How Will the City Pay for Growth-Related Costs?
The Quick Answer
There are new townhomes and mid-rise apartment complexes going up at a prodigious rate. If tax levies are capped, how will the City pay for the growth?
Presumably, the City budget estimates already include allowances for anticipated growth-related expenses.
Furthermore, RCW 84.55, the law that imposes the Levy Lid and specifies how it works, already allows for additional increases in the total tax levy to cover growth.
The Details
First off, the City budget estimates presumably already include allowances for anticipated growth-related expenses. So the City’s predictions of large budget surpluses should Proposition 1 pass already (we would hope) include accounting for project growth.
RCW 84.55 Allows for Extra Levy Increases to Cover Growth
It doesn't often get mentioned, because it makes a complicated process even more confusing, but it’s important to note that RCW 84.55.010 allows for an additional increase in the total levy proportional to the increases in assessed values within the City that are due to new construction or improvements.
That is, if, say, 1.5% of the year-to-year increase in total assessed values in the City is due to the value of new construction, then the total levy limit is increased by an additional 1.5% above whatever the limit would have been without the new construction.
This additional increase is allowed whether or not there is a Levy Lid Lift measure in place — so it applies even if Proposition 1 should be defeated.
Growth Leads to Increases in Other Revenue Streams
As the City itself (in response to a question about the property tax exemptions given to new developers) points out, growth leads to greater sales tax and utility tax collections as well as increases in other revenue streams that contribute to the City's general fund.
See the last question, on page 6 of the City's Proposition 1 FAQ. Part of their answer reads (the emphasis is ours):
We estimate that each new resident of a multi-family housing unit adds the following to the City’s revenue each year :
- Sales & Use Tax: As new residents occupy the multi-family units, they buy goods in Shoreline that generate sales tax. On average, staff estimates that each resident of a multi-family unit generates approximately $166.85 per year of sales taxes in Shoreline.
- Utility Taxes: Residents of multi-family housing use a variety of utilities, which are subject to utility taxes and franchise fees. This includes water, wastewater, solid waste, electricity, natural gas, cable, telecommunications, and surface water. On average, staff estimates that each resident of a multi-family unit generates more than $100 per year in utility taxes.
- State Shared Revenues: Many of the state shared revenues distributed to the City are based on a per capita basis. Assuming that the average multi-family unit occupancy is two people per unit, each resident of a unit generates approximately $36.15 per year of state shared revenues
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In addition to the ongoing sales taxes generated from the new residents, the City also receives one-time sales taxes from the actual construction, Real Estate Excise Taxes from the sale of project sites and, in most cases, completed projects at prices in the tens of millions as well as permit and inspection fees that offset the development review and inspection. From a revenue perspective, despite the initial exemption, the positive impact is significant immediately as well as in the long term. As for the tax burden, while there is a short-term potential shift to existing property taxpayers, these developments help increase the pool of taxpayers, spreading the long-term tax burden for the benefit all residents.