Monroe council delays property tax vote

Tuesday meeting to include all councilmembers, more banked capacity information

The Monroe City Council paused during the final reading of the ordinance setting the 2017 property tax levy last week, choosing to defer passage until Tuesday, Oct. 25, when all councilmembers can be present.  

The city is mandated by state law to adopt its tax levy increase by way of an ordinance, which must be filed with the Snohomish County Assessor’s Office by Wednesday, Nov. 30. Ordinances are read twice in Monroe, unless there are time constraints and the council votes affirmatively to waive the second reading.

The motion to accept the first reading of the 2017 property tax levy was passed 5-0 on Tuesday, Oct. 11, with Councilmembers Patsy Cudaback and Ed Davis absent.

The 2017 levy includes the use of banked capacity, which means that the city’s revenue from property taxes will go up. This is a departure from previous years, where increases were not incorporated. The use of banked capacity has been discussed extensively throughout the year.
In the 2016 budget, property tax accounted for around 17 percent of the city’s general fund revenues. In the 2017 budget, because of the use of banked capacity, it will go up to 20 percent.

Banked capacity occurs when a city levies less than the maximum allowable rate. For the past several years Monroe city councilmembers have been resolutely opposed to applying the allowed 1 percent increase. For each of those years, the city’s ordinance setting its tax levy explicitly stated that the tax levy increased by zero dollars, reflecting a 0 percent increase from the previous year. This action banked the unused capacity of the levy, essentially storing it for future use.

The idea behind banked capacity is to encourage cities to be fiscally conservative without penalizing them, since they don’t lose the taxing capacity by not using it. An ordinance is required for a city to bank its excess levying capacity, which is tracked as a dollar amount.  
Monroe’s total banked capacity from declining the 1 percent increase over the years is $1,107,817.42.

During the process of creating the 2017 budget, Mayor Geoffrey Thomas directed city staff to develop a status quo budget just as he has in previous years. Based on council discussion, he then incorporated $484,312 of banked capacity into the budget, in order to fund three full-time positions and a portion of the city’s deferred transportation maintenance projects.

This was significantly less than the amount of banked capacity proposed by the council’s Finance and Human Resources Committee, which recommended using banked capacity to bring in $798,546.95 in additional revenues.

It is an opportune time for the city to look at using banked capacity, because, according to city documentation, it will not result in an increase in the total amount of property tax paid by the average homeowner. This is due to the sun-setting Snohomish County Fire District 3 Maintenance and Operations levy, which will not need to be renewed due to the fire department’s recent merger with Snohomish County Fire District 7.

The first reading of the 2017 property tax levy ordinance passed with flying colors, but when Thomas called for a motion to accept the final reading on Tuesday, Oct. 18, none came.

Cudaback requested further information from the finance department, including additional detail on what the numbers actually look like. The item was placed on the agenda for Tuesday, Oct. 25, for further consideration and potential final adoption. As a result of Cudaback’s request, Monroe Finance Director Dianne Nelson worked up some preliminary figures in order to estimate what the taxes will look like in 2017.

The city of Monroe is one of several taxing districts that a homeowner will see on their statement of property taxes. Snohomish County gets a cut, as does Snohomish County Fire District 7 emergency medical services, Public Hospital District 1, Sno-Isle Libraries, the Monroe School District and the state school fund. Nelson based her estimates on the average value of a home in Monroe, which is $245,400.

In 2016, the tax rate for the portion of property taxes collected by the city of Monroe was $1.15 per $1,000 of assessed value. This means that the average Monroe homeowner paid roughly $283.28 in property taxes to the city in 2016.

Based on estimates for 2017, implementing the $484,312 in banked capacity would raise the total tax collected by the city by around $61. This would bring the total amount of property taxes paid to the city in 2017 up to $344.28, which equates to about $1.30 per $1,000 of assessed value, based on Nelson’s estimates.

Because the District 3 M&O levy added $72.17 in taxes that are dropping off, and the city’s use of banked capacity adds roughly $61.00 in taxes paid to the city, the overall amount of taxes paid by residents is expected to drop by roughly $11.17 in 2017.

Nelson has included the numerical data for council review at the Oct. 25 council meeting. Overall, with the banked capacity increase and based on estimates and an average home value of $245,400, a homeowner who paid $3,053.33 in 2016 will pay roughly $3,042.16 in 2017.

For more information on the ordinance and to see the estimated numbers, visit this shortened link: http://bit.ly/2dAW1EW. The second public hearing allowing public testimony on matters relating to the budget takes place 7 p.m. Tuesday, Nov. 15, at Monroe City Hall.