Assessor warns of largest property tax increase in state history

By CHRIS McGANN
P-I CAPITOL CORRESPONDENT

(Editor's Note: This article has been changed. An incorrect figure was published in the original version of this article.)

OLYMPIA -- It's an election-year, no-new-taxes, fiscal-responsibility legislative session, but that's not stopping lawmakers from contemplating a bill that could ultimately saddle homeowners with the largest property tax increase in state history.

House Bill 2977 and Senate Bill 6517 would make it easier to dispute local property tax assessments -- an easy sell in a region that has seen property taxes increase as real estate values have gone through the roof.

Sponsors, who include high-ranking Democrats and Republicans alike, say the change would provide a tool for overburdened taxpayers and protect property owners.

"This just lowers the bar for citizens who have to make their case if they think their valuation is too high," said House Majority Leader Lynn Kessler, D-Hoquiam.

But King County Assessor Scott Noble said the real impact is buried beneath the stated good intentions, and it would amount to a tax break for big business paid for by the state's homeowners, because the burden would simply shift.

"This change ... will produce the biggest property tax increase onto residential property owners in the history of the state of Washington," Noble said in an e-mailed warning last week to Finance Committee chairmen.

In King County alone, the change would shift as much as $200 million of taxes onto residential property owners, he said.

"In our budget-based property tax system, reductions of valuations will produce tax shifts onto other taxpayers, and my experience with advocates from our large commercial taxpayers suggests a large increase of appeals and lawsuits from these property owners who have sizable resources," Noble said in the e-mail.

Homeowners have historically been much less likely to appeal property value assessments because they have less to gain, he said.

In California, where a similar rule was passed in 1991, appeals from major industry and major commercial property owners increased tenfold, Noble said.

"If we share California's experience, King County's commercial appeals will increase to over 12,000," Noble said. "Over 80 percent of commercial appeals are handled by lawyers, tax consultants or tax agents."

Noble said assessors offices would not only be inundated because of the way the bill is written, but local assessors would likely lose against well-financed appeals.

In King County, roughly 40 percent of the property tax burden falls on commercial property owners, who hold buildings and land worth $136 billion.

If 30 percent decide to appeal and win substantial value reductions, it would take more than $20 billion of assessed value out of play, he said.

Senate Minority Leader Mike Hewitt, R-Walla Walla, co-sponsored the legislation.

"That wasn't the intention of this bill," he said. "I think just the opposite. It looks like it protects the property owner. To me, that's a better property right than we have now."

Hewitt owns a 22,000-square-foot commercial property in Eastern Washington; he said he has seen the tax on that double in the past decade.

Hewitt said he would look into the issue further.

"Property taxes are a big priority for us," he said. "It might be a consequence we hadn't thought about."

Rep. Kessler also disagreed with Noble and said she'd like to see the bill passed. "Businesses have attorneys who can appeal the valuations. This would put homeowners on equal footing as businesses. It lowers the bar for what they have to prove."

Though the proposal is not central to her agenda, Kessler said, "It's one thing we could do to protect them."

The bills are supported by the Association of Washington Business and opposed by the Washington State Association of County Assessors.

Senate Ways and Means Chairwoman Margarita Prentice, D-Renton, said she respects Noble's opinion and is not inclined to give the proposal a hearing, although she isn't ruling it out.

She said she sees a problem common to many "hot issues," because people are so eager to act on a perceived problem that they tend to overlook the consequences of so-called solutions.

"I don't like overreacting," she said.

Prentice has been reviewing a slew of property tax bills that have emerged since the Legislature convened late last year for a special session on property taxes.

"I don't plan to act on any of these," she said.

Instead, Prentice is organizing a series of work sessions to come up with a more comprehensive solution -- one without unintended consequences.

"It's so easy to play politics with this issue," she said. "I'm not going to do anything based on dogma -- there are lots of misconceptions about this."