An observant reader asks if I missed this story.
No. It just struck me as a he said/she said kind of story that really wasn't all that definitive. If any of you have other thoughts please have at it in the comments.
Posted by Eric Earling at January 24, 2008 09:51 PM | Email ThisSkyrocketing Property Taxes
What did the Legislature's failure to act on the city's Past Banking capacity, leaving it all in play?
Skyrocketing Property Taxes
Should it really suprise anyone that this legislature is offering up two more bills to massivly increase your property taxes?
Posted by: GS on January 24, 2008 09:44 PMKing County, Wash.
County Investment Fund's Credit Rating Suspended
Standard & Poor's suspended its credit rating of the King County Investment Pool, four days after S&P severely downgraded a $52 million mortgage-backed investment in default as a result of the meltdown in the mortgage markets. The pool invests cash surpluses for the county and about 100 other tax districts.
MORE: Seattle Times
http://www.governing.com/local.htm
From the Seattle Times:
"....Another holding, Victoria Finance, was downgraded Monday to S&P's lowest rating, D, after failing to make scheduled payments this month. The investment pool invested $52 million in Victoria Finance.
Defaults by Mainsail, Victoria Finance and two other troubled securities -- Cheyne Finance and Rhinebridge LLC -- have tied up more than $202 million, or about 5 percent of the $4.1 billion investment pool, managers said.
The pool invests cash surpluses for the county and about 100 other tax districts, including school, fire, water and sewer districts, and the Public Stadium Authority that oversees Qwest Field. The pool's two largest investors are King County and the Seattle School District.
The "impaired investments," as the county now calls them, are securities known as "structured investment vehicles," or SIVs, that sell short-term debt to fund their investments in mortgages and other loans.
S&P said it suspended rather than withdrew the investment pool's rating because it is likely the rating will be reinstated. But if King County's "distressed" investments don't merit adequate ratings after they are restructured, the investment pool may not qualify for an investment-grade rating, the firm warned.
The pool probably won't recoup any cash from those investments for three to 10 years, said county Finance Director Ken Guy. "Our goal is to not sell in a distressed market but to try to recover our principal value and, hopefully, our interest over a reasonable period of time," he said...."
http://seattletimes.nwsource.com/html/localnews/2004133924_badfunds19m.html
If the assessors really believed this, then you'd think they would make it specific to residential properties. Problem solved.
Posted by: pudge on January 24, 2008 10:35 PMWhy should a single person living in their own home be required to pay the same RE levy rate as the owner of a rental home with eight occupants?
Each home should be taxed at a flat rate for fire response.
Other services such as water and sewer are already billed at a minimum rate designed for a family of four. The single person therefore is subsidizing the lifestyle of the family, but the residence tax will even that out.
Some residents are too mobile for the assessor to nail. I dread to say, but perhaps an increase in the local sales tax could help them to contribute fairly.
Personal Property taxes, which, through odd definition, are mostly taxes on business property, should be taxed on actual value in the assessment year rather than on value at time of purchase.
Did you know that the Personal Property tax basis on a 1983 IBM PC is about $5,000? Nevermind that it's actual value is MINUS $20
Posted by: Bart Cannon on January 25, 2008 07:41 AMhttp://www.olympiabusinesswatch.com/2008/01/assessor-convin.html
Posted by: Richard on January 25, 2008 07:53 AMOn the one hand, they want to try and lower taxes for the little guy, and provide all of their enviro schemes, bag-banning and other useless minutia and social safety nets. While on the other hand, they need revenue badly, and without an Income tax to burn like the bigger and more socialist US states, they are frantic to do something, anything, to keep the revenue flowing.
This kills two birds with one stone as it allows them to claim they are lowering the bar on the appeals for the little guy, and trot out a few poster children. While at the same time extending a huge olive branch to the corporate and tax lawyer lobby that will quickly shift massive tax burdens from corporations to private home values. And the good little socialist bureaucrats in King County will do their best to assess the higher value properties that that they deem are owned by "the rich" such that they can get their revenue.
So if you bought smart in an appreciating market, but you really are middle class, be prepared to move out of your house when you can't afford the property tax any longer. Or come up with a productive way to make more money.
This is the kind of thing that turns more people in to conservatives.
Posted by: Jeff B. on January 25, 2008 09:21 AMPC@11 and some other commenters obviously do not understand that the job of the assessor is to issue tax bills proportionate to value, not to determine the total amount of taxes.
Richard Pope's suggestion @13 is brilliant, albeit impractical.
Posted by: Bruce on January 25, 2008 11:05 AMJeff, I would be happy to solve your problem. I will pay the increase in your property taxes in exchange for a promissory note for the appreciation that is so troubling to you (backed, of course, by a lien on your house). A perfect free-market solution!
Posted by: Bruce on January 25, 2008 11:11 AMIf the homeowner values the property "enough" (maybe 10%?) below market, then the state would have incentive to buy it. It would pencil out- since the transactions costs would be covered by the difference. The transaction is self-funded, because the state could get a loan collateralized by the real estate value. It is state-budget neutral!
I'd say the homeowner should be given an option: go with the assessor's estimate, or submit an estimate of his or her own.
Most would not take the option, but enough would that it would keep the assessor honest.
Richard's idea is genius.
Posted by: Bruce Guthrie on January 25, 2008 11:17 AMWell, he could have said anything -- he could have said "Hey, let's go to Jupiter and rob a bank" -- but it would have been meaningless. His job, had he won, would have been to assess taxes proportionally to property value, so that the total met the legislature's requirements.
Posted by: Bruce on January 25, 2008 11:20 AMThe Assessors are upset because they know this takes away their way of doing business in which they can unfairly swing the tax burden in any direction they choose, knowing that they have the edge in burden of proof if there is an appeal.
Posted by: ITK on January 25, 2008 11:44 AMThe Assessor cannot and does not set property taxes. The Council does that by legislation. The Assessor's job is to apply the tax levy rate to each property subject to it. The levy dollar amount is set before the assessment occurs, obviously, because the tax rate is a function of the total taxes levied and the total assessed value subject to tax.
So if appeals lower the assessed values for a class of taxpayers, the tax levy in dollars which was previously set by the county legislative body must by law still be collected; ergo, the taxes collected from the other classes go up.
It's called "math."
Posted by: Fritz on January 25, 2008 12:01 PMAnyway, if you don't like Richard's option, then you are always free to let the assessor choose your house value.
Libertarians tend to like choice. We also tend to like economics.
(My gosh, we've got all three Bruce's in on this one! Reminds me of the Monty Python sketch...)
Posted by: Bruce Guthrie on January 25, 2008 12:05 PM1.Make a committment to more Gambling revenues by legalizing gambling in the state.
2.Legalizing industrial cannabis
3.legalize medical cannabis for sale ala state lquor stores..
4.Legalize recreational cannabis.
Then we can use these revenues to scratch the social itches instead of overloading the property taxes,Sales taxes,and business fee's.
Then we dont have to play a game of where's the chin line.
I say we start with 1-3 and then reduce the other taxes below the chin line,until we need to consider 4.
Which is exactly the same thing as going back to the bank and refinancing for a much longer term or at a higher interest rate, to get lower payments. It might end up that people stay in their houses, and have oodles of value, but that value ends up getting eaten up in interest payments and tax payments so that they really don't end up with any of the equity. So then I guess we turn to them Dem home loan bailout program?
Conservatives find it troubling that they get taxed out of the equity they've built. But I guess to Progressives, it's not our money to begin with, so whether it gets confiscated in property tax now, or in a death tax at the end, really should not concern us either way.
Posted by: Jeff B. on January 25, 2008 12:49 PMHow many people do you think actually paid the Death Tax? If you have that much money sitting around you should be smart enough to hire yourself a good lawyer & accountant to transfer you assets in such a way so as not trigger the tax.
Or you could do a the Hilton thing and give your money away to charity. Let your children work for their money rather than hading it to them on a silver spoon.
The Assessor's job is to assign a fair-market value to each parcel of real estate under his jurisdiction. He does not assign taxes.
In Washington, the overall property tax burden is limited by law to an increase of 1% per year (and bear in mind that the cap applies only to the overall burden, not to individual properties). If, for example, last year's overall burden was $100 million, this year's overall burden can be no more than $101 million.
If the values of all of the real estate parcels add up to $101 billion, then the property tax rate will be $1 per $1000 of assessed value.
For a property (call it XYZ) with an assessed value of $100,000, the property tax will then be $100.
If the value of each and every parcel doubled, the tax on XYZ would still be $100, because the tax rate would be cut in half, but the assessed value would double.
For this reason, the assessed value of a property is meaningful only in relation to all of the other properties.
For example, if the value of XYZ doubled, and all of the other properties remained unchanged, the tax on XYZ would double.
This is what Nobles is concerned about. He is quoted in the article as saying that 40% of the tax burden falls on commercial properties, with a total value of $136 billion. Thus the value of all properties is $340 billion, and the value of non-commercial properties is $204 billion, or 60% of the total.
In Nobles' example, 30% of the commercial property owners ($40.8 billion) get "substantial value reductions", amounting to "more than $20 billion in assessed value". That reduces the total property value to $320 billion. To collect the same amount of taxes, the tax rate has to increase 6.25%.
Thus, any property owner whose assessed value remained the same would see his tax increase 6.25%. The commercial property owners who got their assessed values reduced would see their taxes go down 47%, on average.
The levy rate looks to be around $10 per $1000 of value:
http://www.metrokc.gov/assessor/TaxRate.pdf
The owner of a $20 million property thus pays on the order of $200,000 per year in property tax, while the owner of a $200,000 house pays $2000 per year. All else being equal, a reduction of 15% in assessed value is worth $30,000/yr to the former, and $300/yr to the latter.
Obviously, the big property owner has much more to gain from an assessment reduction, which was Nobles' point.
And it's probably easier for the big property owner to get a reduction, as large properties are more difficult to assess. A typical house may have hundreds of comparables, while a large property may be possess features that can't be compared.
Posted by: ewaggin on January 25, 2008 01:09 PMI haven't liked my assessment for the past several years because I have no plans to move, and it's gone up alot. But I also have no plans to contest it, because if they did a thorough appraisal, I'd be worse off.
That said, I do believe there would be unintended consequences to residential property owners with this legislation. I'd prefer they address banked capacity instead, instead of that b.s. bill they passed last session when I-747 was overturned by the courts because they believed voters are too stupid to understand plain English.
Posted by: Palouse on January 25, 2008 01:56 PMOf course, one of the best ways to lower demand is to get rid of the Growth Management Act, which has pushed up demand in already urban zones.
Just a thought.
Posted by: tc on January 25, 2008 03:28 PMYou say that like it's a bad thing. I happen to like my peace and quiet. I don't want my neighbors farms built up with McMansions and force me to pay more for the resources I don't use. Keep the urban folks in thier fancy urban villages and out of Farm Country.
Give this legislature 4 more years with no checks and balances, as they have now, and you will all be penneyless and depending on them for your every need.
This session is an absolute attack on our pocketbooks, the initiative process (YES ONCE AGAIN), with zero leadership or protection from either Gregoire or Chopp.
And they are holding back (HA HA HA HA) due to an election year.
Posted by: GS on January 25, 2008 04:43 PM
Even one?
Having worked on determining values in partial condemnation situations I find your statement difficult to believe. Of course these were eminent domain situations for expansion of right-of-way - maybe "emient" domain is different...
Posted by: BA on January 26, 2008 10:43 AMThanks everyone for the input I have read here.
Currently the county gets (with other levies) about 4 grand per year for my 500k property. If they need to double that, will they value my property at 1+ million?
Posted by: Ted Bundy on January 26, 2008 01:19 PMRichard's proposal is clever, but I would oppose it on principle.
Given the harm done to our individual property rights by both WSSC and SCOTUS on the eminent domain issue, I think encouraging any further takings of private property by the government is a terrible idea.
For that matter, I believe that real estate property taxes are an infringement on our constitutional property rights, as such taxes impose a nonconstitutional requirement on ownership of real property, which is that one must have an income in order to own real property.
Without an income, taxes owed cannot be paid, and the State will seize the property.
For this reason, real estate property taxes are evil. And with all of the attendant problems mentioned in the comments above, such taxes are stupid as well. When legislation is both evil and stupid, it should be replaced with something else.
Posted by: ewaggin on January 26, 2008 03:08 PMHere in the fine city of Vancouver, our Mayor has been busy making closed door deals with developers to purchase city property and way below market value.
Half of a downtown block sold for $200k, while across the street the city sold a bank a build that needs to be razed for $3.2 million. Yes, governments will make a deal if they like the person.
You can check The Columbian newspaper if you like.
Posted by: kim in vancouver on January 28, 2008 03:52 PMMr. Iman??? Lets put it to a vote!
Posted by: Testing the waters on January 29, 2008 07:47 PMMr. Iman??? Lets put it to a vote!
Posted by: Testing the waters on January 29, 2008 07:47 PMMr. Iman??? Lets put it to a vote!
Posted by: Testing the waters on January 29, 2008 07:47 PMMr. Iman??? Lets put it to a vote!
Posted by: Testing the waters on January 29, 2008 07:49 PM