HOUSE BILL REPORT
HB 2124
BYRepresentatives Haugen, Horn, Appelwick, Wood, Cooper, Ferguson, Holland, Morris, Winsley, Wang, May, Fraser, Brumsickle, Basich, Van Luven, Nutley and Spanel
Providing local governments with authority to impose additional regular property tax levies and transferring to counties the responsibility to fund certain activities.
House Committe on Revenue
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. (14)
Signed by Representatives Wang, Chair; Pruitt, Vice Chair; Holland, Ranking Republican Member; Horn, Assistant Ranking Republican Member; Appelwick, Basich, Fraser, Grant, Haugen, Morris, Phillips, Rust, Silver and H. Sommers.
Minority Report: Do not pass. (3)
Signed by Representatives Brumsickle, Fuhrman and Van Luven.
House Staff:Rick Wickman and Bob Longman (786-7136)
AS REPORTED BY COMMITTEE ON REVENUE MARCH 1, 1989
BACKGROUND:
Local government regular property tax levies are limited and stated in exact rates. All property tax rates are expressed in terms of rate per $1,000 of assessed valuation. The state levy is limited to $3.60 plus the "equalized" portion for common schools. For counties, a countywide general levy of $1.80 is authorized. County road districts are authorized a $2.25 levy for road purposes. Cities and towns are authorized to levy $3.60 if the city or town has pre-LEOFF firemen's pensions obligations. For all other cities and towns, the statutes limit their regular levies to $3.375.
Junior taxing districts are authorized various regular property tax rates. Library districts are limited to $.50; Hospital districts are limited to $.75; Metro Park districts are limited to $.75; and Fire districts are authorized $1.00 plus those districts that have at least one full-time employee are authorized an additional $.50. Cemetery districts are authorized $.1125.
Article VII, section 2, of the Washington State Constitution provides that the aggregate of all regular property tax levies on property may not exceed 1 percent. Excess property tax levies are beyond this limitation. Currently, only regular levies of Ports and PUD's are above the 1 percent limitation.
Statutorily, the limitation on local regular levies is $5.55. In the past, the limitation for state and local governments was $9.15 however, in 1988, the state levy of $3.60 was removed from the overall limitation, reducing the $9.15 to $5.55. There are some exceptions to the limitation. Fire, Library, Metro Park, and Hospital districts may impose up to $.35 upon approval of the voters of the districts to protect their regular levies. If so approved, the $5.55 limitation automatically becomes $5.90.
A process is provided to reduce regular property tax levies in the event that the $5.55 is exceeded. Known as pro-rationing of levies, a process is outlined for local assessors to use in the event that the limit is exceeded.
Taxing districts, other than school districts, may impose excess or special levies for general purposes for a one-year period if authorized by the voters of the district. School districts may impose excess or special levies: 1) for one or two years for any purpose; and 2) for up to a six-year period for the purposes of construction, modernization, or remodeling of school facilities. Districts seeking voter approval of such propositions are subject to the 60 percent/40 percent voter approval requirement. In seeking voter approval, taxing districts must describe levies in terms of a dollar amount for ballot purposes. In cases of general obligation indebtedness levies, it is often impossible for a district to know precisely the actual dollar amount required until the bonds are sold and the interest rate or rates, terms, and bond retirement provisions are evident. The state does not possess authority to impose single year excess or multi-year excess levies.
Cemetery districts are authorized to levy $.1125 for regular levy purposes. There are 98 of these districts statewide. As levies have risen since 1984, and because cemetery districts are pro- rated prior to levies for hospital, library, fire, and metro park, these districts have in many cases lost their levy capacity. Cemetery districts are authorized to impose special levies, upon a 60 percent/40 percent voter approval basis.
Local governments are authorized to provide public health services through a variety of governmental structures. Counties may form health districts which may or may not comprise cities. Counties and cities may join together to form city/county health departments or cities and counties may separately operate health departments. Local boards are authorized to oversee these operations comprised of city and county officials. Counties require funding of cities and towns to provide basic health services to citizens in need of those services.
The statutes direct the county treasurer to disburse tax revenues to cities and towns on various dates specified. The county treasurer, as judiciary for taxing districts must disburse these tax revenues within specified dates however, there is no requirement to pay interest if those revenues are not disbursed within specified dates.
Cities and towns that provide firemen's pensions to pre-LEOFF firemen are authorized to levy an additional $.225 for this purpose. Additionally, cities and towns so qualified receive 45 percent of the state's fire insurance premiums tax based on the number of full-time firemen in the jurisdiction. Annually, these distributions amount to approximately $2.5 million. These jurisdictions must maintain a fund from which firemen pensions are paid however, if that fund is proven to be sufficient to make these distributions on an actuarial basis, the city or town is authorized to use the "excess" for any purpose.
Counties, cities, and towns are required to pay the cost of voter registration based on the proportionate share of registered voters within their jurisdictions.
Hospital districts are authorized to use up to 3/4 of 1 percent of the district's assessed valuation for general indebtedness. These bonds may not exceed 30 years in maturity.
The Washington State Association of Fire Commissioners is a statewide organization representing commissioners of the state's fire districts. There are 420 fire districts in the state levying property taxes, for an average of approximately 11 districts per county.
SUMMARY:
SUBSTITUTE BILL: The maximum rates of regular property tax levies for the state, cities, towns, counties, and special districts are altered as follows: a) Counties may levy up to an additional $.40 per $1,000 of assessed value countywide. County road districts may levy up to an additional $.10 per $1,000 of assessed value in the unincorporated area of the county; b) Cities and towns may levy up to an additional $.10 per $1,000 of assessed value within their boundaries. Pre-LEOFF cities (those limited to $3.375 and who are not annexed to a library or hospital district) may levy up to $.225 per $1,000 of assessed value; c) Any property taxing district (including the state) may impose 6-year levies upon voter approval of the citizens within their respective districts. Ballot propositions to voters may be expressed in terms of rate, or in terms of dollar rate of tax levy; d) the regular levy of $.50 per $1,000 of assessed value for library districts is placed outside the 1 percent constitutional limitation; e) The regular levy of Cemetery Districts ($.1125 per $1,000 of assessed value is eliminated; f) the ability is eliminated for library, fire and metro park districts to protect their regular levies by obtaining voter approval to impose the special $.35 per $1,000 of assessed value levy within their districts. Hospital districts that received voter approval for the special $.35 levy would be able to maintain that levy for the years so authorized by the voters in the district. After that, the special $.35 levy for hospital districts is also eliminated; g) The Emergency Medical Services levy for six-years at $.25 per $1,000 of assessed value is clarified as a voter approved excess levy. Current EMS levies may continue during the period of time authorized by the voters.
2. Counties are required to: a) Assume the entire cost of basic health services instead of charging cities and towns for that service. Representation on the health district boards is broadened to include persons from the entire county. Counties with cities in excess of 400,000 population that have formed a combined city/county health department may mutually agree to share the costs of other local services, other than basic health.
b) Assume the costs of cemetery districts at the 1986 level of revenues from regular property taxes imposed by the districts. Counties optionally may provide services in-lieu of remitting revenues under mutual agreement. Counties could assume responsibilities and duties of the districts after January 1, 1995. Cities and towns are required to provide revenues at the 1985 level of assessed valuation of cemetery districts to any cemetery districts that were annexed to cities and towns. Cities and towns are required to continue this level of revenue for as long as the counties are remitting monies to the cemetery districts.
c) Assume all costs of voter registration instead of charging cities and towns for their pro-rata costs.
d) Disburse property tax revenues to cities and towns on the following basis: 1) on the 20th day of May and November, the county treasurer shall disburse monies collected from the 1st to the 10th of those months; 2) on the last day of May and November, the county treasurer shall disburse monies collected from the 11th to the 20th day of those months; 3) on the 10th day of June and December, the county treasurer shall disburse monies collected from the 21st day to the last day of the preceding month. All other disbursements by the county treasurer shall be made on the 10th day of any month for collections received from the previous month.
3. City and town requirements relative to Pre-LEOFF firemen's pension obligations are altered as follows: 1) 45 percent of the fire insurance premiums tax is allocated by the state treasurer on the basis of retired firemen instead of full-time firemen and surviving spouses; 2) monies not needed by the city or town from fire insurance premium revenues for retirees or surviving spouses must be returned to the state treasurer and those monies transferred back to cities and towns who continue to have retired firemen or surviving spouses; 3) cities and towns must report their pension obligation annually to the state actuary.
4. A hospital district's non-voter approved debt capacity is restricted to 1/8 of 1 percent of the assessed value of the district.
5. The Washington Association of Fire Commissioners is required to submit a report detailing proposed fire district consolidation to the House Local Government Committee and the Senate Government Operations Committee by December 31, 1989. The report shall reduce the number of fire districts in counties of 1,000,000 population or more to 15 districts; in counties between 100,000 and 1,000,000 population the number of districts is limited to 10; in counties with less than 100,000 population, the number of districts is limited to 5.
The property tax provisions of the proposed legislation are effective upon voter approval of a constitutional amendment submitted to the voters in November, 1989. If approved, newly authorized levies could be imposed for taxes due in 1990.
SUBSTITUTE BILL COMPARED TO ORIGINAL: The potential for future pro-rationing of local regular property tax levies was clarified. The use of the voter approved special $.35/$1,000 of assessed value levy by hospital districts was clarified. Any emergency medical service levies currently in place when authorized by the voters may continue during the period of time so authorized. County/city combined health departments with cities in excess of 400,000 population may have options in addition to funding basic health services.
Health district board membership was clarified. Counties are required to fund cemetery district services at the 1986 level of regular property tax revenues instead of 1988. Counties may assume cemetery district responsibilities and duties in 1995 instead of 1996. Cities and towns, annexed by cemetery districts were also required to provide revenues to the districts so long as counties did so. Councilmanic or non-voter approved indebtedness was clarified for hospital districts and the maximum indebtedness of a district was restored at 2 1 2 percent of total assessed valuation.
Fiscal Note: Requested February 22, 1989.
House Committee ‑ Testified For: Mark Allen, Washington Library Association; Jim Salatini, Metro Park; Nancy Pearson, Chair, Peirce County Library System Board; Lon Dickerson, Timberland Library; and Pete Spiller, Washington Fire Commissioners.
House Committee - Testified Against: None Presented.
House Committee - Testimony For: Local governments need the flexibility to levy additional property taxes to maintain and provide expanding local government services. The property tax is regarded by local voters as a major local government revenue source. Counties should assume the costs of certain regional local services that they now partially charge to cities and towns. Moving the libraries outside the 1 percent constitutional limit would enable more levy capacity to partially solve the $9.15 property tax problem.
House Committee - Testimony Against: None Presented.