Q: What is a tax levy lid lift? What is I-747?

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In the 1990's government entities were able to increase property taxes 6% annually, so did counties, cities, ports, and fire and library districts. All those 6% increases multiplied year after year, and property taxes skyrocketed.

I-747 was a response to protect taxpayers from over taxation. In 2007, the Legislature instated a 1% annual limit on property tax increases (called a levy lid or cap), with 91% of the State House members and 81% of the State Senators voting yes.

Local governments (like the City of Mercer Island) are not allowed to raise taxes beyond the levy lid without a vote of the public. The Mercer Island City Council is now asking Islanders for a "levy lid lift" to remove the 1% cap and replace it with a 25% lid in 2019, and 3% per year in years 2020-25 (Proposition 1). The net effect of this "levy lid lift" raises city taxes by 45%.

Q: What is Proposition 1? Does Proposition 1 really raise city property taxes by 45%?

Proposition 1 is the levy lid lift measure the City of Mercer Island will place on the November 2018 ballot.

Yes. Proposition 1 increases your city property taxes each year between 2019 and 2024.

·    In year 1, Proposition 1 raises city property taxes 24.7%.

·    In years 2-6, Proposition 1 applies a 3% increase on top of the first 24.7%.

·    If you do the simple math on the % increases each year (25+3+3+3+3+3), you might think this adds up to 40%. But because of compound interest, the increase is 44.56% by year 6.

·    Traditional levy language calls for a levy to expire at its designated end point and taxes return to the original pre-levy base. However, this is not the case with Proposition 1. Post year 6, Proposition 1 calls for whatever rate you are paying in 2024 to become your new foundational base going forward.

·    This means the 45% city property tax increase becomes permanent by year 6.

Q: Haven't our taxes already increased significantly from other taxing authorities? 

Yes. King County has seen some of the highest tax increases in the country in the last several years, coming from 9 different taxing authorities. When those increases are combined with increasing house values, Islanders are getting hit hard. In just the last year, a homeowner with a median assessed value home has seen taxes increase by $1,607. Increasing house values will drive that high, and if Proposition 1 passes, it will be an additional increase.

Q: Why does the City want more taxes? 

A: Our city government needs an equal balance of efficient spending, accountability, and taxes. But we've had an imbalance since 2011.

The City receives revenue from two places, both of which have continued to increase:

·    "Other" City revenues and fees (60% of the budget) increased 7% annually

·    Property taxes and new construction revenues (40% of the budget) increased 2.4% annually

However, spending has been out of line with annual revenue increases:

·    City spending has grown 38%

·    Staffing has increased 12% (22 new employees) with only 4% population growth

·    The City has not applied formal spending containment since 2005

Proposition 1 does not address the core issue of spending, it asks Islanders to contribute more taxes, so the City does not have to live within a budget.

Q: Will Proposition 1 impact schools? 

A: No. Mercer Island schools are funded through other tax dollars and school bonds. Proposition 1 has no impact on our schools. 

Q: Is it true that school mental health care counselors will not be funded without Proposition 1? 

A: No. School counselors are partially funded through the City's Youth and Family Services budget, but are not at risk. This topic was discussed during the June 26th, 2018 council meeting and our city council members voiced strong support to protect and prioritize funding for school mental health counselors. 

Q: Will the City have to reduce the police and fire staff if Proposition 1 fails?

A: No. Mercer Island's budget has over $40M in cash reserves. Even if the City put no effort into reducing costs for our 2019 budget, our police and fire could remain fully funded with no changes through 2019 (and beyond). 

Q: Does Proposition 1 affect Mercer Island parks? 

A: No. The City has a parks maintenance and operations levy in place that will expire in 2023. It is expected the City will ask voters to renew that levy in 2023. 

Q: What will happen if Proposition 1 fails? 

A: Our City will receive the message that Islanders want it to prioritize how it spends our tax dollars. Mercer Island will still remain a high service community. Efficiency is about using your valuable tax dollars wisely. A "No" vote on Proposition 1 does not translate into cutting services. It is a message to the City to prioritize highly valued services and identify operational efficiencies to deliver those services, so we receive the most value for our tax dollars.

Q: Did the City review Proposition 1 with citizens before placing it on the ballot?

A: The City formed a community advisory group (CAG) last fall to study the budget and the potential for a levy lid lift. The CAG produced two documents, but the City Council did not follow either citizen recommendation. 

CAG Sub Group Recommendation for No Levy in 2019

CAG Recommendation for Levy in 2019

Q: In the June 26th City Council meeting, City Manager Julie Underwood outlined an estimated $30M in future capital needs for Mercer Island. I have also heard our water system might need a future capital levy. Does Proposition 1 support those needs?

A: No. Proposition 1 only funds the existing expenditures of the City Council at status quo and does not address any capital improvements for the City of Mercer Island.

Q: If Proposition 1 passes, how much will Island property taxes increase?

A: According to the City’s calculations, the levy lid lift will cost the owner of a $1.2M home, an additional $286 in the first year and an average addition of $374 per year for a total addition of $2,244 over the six years of the levy. This is in addition to the $1,209 per year that a $1.2M homeowner pays today in City property taxes.

Most levies expire with taxes returning to their original level before the levy. However, Proposition 1 is a permanent levy. If approved by voters, Proposition 1 will impose the 45% increase permanently.

Q: Did the City survey voters to see if they wanted to increase property taxes?

A: Yes. In the summer of 2018, the City distributed its biennial survey to about 2,000 randomly selected Island households. Question 16 concerned the potential levy lid lift and read in part “What is the maximum increase in property taxes that you would be willing to pay (based on a $1.2M median assessed value home)?” The answer choices were: “$331 annually”; “$254 annually”; or “do not increase taxes”.

A majority of Island survey-responders, 51.3%, chose “do not increase taxes”. An additional 28.1% indicated that $254 per year was their maximum. Thus, 79.4% of Islanders surveyed were against the $374 per year levy lid lift.

Q: Is the City of Mercer Island limited to 1% annual revenue increases?

A: No. City revenues have increased 7.3% per year for the last five years (2013-17), well over the 2.07% inflation. Additionally, the City fund balances, funds the City has in the bank, have increased 9.8% annually over the same period (2013-17).

Q: Is Mercer Island property tax revenue limited a 1% increase per year?

A: No. Property taxes increase 1% plus new construction. For the last five years, new construction has averaged 1-2%. Total Mercer Island property tax revenue increased 3.03% annually in years 2013-17 and 3.39% in 2017.

Q: Are low-income seniors and those with disabilities exempt from the levy?

A: No. This year, the Washington State Legislature passed SHB 2597 which allows cities to exempt low-income seniors, disabled veterans, and others with disabilities from tax increases resulting from a levy lid lift. The exemption is optional and to be effective must be stated in the ballot measure. The City did not include the exemption in the ballot measure.

Q: Is the levy lid lift narrowly tailored to fit specific, defined needs?

A: No. The levy lid lift can be used for almost any purpose. Ordinance 18-07 indicates the following can be funded: “police/emergency services, mental health counseling, safety net services, the maintenance of parks, trails, playgrounds, and ballfields, recreation services, code compliance services, and right-of-way maintenance.” The City Council is given broad authority to “determine the timing, order, and manner of funding.”

Q: What can I do to ensure that the City spends taxpayer funds responsibly?

A: (1) The most important thing you can do is VOTE in November. Ballots are mailed October 17th. Insist that the City pursue efficiency first , implementing a cost-control program before considering imposing additional property taxex - VOTE NO.

(2) Endorse MI for Sustainable Spending - https://www.miforss.com/become-an-endorser/

(3) Contribute to our efforts by contributing to Mercer Islanders for Sustainable Spending, 8300 Avalon Drive, Mercer Island, WA 98040 or https://www.miforss.com/contribute/. We are all volunteers but spreading our message (postage, web hosting, digital and print ads) is expensive.