Potential New Property Tax Increases in Olympia

Emmanuel Son, Staff Writer

Olympia’s program manager, Pamela Braff, has come up with some options for what she believes will generate more funding to combat climate change. According to the Olympian, Braff has come up with the idea of raising property taxes, but before this can happen, it must be approved by voters. Braff spoke to the Olympia Finance Committee while giving an update on the city’s climate funding. Staff were assigned to research options for a dedicated revenue stream to achieve the city’s climate goals.  The Olympian states that some of these options included increasing property taxes, and private utility or municipal utility tax rates. 

The city could increase property taxes; however, it would need to win the favor of voters. Braff says that an increase in property tax would create a “consistent and predictable source of funding, and it could be imposed for a specific amount of time.” The amount of increase has not yet been stated. It is possible that the amount that gets collected and charged could fluctuate, especially as property values are set to change. City manager Jay Burney says that a key lid lift may be needed in the future if voters allow this to happen. 

From a study based on 2022 property assessments, if rates were to be increased by $0.01 per $1,000 of assessed value, it would generate $117,000 a year dedicated to tackling climate change. If this were to be raised to $0.10, the city would collect $1.7 million a year. If the city aimed for a $0.20 per $1,000 increase, about $2.34 million could be raised annually. 

Braff says that the property tax increases costs for property owners but argues that it is the least regressive model in burdening low-income households. She argues that increased property values correlate with a higher ability to pay. 

Another suggestion currently being brought up is the increase of sales tax. The city, however, does not have the authority to implement this as the maximum on imposing unrestricted sales tax is the state’s current 6.5% sales tax. If this were to happen, the state would need to authorize increases to the city’s sales tax for dedicated purposes. The downside to this is that sales taxes are imposed, meaning there would not be much flexibility. This plan would generate revenue from out-of-town visitors, although Braff argues that tax burdens would fall the hardest on low-income households. A 1% sales tax increase would generate about $2.2 million a year.

Another idea in mind is the Private Utility Tax. The city has the authority to increase taxes locally. This would increase rates on electricity, gas, and telephones. This would have to be approved by voters. Braff mentions that the increase in the rate of utilities could persuade contractors and developers to move towards electrifying their buildings to save money. A 1% increase with the 9% tax rate currently on electricity would generate $590,000 a year. Gas would be about $166,000 a year, and telephone rates generate $216,000. 

The last option given to the city manager is the municipal utility tax. The city has the authority to raise municipal utility tax rates, with no established upper legal limit for what can be changed. The current tax rate is about 12.5% for garbage, sewer, stormwater, and water. A 1% tax increase on garbage would generate about $137,000, with sewer generating about $202,000, stormwater generating about $62,000, and water about $140,000. This option, however, is one of the larger burdens on low-income residents. 

The city’s Finance Committee has stated other options, including excise tax. This would affect business owners and developers. It was also suggested that the city could modify fees to generate more money each year. Braff states that the staff is creating a budget and maintenance plan to give the city council a  better idea of what they think the city needs. This will be done in August. 

Braff says that it is difficult to estimate future needs. She states that it is complicated modeling future emissions and achieving the reduction goal. She argues that it is easier to know what vehicle miles travel need to be reduced and how many buildings need to be retrofitted. 

This issue has drawn a reaction from City Council members. Jim Cooper, who sits on the committee, states that this is not the first time the committee has discussed needing money for its climate goals. The numbers have never been easy to look at, he said. Cooper mentions that he needs a better picture of where the money should be coming from. 

Lisa Parshley, also on the finance committee, argues that the city doesn’t need to ask the legislature for permission to change local taxes and should be pushing legislators to put more funding into battling climate change. “I think there is a role for a jurisdiction like ours to keep doing the work locally, because sometimes we can encourage the state to do the right thing as well,” Parshley says. 

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