Commish's Corner

“Property taxes are skyrocketing in Washington!” “We need to defuse the property tax time bomb!”

These were the rallying cries of Tim Eyman, author of Initiative 747, which passed voter approval back in 2001. I-747 was designed to limit property tax increases to one percent more tax collected than in the previous year.

This sounded great, right? Government has gotten out of control! They’re wasting all of our tax money! This certainly may have been the case in many instances, especially at the federal and state government levels. But for the most part, local governments seem to operate quite efficiently. The smaller the government, the more that holds true. But, when people are frustrated and don’t like how their tax dollars are spent, some tend to not differentiate between the federal, state and local governments. It’s just the government. It is easy to blame local government when you write out your property tax payment, even though the lion’s share of it goes to the state government and the schools.

I believe that this was the rationale behind the passage of I-747. People were tired of the “government” growing unchecked and wasting their tax dollars. Well, I-747 must have been a good solution, right? Because here we are, 14 years later and state and local governments are still open for business. Local governments have continued to make cuts and use reserves to balance their budgets, all the while struggling to provide adequate essential services such as public safety and public health. Small counties are masters of “doing more with less,” but the problem with limiting revenue growth to one percent is that it is not tied to inflation, and it is not sustainable in an economic climate where the cost of goods and services continues to rise at a faster rate. But make no mistake, it’s not just small counties. The effect is just more pronounced in smaller counties. They are especially hit hard because the smaller the amount of levy dollars collected, the smaller the yearly increase.

Take Lincoln County, for instance. By far, the number-one source of revenue is the property tax. The amount budgeted for collection in “County Current Expense” (all services except the County Road District) for 2015 is $1,972,000. For 2016, that will bring in a whopping extra $19,000 (plus the value of any new construction). The cost of providing services mandated by the state constitution, state laws and state rules, rises at 3-5 percent per year, yet property taxes can only increase by one percent. This compounds itself, making the problem exponentially worse with each passing year. Basically, no matter how efficient local government is, its ability to provide essential public services is eventually jeopardized if its revenue is restricted from growing or at least keeping pace with the economy.

The statutory limit that any county can levy for its current expense fund is $1.80 per $1,000 of assessed value. However, because of the one percent limitation, $1.80 has been unreachable since 2002. The $1.80 has declined steadily since then and is currently $1.47 for 2015, which is an effective loss of revenue of $430,000 just this year. Since 2008, the total loss has been over $2,000,000. As you can see, this is a steady, rapid decline in revenue coupled with a steady increase in costs, with no apparent end in sight.

So what about other sources of revenue; doesn’t the sales tax increase? Well, in some counties it does. In Lincoln County, sales tax is the second biggest source of revenue, and it has declined $20-$30,000 per year over the last four years. But because the overall economy in Washington state seems to be recovering, counties with industrial and retail locations in their unincorporated areas, are seeing spikes in sales tax revenue which has help ed them offset declining property tax revenues. We have very little retail sales in the unincorporated county and rely mostly on various forms of construction and service to produce sales tax.

It may come as a surprise to many, but the third biggest source of revenue for the Lincoln County current expense fund is produced by processing divorce cases from all across the state. This also is on the decline. Filings processed have gone from 4542 in 2008 down to 3292 last year. In dollars and cents, that equates to over $100,000 of lost revenue per year.

Shared revenue from various state sources provides funding to help pay for such things as criminal justice and indigent defense, but as the state struggles to balance its budget, these revenue streams dwindle, leaving counties to struggle with unfunded and partially funded mandates. There are also many other smaller sources of revenue that make up the county’s budget, but most of them appear to remain relatively stable.

So now the big question: How can you build a new public works shop if all of these revenue sources are in the tank? Well, the county road fund and the rest of county government are two completely separate animals with different funding sources. The road fund does levy a property tax, however that only accounts for about 15 percent of its budget (property owners only pay taxes to the county road fund on those parcels lying within the unincorporated areas of the county). The primary revenue sources are the motor vehicle fuel tax and state and federal funding. Although the county road fund is subject the one percent limitation on property tax, it is not the primary source of revenue. Luckily, the other revenue sources have been better able to offset the loss of property tax. The current shop is far beyond its useful life. The energy savings alone coupled with the increased efficiency of having all of the facilities located together, make this a much needed, sensible project. There just comes a time when everything needs to be replaced. This project is long overdue and will efficiently serve its purpose for many generations to come.

So, what does all of this mean at the end of the day? It means that counties will continue, just like most working folks, to live on what they take in. As revenues decline, so will the levels of service. They will have to prioritize continuous lower levels of service that are based on revenues and not necessarily on public expectations. The unfortunate thing is, that there continues to be more bad guys committing crimes, and those same people can’t afford legal counsel, which just adds to the increasing expenses. Counties are mandated to provide the services to process these criminals, and in Lincoln County, as in other counties, public safety and criminal justice comprise over 70% of the budget. Criminal justice includes the jail, dispatch, sheriff’s office, prosecuting attorney, public defenders, District Court, Superior Court, the county clerk, juvenile services and probation. Although public safety is mandated, the level of service is discretionary.

Recognizing the financial crisis facing counties, the Washington State Association of Counties has, for the last several years, been working on a fiscal sustainability initiative. The Association of Counties has been leading the effort to educate legislators to stop the erosion of critical government services, enable counties to keep pace with inflation and provide greater local control over state mandated services. More information can be found at: http://wacounties.org/fsi.php.

Currently, several options are available for increasing or at least maintaining current service levels, but they require voter approval. Generally, people, including myself, are not real fond of paying more taxes unless they receive a direct benefit. I am not advocating for increased taxes, but I feel it is my duty as a member of the Board of Lincoln County Commissioners to engage with the public that I serve and keep you informed.

If you have questions, concerns or would like to discuss these or any other issues, as usual, please call 509-641-0099, email, facebook or just stop by.