Title
Briefing on Property Tax Levy History, Current Structure, and Limitations
Recommended Action
Committee Recommendation:
Not referred to a committee.
City Manager Recommendation:
Receive a briefing on Property Tax Levy history, current structure, and limitations.
Report
Issue:
Whether to receive a briefing on Property Tax Levy history, current Structure, and limitations.
Staff Contact:
Joan Lutz, Senior Finance and Budget Manager, 360.753.8760.
Presenter(s):
Michael Githens, Finance Director
Background and Analysis:
The City of Olympia relies on its ad valorem (property tax) levy as a foundational revenue source that supports general government functions, including police, fire, parks, transportation and administrative services. Since property tax is both highly regulated under Washington State law and sensitive to economic changes, it is important to understand how the levy has evolved, how it operates today, and what legal constraints shape future budget planning.
Washington State's property tax system is based on a budget-driven levy structure rather than a rate-driven system. This means that the City adopts the total property tax amount to be collected each year, subject to state limitations and then calculates back to a rate amount.
Significant legislation occurred with the statewide adoption of the 1% annual levy-increase limit, which caps growth in the City's regular property tax levy to 1% over the highest levy amount from the previous year, unless voters approve a larger increase. Although additional revenue from new construction, improvements, and state-assessed utility property is allowed, the 1% limitation has historically constrained the City's ability to keep up with inflation driven costs for personnel, maintenance, equipment and services.
Over time, this structural limitation has prompted the City to increasingly rely on voter-approved levies, bonds, fees, and other revenue sources (such as sales tax as well as business and occu...
Click here for full text