Initiative 747: Revenge of tax crusaders
Seattle Times Olympia bureau
So Eyman is back with a vengeance. He readily admits his latest effort, Initiative 747, is not just about property-tax relief. He said it is also about punishing politicians — he counts judges as politicians — for "robbing the voters" of previous tax breaks.
Under I-747, annual property-tax growth would be limited to 1 percent or less. The only way local governments could go beyond that limit is if voters said yes.
If the initiative passes Nov. 6, the state estimates the average annual tax savings on a $150,000 home would be $23 next year and $126 by 2007.
Many of the same local government leaders who challenged Eyman's past initiatives have again joined forces with unions and business groups to fight I-747. Armed with more than $350,000 in campaign donations from public-employee unions, opponents tomorrow plan to launch an anti-747 media blitz.
And they're using many of the same arguments they used in past battles, only tailored for more troubled times.
Critics warn the initiative will badly erode local government services just as the economy is flagging and many governments already face their biggest deficits in nearly a decade. Local fire, emergency-services and public-library districts could be particularly hard hit because they rely so heavily on property taxes.
I-747 opponents are using lots of firefighter and paramedic images in their campaign material, pictures they believe will resonate even more with voters since the Sept. 11 terrorist attacks on the World Trade Center.
"Firefighters and emergency services — these are the services that are most at risk," said Christian Sinderman, spokesman for the No on I-747 Committee. "We're not saying the ambulance isn't going to show up. We're saying it might take longer, and that could cost lives."
Eyman calls such predictions "flagrantly dishonest" attempts to scare people into voting no.
And he contends that Washington's property taxes are "skyrocketing" and driving people from their homes.
Last spring, more than 240,000 voters signed petitions to put I-747 on the ballot. More than 3,000 people have donated money to Permanent Offense, the private business Eyman set up to run initiatives. By contrast, fewer than 500 people have given money to the No on I-747 Committee.
The 'most-hated' tax
People on both sides say it's easy to understand why Eyman has so much support.
"Historically, the property tax has been the most hated," said King County Assessor Scott Noble.
One big reason: sticker shock. Over the past decade, Washington residents on average have seen their property-tax bills grow by 64 percent — or about 5 percent per year, according to the Department of Revenue.
Total property-tax levies, which include collections on new construction, more than doubled, to $5.7 billion. That increase outpaced sales taxes, business-and-occupation taxes, inflation and average household income.
About half of all homeowners still pay their annual property taxes in two big installments — one is due in 10 days — and not indirectly, through mortgage payments.
So the hit is felt directly.
"It's not an illusion," said King Council Councilman Rob McKenna, R-Bellevue, one of I-747's most prominent supporters. "People are seeing huge increases."
Four years ago, Washington voters approved Referendum 47, which limits annual growth in property-tax collections to the rate of inflation, typically less than 3 percent. But the measure has an escape clause that allows governments to increase property-tax collections by as much as 6 percent if their elected leaders show a "substantial need" for the revenue.
A recent study found that the state and most counties and cities this year held their property-tax increases at or below inflation. In smaller taxing districts, however, larger increases are still the norm.
Noble and others point out that voter-approved "excess levies" typically account for about 40 percent of property-tax bills in King County.
Earlier this year, for example, Seattle voters approved $128 million in increased school levies. So even if I-747 passes, they will see double-digit property-tax increases, Noble said.
Statistics or scare tactics?
Eyman claims that people, especially the elderly, are being driven from their homes by soaring property taxes.
His opponents dispute that, pointing to a state program that last year provided more than $112 million in property-tax relief to 123,000 senior citizens.
Noble said there have been fewer than 10 property-tax foreclosures in King County during the past decade.
When pressed, Eyman can't name anyone who has actually had to give up his or her home. "But I am hearing from a lot of people who say, 'Hey, you're on the right track.' "
One of those was Nancy Robinson, a 61-year-old retiree on a fixed income who owns a townhouse near Green Lake. Robinson recently received her new assessment: $387,000, up from $283,000. Even if her tax rate stays the same next year, her tax bill will increase by nearly $1,200.
Robinson said she doesn't qualify for the state's relief program and worries she might not be able to afford her 1,500-square-foot home much longer.
"This is really, really scary to me," she said.
Then there's Fred Bucke, who owns a 10,400-square-foot used-car lot on Lake City Way. Bucke's latest assessment bumped the lot's value from $125,000 to $416,000. He could face a $3,000 tax increase.
Bucke and Robinson plan to appeal their assessments.
Bucke said he realizes I-747 would not prevent rapid run-ups in property values like his, and thus wouldn't give him immediate relief. But he has campaigned against taxes before and helped gather signatures for I-747, and he is more motivated than ever to fight for property-tax relief.
"If people just sit on their butts and shut up," Bucke said, "it's just going to keep getting worse and worse."
Planning for budget cuts
Even before I-747 was certified in July, government budget writers across the state began bracing for its impacts.
Forcing more than 1,700 separate taxing districts to go to voters every time they need a levy increase of more than 1 percent would be expensive and impractical, opponents argue. Over time, they say, local government budgets would be devoured by inflation.
In King County, for example, employee costs — such as cost-of-living raises and health-care coverage — are rising by about 6 percent a year, more than twice the rate of inflation.
Even Paul Guppy, research director at the Washington Policy Center, a conservative, Seattle-based think tank, calls I-747 "the most sweeping change in the tax code to come before voters in at least five years."
Though Guppy thinks some government officials are exaggerating the potential fallout, he adds, "There's no question ... if you take six (percent) down to one, that's a huge change."
No one knows by how much taxing districts would increase their future levies if I-747 failed. But assuming each would continue getting the same increase it got this year, the state Department of Revenue estimated that I-747's passage would cost state and local governments $1.8 billion over six years.
About a quarter of that would have been earmarked for schools. The rest would have gone to local governments.
Critics say Eyman's timing could hardly be worse, given the recent terrorist attacks, the ensuing war and large-scale layoffs by Boeing.
Even without I-747, state government is looking at a possible $1 billion shortfall. King County is preparing deep cuts to help close a $41 million gap in its 2002 budget.
Making matters worse for local governments, they could soon be forced to bear the full brunt of Initiative 695, a 1999 Eyman initiative to eliminate the state's hated car-tab tax.
Though courts rejected the measure, state lawmakers sought to appease voters by abolishing the tax themselves. To help local governments cope, the state has since been sending hundreds of millions of dollars in so-called "695 backfill." That could be one of the first things to go when lawmakers start looking for cuts.
"We haven't see the full impact of the first punches before this next punch is being thrown," said Dick Davis, president of the Washington Research Council, a business-backed economic think tank.
In a recent analysis, the council said a significant loss of property-tax income might prompt local governments and the Legislature to increase taxes on businesses.
"People are operating on some of the thinnest margins they've ever faced," Davis said. "Increasing the business tax is simply a bad idea."
Eyman, however, argues that tough economic times make his case even stronger. "Think about how taxpayers feel right now," he said. "You're lucky to get a cost-of-living increase."
Dire straits at District 26
Earlier this month, King County Fire District 26 found out its health-insurance premiums for firefighters will go up 20 percent next year.
Property taxes pay more than 90 percent of the bills at Fire District 26, which serves about 30,000 people in Des Moines. Chief Jim Polhamus said the district increases its levy at least 5 percent each year and still has trouble keeping up with expenses.
Fire districts don't have any other taxing authority, said King County Councilwoman Louise Miller, R-Woodinville. "They'll have to terminate firefighters. They'll have to move away from 24-hour coverage. ... I can't imagine the average citizen thinking that is something they wanted to give up."
With I-747 looming, several fire districts in King and Snohomish counties recently won voter approval to temporarily increase their levy rates.
Libraries foresee big cuts
Library districts are in a similar predicament.
King County Library Director Bill Ptacek said property taxes will cover nearly 95 percent of the library's $67 million budget this year. Based on the Department of Revenue's I-747 analysis, Ptacek said the library — one of the five busiest in the nation — would eventually have to cut spending by at least 20 percent.
Book purchases, public computer access, maintenance, staff hours and possibly library hours would be cut.
"This is going to screw up the library for the rest of this generation," Ptacek said.
I-747 backers bristle at all the dire predictions.
"They've become so accustomed to eating out of the trough for so long," said Monte Benham, who co-sponsored the initiative with Eyman.
Even under I-747, Benham said, most tax districts could stay ahead of inflation. That's because the initiative's 1 percent limit would not apply to taxes on new construction. On average, those taxes boosted revenue by more than 2 percent in each of the past three years.
"And if they still need more money," said Benham, a retired engineer from Kennewick, "let them come and justify it to the voters."
Ralph Thomas can be reached at 360-943-9882 or email@example.com.