Sales Tax and Property Tax Lid Lift Legislation for Cities and Counties

MRSC FOCUS › Sales Tax and Property Tax Lid Lift Legislation for Cities and Counties

(2ESSB 5659, ch. 24, Laws of 2003, 1st Special Session)

MRSC, June 25, 2003

One of the goals this year of the Association of Washington Cities, the Washington Association of County Officials, and the Washington State Association of Counties was to get legislation passed that would provide for new voter-approved taxing authority for cities and counties. 2ESSB 5659 provides such authority.

Sales Tax

A county legislative body may submit a ballot proposal to a countywide vote for a sales tax increase of up to 0.3 percent. Sales of motor vehicles or the lease of motor vehicles for up to the first 36 months are exempt from the tax.
The proposal must be approved by a majority of the voters.
The title of the ballot measure must state the purposes for which the funds will be used. However, the legislation states that at least one-third of the money must be spent for "criminal justice purposes," which is defined as "additional police protection, mitigation of congested court systems, or relief of overcrowded jails or other local correctional facilities," with no supplanting.
Sixty percent of the funds will be distributed to the county, with the cities in the county getting 40 percent on a per capita basis.
The vote must take place at a primary or general election - September 16 or November 4, respectively, of this year. Note that the Department of Revenue requires 75 days notice for sales tax rate changes and they only can occur on the first day of a quarter. That means that if you pass a tax increase at the September election, it can go into effect on January 1, 2004. Firms report January tax collections on February 25 and they are distributed in March. So, plan on only ten months for budget purposes in 2004.

If a tax increase is passed in November, it will not go into effect until April 1, 2004, with the first receipts coming in the end of June 2004.

Of course, you need to let the Department of Revenue know if you have passed a tax increase. You do that by sending a letter and a copy of your ordinance or resolution to:

Jim Harden
Local Tax Supervisor
Department of Revenue
PO Box 47476
Olympia, WA 98504-7476

Alternative Levy Lid Lift

RCW 84.55.050 has been amended so that cities, counties, and towns can now do multiple levy lid lifts for up to six years. However, there are somewhat different rules and, of course, the tax rate must be within your city's or county's limits per RCW 84.52.043.
The ballot proposition must state the tax rate for the first year of the lid lift and then state the rate of increase for succeeding years. This can be some kind of index, such as the Consumer Price Index (for goodness sake, if you choose to use the CPI, be sure to state the exact one you are using because there is a U.S. CPI-U, U.S.-CPI-W, and similar measures for the Seattle-Tacoma and Portland-Vancouver areas) or any other amounts, which do not need to be the same for all years.
The ballot measure must state the purpose and there can be no supplanting. Note that if you want to use the old "rules" and just do a lid lift for one year, subject to the 101 percent lid process in future years, you do not need to state a purpose or worry about supplanting. This is just an alternative measure
Majority voter approval is required.
You can include in the title of the ballot measure, a provision that the maximum amount of the levy in the final year of the lid lift will be the base for future levy increases. Otherwise, at the end of the lid lift period, the base will be reduced to what it would have been if there had been no lid lift.
The election must be held in September (primary) or November (general.)

Other Provisions

The bill also included some other provisions dealing with the Growth Management Act, which the Governor vetoed. The remainder of this act takes effect on July 1, 2003.