What's Going on With Property Taxes? A Discussion with King County Assessor John Wilson
I attended a class yesterday with special guest speaker, John Wilson, the elected King County Assesor.
The overall synopis of Wilson's message was simple: The surging values of properties plus voter approved levies are driving up taxes (particulary, sound transit, emergency radio system, and the McClearly Decision).
So, why are our property taxes so high? Keep reading...
THE McCLEARY DECISION
Ultimately over 60% of our tax increase is due to the McCleary Decision, according to Wilson.
Most of you already have heard of the McCleary Decision, but most people don't know how that directly impacts our property taxes. Basically, someone sued the State of Washington several years ago saying that the schools were underfunded. The Supreme Court ruling, basically says that yes, the schools were underfunded, and now the State of Washington will have to pay for the underfunding.
Really that means the people of the State of Washington will pay for the underfunding.
To comply with the McLeary decision, the legislature raised the state property tax rate by $1.01 per $1,000 of assessed valuation.
Let me say this again in a different way - the way the McCleary Decision is applies in real life is that if your proerty goes up in value, so does the money for schools. This equates to higher taxes for you. (Apologies for the quality of the pictures - but these are pictures of John Wilson's slides.)
For easy math, if a homeowner has a house valued at $500,000 and the levy is at a $1.00 levy rate, that will cost the homeowner $500 annually in property taxes. If your house's value increased to $600,000, that same homeowner would now be paying $600 for that levy.
We all instantly got an increase this year with the McCleary Decision, but if your home value increases, then so will the amount going towards McCleary/schools.
According to Wilson, beginning in 2019, local school levies will be capped at $1.50 per thousand or $2,500 per student, whichever is less. Property taxes rates are to drop from the 2018 level, but in most urban and suburban school districts property taxes will be higher in 2019 than they are today because of higher value.
SOME LOCAL STATS & PREDICTIONS
According to Wilson, some people's taxes have increased 66% in the last five years. Wowzer.
Just last year, in my home town, Redmond, our taxes went up 19.59% (based on a median value of $700K.) Bellevue was 21.4% (based on a median value of $791K), Kirkland went up 16.26% (based on a median value of $574K), and Carnation went up 31.47% (based on a median value of $379K).
When I asked John Wilson why Carnation's increase (31.47%!!!)was so dramatically different percentage-wise, he said that Carnation does "not have a large business base to offset tax expense." Carnation has far fewer businesses to leverage property taxes from, whereas the many of the other cities in King County are able to tax business property owners more, relieving residential home owners in those areas. Carnation doesn't have that same balance, so the burden of property taxes fails mostly on the home owners.
Wilson's predicts an average of 10% increases projected for next year, but in future, expects less than double digit increases. Thankfully.
HARDSHIP TO SENIORS
Unfortunately, one of the biggest issues with increases in property taxes is that most seniors are on a fixed income - and seniors aren't exempt from levies.
There is some relief where seniors that are 61 years of age and older can apply for senior exemptions, which reduces the amount of property tax that would be paid. However, one of the biggest issues is that there can only be a combined income of $40,000 - which includes your social security income.
John Wilson did mention that he was planning on going to Olympia to ask for an increase to $56K combined income - a more realistic number for those residing in King County.
WHERE TAX MONEY COMES FROM/WHERE IT'S APPLIED
King County's budget is around 1.16 billion, according to this graph. There are 7 revenue streams in this graph, with well over half of the revenue coming from our property taxes at $683.5 million (darker blue). (Sales tax in green is another huge contribuor at $272.8 M.)
Good, bad or indifferent, King County's current system takes our property taxes as the main stream of revenue for the budget.
The King County Assessor's office created a couple of tools that I will share with you that may help you understand how property taxes are assessed and in particular to your own property - where your property tax dollars are being spent.
This is a video to explain how property taxes are assessed here:
And here's a "transparency tool." Type in your address and you will see, dollar for dollar, where your property tax money is being spent:
Take a look at this link here: https://localscape.spatialest.com/#kingcountyassessor/Tax
OTHER INTERESTING DETAILS FROM THE MEETING:
1. Ever notice that your assessed value is less than the market value? That's because There is 12 month lag built into state law. So your 2018 taxes, were established Jan 2017.
2. King County Assessors office has over 700,000 properties that must be assessed.
3. Your property will physically be assessed every 6 years. They use a combination of "boots on the ground" personnel and detailed aerial photography to capture updates and changes that occur to each property.
4. If you have a home remodel - basically if you have permitted remodels - you may see a quick change to your value - or it may take up to 6 years. Many factors, including how the local municipalities communicate with each other to notify King County about remodels/changes - will impact when you will see a rise to your property value on your tax bill.
5. There's a temporary tax benefit to doing remodels if you fill out the proper paperwork with King County. It won't keep your tax value at the previous value forever, but it will give you some relief.
6. There's an actual law that allows King County Assessor personnel onto your property.
7. Governments can only increase property tax revenues by 1% per year - and the rest of the increases is because of us - the voters.
So, as I said before - good, bad or indifferent, this is how our current system works in King County. If you would like to chat more, I'll be happy to discuss the information I found out during John Wilson's meeting. Wilson actually seems like an approachable person, who admits that our tax system isn't perfect. His office will respond to inquiries, but depending on what your issue is and where it falls within their department - they have a months long backlog, so you may wait a while. John Wilson also has a public profile on Facebook, if you are interested.
If you have any other real estate questions, feel free to contact me as well.
Kristin Bushnell is Designated Broker of Bushnell Real Estate Solutions and Co-owner of Bushnell Craft Brewing Company in Redmond, WA. Check out my profile here.
If you are ever interested in chatting about real estate or becoming a member of our team, contact me at firstname.lastname@example.org or call me at 425-559-1355.