare dollars, but not in levels of service. The whole basis of the property tax is the understanding that new improvement value typically means that each taxing government will need to provide its particular services to more property. That requires more dollars to keep levels of service from declining for everyone else. It's not hard to see that if twice as many houses appear in a community, that additional expense for library service will be needed to keep the same level of service per capita, just as more police, fire and school expense will result. Unless the library district gets more than the last year's rate of tax times the new value, it doesn't get richer. Under I-695, the library district in my example would suffer some loss of services, even if they got taxes on new construction value as I-601 allows now. That is because inflation makes them spend more money for the same services, but I-695 requires voter approval each year just for them to get enough dollars to keep the same level of service they had the previous year. Otherwise, the district will have to reduce library service levels because of inflation.

If the law stays the way it is now, county assessor's will have to get the list of owners of cars and mail each a personal property tax affidavit for return in April. As I mentioned, that will increase the number of personal property taxpayers to which mailing is required in most counties by 2000%-3000%. Even if they could hire qualified extra staff that fast, inputting all the information for that many new accounts in a single year will set their tax schedule back for several months. All that mandatory expense will have to come out of budget cuts for other county offices that actually provide services to taxpayers. Once assessors get car values determined using the methods they use for other personal property, then they will dump this added value into the total real and personal property tax rolls for computation of tax rates each can levy for 2001 to recover the dollars limited by I-695. New vehicles which were formerly exempt do not meet the definition of new construction in I-601. As a result, the only effect of this new value will be to drive down the overall property tax rates for each government, not to provide new construction dollars which would help them keep levels of service the same.

If I-695 passes, this property tax reduction will fall on local governments with none of the powers of the legislature to raise statutory limits on taxes with voter approval. Even a willing local public can't vote to approve taxes higher than allowed by the legislature, if I-695 guts a program they consider to be of high priority, like law enforcement, transportation or health. The legislature caused the problem I-695 wants to fix, but most of the impact falls on local governments which have few of the tools available to the legislature to reset priorities. I-695 doesn't tell the legislature how to fix things and doesn't let local government do so adequately, even though most of the reductions I-695 causes fall on local governments. I-695 is just another unfunded mandate on local government. Locals have to keep doing things required by state laws, but can't exceed state limits on revenue. This is just another reason to vote NO on I-695 and demand that legislators fix the MVET problem.

-- Bob Dick (bdick@harbornet.com), October 22, 1999.


Bob Dick:

Thank you again for another very clear and comprehensive explanation. Craig Carson ought to read it; with particular attention to the need for increasing funding to match the increasing need, due to both inflation and new construction, just to maintain the existing level of service. He prefered not to believe me.

-- dbvz (dbvz@wa.freei.net), October 23, 1999.


I read it d.

This is not the point upon which we disagreed. You indicated that the government continually needed tax rate increases ABOVE the rate of inflation to maintain parity. He is saying that in order to keep raising amounts collected to MATCH the rate of inflation, voter approval will be required if I-695 passes. His point is that capping the amount of money collected in real year dollars will attrit away the purchasing power. This would be offset by an increase MATCHING the rate of inflation (or slightly less, hopefully governments ought to get the same economies of scale everyone else does). His complaint is that to get the same amount in constant year dollars, a public plebescite would be required. That is not exactly the way I read the initiative, but if he is correct, I can easily live with it. Heck, what I'd like to see is about a 5% annual reduction each year of programs that can't get a majority vote of the people. I guess I just dojn't have the same degree of contempt for the voter that most politicians and bureaucrats have.

-- (craigcar@crosswinds.net), October 23, 1999.


Craig:

You must not have read it all. Look at this part again:

"Your suggestion that if new construction is not viewed as an increase, then library districts would get actual increases is true in bare dollars, but not in levels of service. The whole basis of the property tax is the understanding that new improvement value typically means that each taxing government will need to provide its particular services to more property. That requires more dollars to keep levels of service from declining for everyone else. It's not hard to see that if twice as many houses appear in a community, that additional expense for library service will be needed to keep the same level of service per capita, just as more police, fire and school expense will result. Unless the library district gets more than the last year's rate of tax times the new value, it doesn't get richer. Under I-695, the library district in my example would suffer some loss of services, even if they got taxes on new construction value as I-601 allows now. That is because inflation makes them spend more money for the same services, but I-695 requires voter approval each year just for them to get enough dollars to keep the same level of service they had the previous year. Otherwise, the district will have to reduce library service levels because of inflation." - Bob Dick

The first half or the paragraph deals with the fact that new construction will require an increase in revenue to provide service to the "new" homes and businesses. The second half of the paragraph notes that even without new construction to serve, the library district would "reduce library service levels because of infalation", without an increase in revenue that matches the increase in their expenses due to inflation.

This is exactly the point we disagreed on. I add new construction needs to inflation needs, and get a sum in excess of the CPI every time. You refuse to add new construction needs and inflation needs, and get a reduction in service-level every time. Your way can look like it works for a year or two, but when the "reserves" or "rainy day" funds are gone, and the internal operating costs are squeezed, something will give in the area of services provided. For agencies without much in reserve, the service cuts can be almost immediate.

Bob Dick - I hope you don't mind my use of your post to attemt to conclude a dispute I had with Craig Carson. You stated, without prompting, exactly what I was attempting to explain to Craig without success.

-- dbvz (dbvz@wa.freei.net), October 24, 1999.



"I add new construction needs to inflation needs, and get a sum in excess of the CPI every time. You refuse to add new construction needs and inflation needs, and get a reduction in service-level every time. Your way can look like it works for a year or two, but when the "reserves" or "rainy day" funds are gone, and the internal operating costs are squeezed, something will give in the area of services provided. For agencies without much in reserve, the service cuts can be almost immediate." No d-

What you are talking about are capitalization expenses. If they were included in the tax rate originally, they are still there. If they were not, then the libraries were built by either a specific higher levy that has now expired, or by selling bonds the retirement of which are covered by some other revenue source. If the tax revenue increases by CPI level and corresponding to the increased tax base it should approximate the same per capita revenues in constant year dollars. You maintained that in addition to the growth in tax base and growth in valuation (which should approximate the CPI increase) an additional increase above the CPI would be required each year. I indicated that if that was done, ultimately the taxes would become 100% since the relationship of the tax to the total is essentially binomial with (1-(tax rate)) = what you keep. If the tax goes up in excess of the CPI the trend is for the government to get an increasing percentage and ultimately 100%.

-- Craig Carson (craigcar@crosswinds.net), October 24, 1999.


Craig:

No Craig. I am not talking about capital costs or bonds. I am talking about operating expenses. If you serve 100,000 people last year at a cost of $10 Million, if inflation is 3% you need $10.3 Million to serve the same 100,000 people the following year at the same level of service. That is the CPI adjustment. If at the same time, the new development in a communiy adds 4,000 more people to the area, you have a problem unless the budget also increases above the CPI for service to these new people, homes and businesses. In my example it is another 4%.

From the point of view of the original 100,000, their taxes go up 3% for inflation; and if incomes go up with inflation it is essentially no increase in taxes as a share of income. They don't see the increase due to new construction and new people, because the new people are paying that as their share of the revenue needed to serve them.

From the point of view of the local government, however, if their income does not go up by 3% for inflation and another amount for new service requirements (4% in my example) the service level must be reduced. If only new construction is permitted to produce an increase in budget, they get funding to serve 104,000 people but at the cost of the service as it was last year - no money to cover inflation. If only inflation is permitted to produce an increase in budget, they get funding to serve 100,000 people at the current cost of providing the service, but no money for the 4,000 additional people they are obligated to serve. In either case they will be obligated to serve the additional population, but they will only be able to do it by a reduction in the level of service.

This is clearly a simplified explanation of why a local government budget must increase at a rate higher than inflation, to maintain a constant service level. Pick it apart if you want, but if you don't factor in both inflation and additional service demand the agency is reducing service to the community.

Perhaps the easiest way to see it is to consider some extremes, and use a school district student population. If a community is experiencing rapid residential development (10%/year), and only gets a CPI increase in funding, they can continue to educate the same number of children they had in school last year but they have no new money to hire the teachers to educate the 10% increase in students. Class size goes up 10%, and the service level goes down. That may work for a year, but over time it gets rediculous. Let that situation run a few years and class size would double, and not fit in the rooms.

The initial reading of I-695 seems to indicate that neither increase, not for inflation and not for new construction, would be permitted without a public vote. The Department of Revenue memo to county assessors issued Sept 20, 1999, interprets the new construction increase as "not a tax increase" by the state. The local government revenue would increase by application of the current tax rate to the new value added by the property owner (in the case of the propoerty tax). If that holds up in court, it takes care of half the problem but not all of it. Unfortunately, local governments have to take a governmental action to apply the tax to the new construction value; so the Deparment of Revenue interpretation that it is not a tax increase will need to be evaluated concerning the "monetary increase" language in I-695. It may be that both parts of the revenue increase problem for local government, will still be a problem after the court rules.

So, is all that clear now?

-- dbvz (dbvz@wa.freei.net), October 24, 1999.


It is perfectly clear. But you're wrong.

"The local government revenue would increase by application of the current tax rate to the new value added by the property owner (in the case of the propoerty tax). If that holds up in court, it takes care of half the problem but not all of it. Unfortunately, local governments have to take a governmental action to apply the tax to the new construction value;" The increase in assessed valuation, or in the case of sales tax, inflation driven increase in sales tax revenues will cover the original 100,000 people at the new (inflated) values, as long as the increase in income essentially equals the CPI. The increase in funds you get by the application of the current tax rate to the new value will give you the pro rata share to cover the 4000 new people as long as the value of the new property also essentially reflects the CPI increase as well. . If capitalization costs were included in the original amounts (through interest and principal payments on bonds, for example), they would STILL be included in the inflated revenues, because there would really be no baseline change. If they were not included (beause the previous capital investment was already a "sunk expense," then the new library construction (or whatever) WOULD have to be capitalized. That might be through new bonds, from a new levy, or from developers fees. Mr. Dick implies that I-695 could perhaps be interpreted as requiring a level amount of tax dollars to be collected, notwithstanding inflation or growth in tax base. I don't interpret it that way, but even if I did, do not see that as a reason to vote against it since I don't have any objection to the taxpayers being asked periodically if they concur with paying taxes at any level, even a default level lower than baseline adjusted for inflation. If the government can't justify to 50%=1 of the people an inflation (or growth) adjustment, then they ought to get less since people will have essentially voted for a cutback in rates by turning down the inflation adjustment. But even if he is correct, that doesn't directly bear on OUR issue. I stated that if the taxpayers income increased at the level of the CPI, and the taxable part of the taxpayers income increased at a level greater than the CPI, ultimately the taxes would consume his/her entire income. That is still true, and a very good reason to hold tax increases to NO MORE than the CPI for services currently being provided. And as I said before, as something gets bigger, there are typically economies of scale in the "real world," although I grant you that government rarely sees these.

-- Craig Carson (craigcar@crosswinds.net), October 25, 1999.


To Bob Dick: Sure enough, I looked in my Voters' Guide Pamphlet, and there you are. Unfortunately, I live just outside the Gig Harbor city limits, so I can't vote for you. Even though you oppose I-695, I would still vote for you. You appear to oppose the initiative for sound reasons. However, I support the initiative for reasons I believe to be sound, as well.

I'm a little confused, though, with some of your explanations. It seems to me that you're saying that the voters can't even choose to increase their own property taxes to fund mass transit. If the community wants to vote for a new property tax of say $30 - $50 per year per 100K valuation of a house, what state law prevents this?

Also, you say there is an "express" to downtown Tacoma from Gig Harbor. I'm not sure your definition of an "express" is the same as mine. But you seem to imply that the "express" buses are full. If Pierce Transit can't justify maintaining a bus line when the ridership is full, then why do we have Pierce Transit? I think the greater Gig Harbor community is better off forming its own non-profit bus coop. The people who ride the buses can become qualified in driving the bus, and they can take control of their own destiny.

You also lament the lack of road construction in Gig Harbor. I persoanlly believe that gas taxes should be the main source of funding for roads. In addition, there should be zoning requirements for developers, requiring the developers to build spurs to and from the highway to support their developments.

Why can't the people of the Peninsula vote on a gas tax increase to fund specific road projects in the community? Why can't the people of Kitsap county vote to increase their gas tax to fund the ferries?

If we were to fund road construction through higher gas taxes (with approval from the voters), then there would be more ridesharing plus a lower percentage of gas-guzzling cars on the road. This means there would be cleaner air.

The current MVET law is an ugly subsidy for the oil companies and the manufacturers of gas guzzling cars. If people want massive road construction, then they should vote to increase the gas tax. If they don't want to increase the tax, then they don't deserve the new construction.

-- Matthew M. Warren (mattinsky@msn.com), October 25, 1999.


to dbvz and Craig: I'm afraid I have to agree with Craig on this. I-695 does not say that assessments on homes cannot increase without a vote of the people. Hence, increases in the CPI should strongly correlate with increases in the assessed values of home. Likewise, new construction provides additional revenue. Therefore, local governments should have no problem funding the same level of service, even though inflation increases the cost of providing the service.

According to Bob Dick's explanation, I now se why businesses are opposed to I-695. The businesses will now have to pay a property tax on the vehicles they own, but the monies they pay will merely help to drive down the property taxes on homes. The monies will not be available for the massive road construction via Referendum 49. It sounds like the big winner from I-695 will be the homeowners in King County, since there are so many large employers (i.e., Boeing) in King County who, apparently, have been unfairly subsidized by the homeowners. Now, I-695 will turn the tables on the businesses.

Vote for I-695. It rewards the homeowner at the expense of businesses. And, it will force people to pay for higher gas taxes if they want new road construction, which is only fair.

-- Matthew M. Warren (mattinsky@msn.com), October 25, 1999.


Craig and Matt:

Why don't you guys read the initiative you are supporting?

Craig wrote, "Mr. Dick implies that I-695 could perhaps be interpreted as requiring a level amount of tax dollars to be collected, notwithstanding inflation or growth in tax base. I don't interpret it that way, but even if I did, do not see that as a reason to vote against it since I don't have any objection to the taxpayers being asked periodically if they concur with paying taxes at any level, even a default level lower than baseline adjusted for inflation."

Bob Dick and I simply note that 695 requires voter approval for any tax increase, defined broadly to incluse not only new taxes and fees, but also any "monetary increase" in existing taxes and fees. If that is not what you want to occur, Craig, you should vote NO.

A monetary increase in the amount of the tax would seem to include any increase in revenue due to inflation in the value of property, in the case of the property tax; and any increase in revenue due to new construction value added to the tax base, in the case of the property tax. Don't confuse the issue by throwing in sales tax and capital costs and bonds. I am talking about operating expenses needed to deliver services to the public.

What you now state our dispute was, and what it actually was, are not identical. My issue has always been that from the point of view of the agency or local government, their budget needs to go up by BOTH the rate of inflation and the growth in the service need, particularly in a high growth environment. I don't dispute that from the point of view of the individual tax payer, increases greater than the CPI constitute a "real" tax increase; but that already is restricted by existing law. The new construction part of the increase is paid by the new tax payers, and the old tax payers should not see it on their bills.

From a direct reading of I-695, local governments would not be authorixed to increase their tax revenue to cover EITHER inflation, or the increased service demand represented by new construction; without a vote of the people. The Department of Revenue thinks they can win in court on the new construction, but no one knows. That looks like every local government that depend on property taxes, will need to go to the ballot every year to reauthorize the levy and fund the regular expected increase needed to maintain the current level of service. See the school district example above; and that situation applies to cities, fire districts, library districts, port districts, counties, hospital districts, flood control districts, EMS districts, etc., etc.

If you didn't understand that before, I hope you understand it now. As for a reason to vote No, this is enough but is by far not the only problem with 695. Poorly written. Bad law. Vote NO.

-- dbvz (dbvz@wa.freei.net), October 25, 1999.


d-

" What you now state our dispute was, and what it actually was, are not identical. My issue has always been that from the point of view of the agency or local government, their budget needs to go up by BOTH the rate of inflation and the growth in the service need, particularly in a high growth environment. I don't dispute that from the point of view of the individual tax payer, increases greater than the CPI constitute a "real" tax increase; but that already is restricted by existing law. The new construction part of the increase is paid by the new tax payers, and the old tax payers should not see it on their bills. " This is not the way I remember the dispute, but searching among the reams of our previous postings, I haven't found the original. If you know it, tell me what thread it was on. My recollection is that you kept insisting that the increase needed to be greater than the CPI, notwithstanding the new growth, but if you show me I'm wrong, I'll admit I misunderstood what you were trying to tell me. As for popular vote for the CPI related increases, I didn't read it that way, but I hope that you're right. I like your interpretation a whole lot more than mine.

-- (craigcar@crosswinds.net), October 25, 1999.


to dbvz: You may be correct. I re-read the initiative and the definition of a tax increase includes any monetary increase of an existing tax. It is not clear (to me) if this prevents the government from assessing homes at a higher value due to inflation.

In any case, it's still ok to vote for I-695, as we can always smooth out the rough edges down the road.

The bottom line is that I-695 will make the government more responsive and more accountable.

I-695 will also force new road construction to be funded by increases in gas taxes (with approval of the voters). Why do you want to subsidize the oil companies and the manufacturers of gas-guzzling cars? I could understand if the cars were manufactured in the state of Washington. I suppose since we do a substantial trade with Alaska, that one could argue it's in our interests to subsidize the oil companies. But, I don't find the argument very compelling.

-- Matthew M. Warren (mattinsky@msn.com), October 26, 1999.


Craig:

I can't find it either. I think it was so long ago it dropped off the bottom of the list of questions. I am satisfied to drop it here. I have voted already, and you are not going to change your opinion either. We all live with what happens next week.

-- dbvz (dbvz@wa.freei.net), October 26, 1999.


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