The sale of two multimillion-dollar properties has resulted in the City of Port Townsend’s real estate excise tax (REET) being higher than usual.

“We’re almost at 100 percent of the real estate excise tax for the year,” Port Townsend City Manager David Timmons told City Council members during the May 1 council meeting.

“Wow, and we’re not even halfway through the year,” responded council member Michelle Sandoval, who also is an owner-broker with Windermere.

And that’s just one-third of the way through the year, as the REET figures were for April.

Timmons said the city’s share of REET is a 0.5 percent tax on the value of the property transactions that is imposed locally.

The REET is authorized by state law and is designed primarily for capital investment and for paying debts, Timmons said.

The REET is at $281,706 as of the end of April, and the city had budgeted an estimated $460,000 for the year.

“So we’re two-thirds of our budget,” Timmons said.

“Real estate excise is based on real estate activity in the community. So that’s kind of a measure of the community’s health,” he said.

The Jan. 30 sale of Seaport Landing assisted living facility to North Star Assisted Living for $23,268,350 was one of the reasons the REETs are higher than usual, Timmons said.

The other big sale was Watership Medical Building at 1010 Sheridan St., located across the street from Jefferson Healthcare. Jefferson Healthcare bought the property in March for $2,680,923.

According to county documents, Seaport Landing’s REET tax for the city was $116,336.75, and the medical office building tax was $13,404.62.

The city budgeted even more for the REET in 2016: $570,000. The city actually took in $590,244 that year, slightly more than what was expected, Timmons said.

ELECTION AND MARKET

For 2017, the city budgeted the REET “more conservatively,” Timmons said, at $460,000. Part of the reason the city backed off on its REET budget for 2017 was the 2016 presidential election.

“We didn’t know what that would do to the real estate market and interest rates,” Timmons said. “Sometimes you see a change in interest rates after a presidential election,” and it would have been unhelpful to overestimate what the tax might collect.

“Right now, we’re tracking ahead of last year, but what really bumped us was there was a purchase by the hospital of some property and then the sale of the assisted living facility.”

Timmons said the key factor was that the REETs were tracking so high so early. He said that if the city economy continues as it is, the REET this year might peak at about $600,000.

“So, it looks like we might hit around $600,000 this year, total REET income.”

“We had an anomaly,” Timmons said of the REET bump, “but underlying that, it’s running very similar to last year. It’s ahead of expectations, which means there’s a lot of activity. And that’s what we’re seeing from real estate agents as well, and that’s what we’re seeing in the permitting office.”