Deflation in a key measure of the City of Issaquah’s property tax formula is forcing it to consider an unusual measure, said officials at a Nov. 2 city budget hearing, to hold that tax rate at the same level as last year.
The city is facing a budget challenge this year after drops in tax revenues and other funding sources forced Mayor Ava Frisinger to propose General Fund cuts of 7.7 percent for 2010. One of the city’s primary sources of funding, city officials are trying to nail down property tax numbers before the budget is scheduled for adoption on Dec. 21. This year, the city raised approximately $6,587,000 from property taxes and Frisinger pledged to not raise taxes for next year. The city hopes to raise $6,990,848 in property tax revenue, about 24 percent of the General Fund. Local homeowners are currently taxed at a rate of 8.9904 per $1000 of assessed value.
But many didn’t expect property tax regulations to push the tax rate downwards, forcing City of Issaquah Finance Director Jim Blake to draw up an “Ordinance of Significant Need”.
“Prices have not decreased for us,” said Blake.
He pointed to city insurance premium increases of $60,000 per year and hikes in municipal utilities paid by the city to function on a day-to-day basis.
“We have an inflationary factor” of the costs, he said.
The decline in property taxes is being triggered by the way the tax is calculated. Passed by initiative in 2001, Tim Eyman’s I-747 restricts tax increases to a maximum of either one percent or the rate of inflation, whichever is lower. The nationally-based consumer inflation measure, Implicit Price Deflator (IPD), is currently showing a deflation of nearly 1 percent this year. To avoid using the measure, the special resolution will be needed in addition to approving the annual property tax resolution.
If the city does nothing, said Blake, it will collect $55,994 less than last year.
Like the city, Peregrine Point HOA vice president and treasurer Jennifer Nudelman said her members have had extreme difficulty coping with the current economic climate. She reported a delinquency rate of homeowners there reaching 10 percent and pleaded with the council to stay fiscally prudent.
“Please consider the crippling effect that raising any individual resident’s property tax bill will have on delinquency rates, short sales and foreclosures will have on our community,” Nudelman said.
Both Councilmembers Fred Butler and Joshua Schaer acknowledged times were tough and said the proposed action was no increase, only an adjustment to keep the tax rate at the same level as last year.
“This is the second year of trying to help folks out in this economic climate,” said Schaer.
City Council voted to authorize the city to prepare the resolutions, 6-0. Councilmember John Rittenhouse was absent.
The issue was brought up at the Nov. 2 budget hearing because of public concern in the past over property taxes, said Blake, and would give the public a chance to weigh in on what revenues they thought were appropriate for the city to use in their next budget.
The fix does nothing to address the city’s decline in assessed value, however. Blake said the city’s assessed value of $6.8 billion in 2008 had dropped to $6.1 billion in 2009 and many area homeowners had seen a decline in the assessed value of their home — which could also lead to lower property tax revenues in the future.
The property tax ordinances are scheduled for a vote on Nov. 16. A final public hearing on the proposed budget is scheduled for 7:30 p.m. on Dec. 7 at City Hall South.
