The Port Townsend City Council has rescinded a law requiring an advisory vote on the use of "banked" tax capacity and decided to use some of that money to balance its 2008 budget.
At a special meeting Tuesday, Nov. 27, the council gave final approval to an ordinance repealing the law requiring advisory votes on banked capacity. It also gave final approval to using some of the city's banked capacity in 2008.
The council is expect to finalize the 2008 budget on Monday, Dec. 3.
The council's actions this week increase the tax bill on a $300,000 home by about $43.40 per year. Had the council stuck with the 1 percent increase it approved in October, that same homeowner would be paying about $4.22 more, not including property tax increases by Jefferson County, the Port of Port Townsend, and other agencies that levy property taxes.
However, it's not clear if the city will be able to use all of the banked tax capacity approved Tuesday night because the Legislature is meeting this week to discuss Initiative 747, which was overturned by the Washington Supreme Court earlier this month. The Legislature is expected to, in effect, restore I-747, the 2001 initiative that limited property tax revenue increases to 1 percent annually.
The 2001 law approved by 70 percent of city voters required an advisory vote prior to using banked capacity. It was rescinded in a 4-3 vote on first reading, with Geoff Masci, Laurie Medlicott and Frank Benskin voting against the repeal. Voting in favor were Mayor Mark Welch, Michelle Sandoval, George Randels and Catharine Robinson. It passed by the same vote Tuesday night.
Benskin challenged the vote on procedural grounds, but his colleagues concurred with City Attorney John Watts, who advised that the mayor had the power to place the matter on the agenda and only four votes were required to approve it.
Earlier on Monday, County Assessor Jack Westerman III suggested that state law required a published notice two weeks in advance of taking banked capacity. Watts checked with several municipal organizations and concluded that the notice the city provided for a 1 percent property tax revenue increase in October, which did not specify any amount, was sufficient for this week's actions. The deadline for submitting a banked capacity increase to the assessor is Nov. 30.
How much in the 'bank'?
In theory, the city had as much as $665,323 in banked tax capacity. The ordinance adopted Monday night activates about $168,000 of banked capacity. The council chose that amount in part because banked capacity accrued since I-747 was passed - about $466,000 - is not expected to be restored by the Legislature.
A 1 percent property tax revenue increase would have netted the city's general fund just $16,786 annually.
The $168,000 preliminarily approved amounts to a 10 percent increase to the city's general fund revenues but only a 2 percent increase on an individual property tax bill.
Several residents spoke against the increase Monday night, and none spoke in favor. "Everything can't be fixed on the backs of homeowners," said Brigida Knauer.
Jim Hagen argued that rescinding the advisory vote requirement would overrule the trend shown by city voters in three recent elections (approving the advisory vote requirement in 2001, rejecting a 53 percent increase in property tax revenues in 2004, and rejecting a utility tax increase from 6 to 10 percent in 2007).
Tuesday night, Joan Tyler and David Hero commended the council for the actions it took Monday night.
Had banked capacity gone to the voters in the Nov. 6 election, the city's cost would have been about $3,500, county Auditor Donna Eldridge said. If it had been a stand-alone city election, the cost might have been as high as $16,500, she estimated.
After the vote to rescind the ordinance, the council voted to use banked capacity by a vote of 4-2, with Benskin and Masci voting "no." Medlicott abstained after taking exception to a comment Sandoval made about the courage it takes to raise taxes. Tuesday night, Medlicott, Benskin and Masci all voted "no."
"What are you going to do when there is no more banked capacity?" asked Benskin. "Something has to go."
"That's why people have elected us," Welch said of the council wrestling with a combination of cost reductions and revenue increases.
Welch noted that while the city receives about 16 cents of every property tax dollar paid by Port Townsend residents, all but 4 cents of that goes to either the county or Fire District 1 (East Jefferson Fire Rescue).
Combined with a hike in swimming pool user fees and a reduction in city employee health benefits, the preliminary actions are expected to both balance the budget and bring the city's ending general fund balance above the 5 percent minimum required by City Council policy.
County budget questioned
City Manager David Timmons pointed out that even if the council had voted to use more banked capacity, city homeowners would still be paying less than most county homeowners with the same assessed value. In 2007, a $300,000 home in the city was taxed a total of $2,514, he said, while a Kala Point home of equal value paid $2,881 in property taxes.
Timmons also raised questions about the county's budget practices. He argued that while the city has been struggling to bring its general fund beginning balance up to 5 percent, the county has increased its general fund beginning balance from 11 percent to 22 percent over the last four years.
Timmons pointed out that while the county's balance has been growing, it has been charging the city more for jail, dispatch and other services it provides to the city. "[The county] is adding $500,000 a year to its fund balance, yet our costs have been escalating," he said.
Timmons also questioned county reductions in funding for health programs, a service the city also helps fund. "I don't understand why a county department has to come to the city for funds," he said. "The county keeps squeezing the city while they grow their own reserves," agreed Mayor Welch.
"One reason our fund balance is growing is we've been very conservative over the last three years," Board of County Commissioners Chairman Phil Johnson said on Tuesday. He said his board had turned down many budget increases, including requests for more sheriff's deputies.
However, Johnson said he wants to look into how jail costs are allocated to make sure they are fair and accurate. "Our jail rates are quite high," he said.
Trust funds rejected
In response to budget concerns raised by pool and library supporters, Timmons had suggested that trust funds be set up for those two projects. Also, he proposed that banked capacity be earmarked for those purposes, and that nonprofits take on most of the fundraising responsibilities. Those ideas didn't go far, however.
"I feel like we're moving too fast on this," said David Hero, a member of Make Waves! - the group trying to keep the existing pool going while raising funds for a new athletic and pool facility. He was not speaking on the group's behalf, but Karen Nelson, its chairwoman, concurred with his reservations. The council set the idea aside without a formal vote.
One other idea was the suggestion by resident Jack Molsness, a retired engineer, that the city form a local improvement district (LID) to collect $500,000 from property owners for planned improvements on Upper Sims Way. Most of those owners have objected to city plans for traffic circles as well as any proposal that would force them to pay for the project.
And former councilor Allen Frank blamed the city's budget woes on "complete mismanagement" by Timmons and the council. When he left office, the general fund had a balance of $1.4 million, he said in an email. Timmons said that was a one-time windfall resulting from the closing of the solid waste fund; that money went to the general fund and was then transferred to the street fund, he said.
Reader Comments
Posted: Wednesday, November 28, 2007
Article comment by:
Martin Vetere
Amazing! Four councilers can override 70% of PT's voters. It takes more than courage to raise taxes in PT. It takes utter disregard for the wishes of the people. I can't wait for the next election to "throw the bums out." Does anyone in this town realize what's happening to us. Wake up!
Posted: Tuesday, November 27, 2007
Article comment by:
Bob Sokol
Burke's article is incomplete. He failed to mention that at least four others testified against the tax increase including two board members of Make Waves which is scheduled to be the recipient of banked capacity funds. I believe, and testified to that belief, that Council has set up a Pool District and a Library District without voter approval by establishing "trust funds" with property tax money. Also, Burke did not mention that Timmons' rush to act before Nov. 30 is bogus because there has been 11 months prior to the meeting last night to make budget decisions. Leaving unfinished business until there is little time for the public to act is the cowards' way out.
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