FINAL BILL REPORT

SHB 1420

                                  C 274 L 88

BYHouse Committee on Local Government (originally sponsored by Representatives Haugen, Ferguson, Cooper, Appelwick, Sayan, Brough and H. Sommers) 

Revising provisions on property taxes.

House Committe on Local Government

Rereferred House Committee on Ways & Means/Revenue

Senate Committee on Ways & Means

SYNOPSIS AS ENACTED

BACKGROUND:

The constitution and statutes place several restrictions on property taxes.

Statutes establish the maximum tax rate that each taxing district may impose.  These rate limitations are expressed in terms of a dollar value per $1000 of assessed valuation, except that the state's rate is a dollar value per $1000 of assessed valuation adjusted to an equalized value.

Statutes place a cumulative rate limitation on most of the regular property tax levies of most taxing districts at $9.15 per $1000 of assessed valuation that may be imposed on any property. The relative status of the various taxing districts has been established so that the senior taxing districts (counties, road districts, cities and towns, and the state for educational purposes) are permitted to impose their tax levies before the remaining taxing districts, referred to as junior taxing districts, impose their tax levies.  Different status levels have been established for the regular property tax levies of various junior taxing districts.  If the requested rates of tax levy exceed this $9.15 limit on any property, levy rates of the lowest status tax levies of the junior taxing districts are reduced or eliminated to remain within this cumulative ceiling rate.  The reduction or elimination occurs on the lowest status levies and districts before the next highest are affected.  Provision has been made for voters to authorize temporarily an increase in this $9.15 limit up to an amount not to exceed $9.50 per $1000 of assessed valuation.

Taxing districts other than the state have been authorized to transfer money to other taxing districts, in return for the recipient district reducing its tax levy, and to enter into contracts where a service is supplied, in return for the recipient district reducing its tax levy.

Fifth class and smaller counties are authorized to increase their county-wide property rate from a maximum of $1.80 per $1000 of assessed valuation up to $2.475 per $1000 of assessed valuation, and reduce the road district levy rate by an equivalent amount so that the sum of both rates does not exceed $4.05 per $1000 of assessed valuation.  Fourth class and ninth class counties are authorized to increase their county-wide tax rate from a maximum of $1.80 per $1000 of assessed valuation up to $2.25 per $1000 of assessed valuation if no other taxing district's tax rate is affected.

The boundaries of a taxing district are established on the first day of March in each year for purposes of imposing property taxes later that year for collection in the following year.

SUMMARY:

Property tax laws are altered as follows:

The sunset provisions are deleted on:  (a) the ability of a taxing district to transfer money to another taxing district, in return for the district that receives the money reducing its property tax rate; (b) contracts between taxing districts where one district supplies a service to another district, in return for the district that receives the service reducing its regular property tax rate; and (c) the hold harmless provisions of the 106 percent limitation for taxing districts that lower their property tax rates.

The ability of fifth class and smaller counties to increase their county- wide tax rate above $1.80 per $1000 of assessed valuation is eliminated, but any county is authorized to increase its countywide tax levy, and decrease its road district tax levy, if the sum of both levies does not exceed $4.05 per $1000 of assessed valuation, and if the tax rate of no other taxing district is affected.

A one year assistance program is established to fund the costs of a fifth class or smaller county that contracts with, or transfers money to, taxing districts where such action enables the county to increase its countywide property tax beyond the normal limitation of $1.80 per $1,000 of assessed valuation.  A temporary revolving fund is established to provide money for such assistance.  An appropriation of $100,000 to this account, plus one-half of the interest earnings on this local sales and use tax account is transferred to the account.  One-half of the distributions is made to eligible counties on April 30, 1989 and one-half of the distributions is made on October 31, 1989.

Laws establishing the "$9.15 limitation" are clarified that this limitation actually includes two limitations as follows: (a) a cumulative limitation of $5.55 per $1000 of assessed valuation for all taxing districts, other than the state, port districts, and public utility districts (PUD's); and (b) a limitation of $3.60 per $1000 of assessed valuation adjusted to an equalized value for the state for education purposes.

Laws are clarified that the county property tax for conservation futures are beyond the $9.15 limitation.

The provisions of law are altered concerning the pro-rationing of junior taxing district levies so that the highest status junior taxing district tax levies are protected somewhat.  After pro-rationing of the lower status junior taxing district levies, the levy of the taxing district with the smallest assessed valuation is reduced, and the taxing districts with levies that otherwise would have been pro-rated but for this reduction pay to the district that had its levy reduced an amount equal to the amount that this district lost due to a reduction in its levy.  The amount paid by each of these districts is proportional to the amount that each would have lost to pro-rationing if the levy of the smaller district were reduced.  A city or town that has been annexed by a fire district or library district would forgo a portion of this payment.

Annexations by fire districts of adjacent territory located in another county in 1987 and thereafter, are validated if the applicable procedures are followed.  The effective date of such an annexation that was accomplished in 1987 is February 1, 1988 for purposes of establishing boundaries for taxation purposes.

VOTES ON FINAL PASSAGE:

      House 94   0

      Senate    46     1(Senate amended)

      House             (House refused to concur)

Free Conference Committee

      Senate    40     8

      House 97   0

EFFECTIVE:June 9, 1988