Community Government

City residents discuss pros and cons of property tax vote

Over the next two weeks, Gig Harbor voters will decide whether to raise their property taxes nearly 60 percent to plug a $3 million hole in the city’s general fund that could happen as early as 2025.

The Pierce County Elections Office mailed ballots to city residents on April 5. The ballots ask voters inside city limits to decide on Proposition 1, a levy lid lift that would increase the portion of property taxes that goes to the city from the current $.70 per $1,000 of assessed value to $1.10 per $1,000.

The average homeowner in the city limits would see their property taxes go up by an estimated $300 per year. The number could be higher or lower, depending on the assessed value of the property. For example, the city property tax would increase from approximately $525 to $825 per year for a home assessed at $750,000.

Voters learn more about Prop. 1

A crowd of more than 60 people gathered last week to discuss Proposition 1. Engage Gig Harbor, a group dedicated to encouraging civic engagement, hosted the forum.

Members of “for” and “against” committees — appointed by the City Council to write statements for the voter’s guide — answered questions. So did city staff members, including City Administrator Katrina Knutson, Police Chief Kelly Busey, Finance Director Dave Rodenbach and Public Works Director Jeff Langhelm.

The case for

Speakers from the “for” group argued that voter approval of Proposition 1 will “ensure Gig Harbor remains one of the safest, most beautiful and well-maintained communities in the country.”

Property tax receipts would provide a steady, reliable money stream into the city’s general fund. Proceeds would pay for police and public safety, park and street maintenance, city-sponsored special events and activities, public art and other services.

The case against

Speakers opposed to the proposition noted that it would be paid only by local property owners. Higher property taxes could mean that some people could no longer afford to stay in their homes.

The “no” group suggested that a better solution would be to increase the sales tax and establish a Business and Occupation tax, from which the city council could exempt small businesses.

The “no” group also noted that a sales tax increase requires everyone who shops in Gig Harbor – residents and non-residents alike — to contribute to the upkeep of the city’s roads, parks, public safety and other services.

How we got here

The city’s population grew 65 percent, to 13,060 residents, over the past 10 years. The population spike brought increased demand for services and higher operational costs for the city. The city has also built new roads and added new parks and other public facilities that must be maintained.

Even though the population and property values have increased – often dramatically – property taxes have not kept pace. That’s partly because state law limits property tax increases to a maximum of 1 percent per year.

In 2013, the city portion of the property tax was $1.40 per $1,000 of assessed value. Collection has shrunk to $.70 per $1,000 since then. Proposition 1 would reset the levy to $1.10 per $1,000.

Where property taxes go

The city receives 8.3% of the total property taxes collected on buildings and land inside city limits. The rest is distributed as follows:

• Pierce County gets 8.80%.
• Gig Harbor Fire & Medic One gets 26.10%.
• Peninsula School District receives 22.40%.
• The state of Washington gets 27.30%.
• The Port of Tacoma gets 1.60%.
• The library gets 4.00%.
• Conservation Futures and the county flood district get the remainder.

Other factors

In addition to the decline in property tax income, sales tax revenues have also diminished, in part because of inflation.

Meanwhile, the city has relied on building permits and other development revenue for more than a decade. But in the past three years, development revenue fell short of projections. It was down 72 percent last year, according to city staff.

The city put its 2023-24 budget together in 2022, when the city had a beginning fund balance of $6 million, Finance Director Rodenbach said.

City Administrator Knutson added that there was “no way we could predict that there would be a 25 percent reduction in development fees” or a big dip in sales tax revenues.

The city has already cut costs by freezing several vacant staff positions and by declining to renew a $100,000-a-year contract with a federal lobbyist who worked for the city for several years.

If Proposition 1 fails

If the levy lid lift fails, the funding issue will go back to the city council. The council could opt for another public vote later this year requesting a lower property tax rate. It could also impose a B&O tax or a combination of a B&O tax and a sales tax increase.

A sales tax increase will already be on the ballot in August. It asks voters to approve a 0.1%  sales tax increase to fund public safety. This would generate about $1 million in revenue annually.

If no additional revenue sources are established, the city will need to find ways to reduce general fund expenses by about $2 million every year (roughly 10% of the general fund budget). That would affect funding for police and public safety, park maintenance, roads and other city services.

Knutson noted that the council has the authority to raise taxes without a vote of the people, but declined to go that direction. Hence the special elections.

“It’s democracy in action,” Kuntson said.

Voters must return their ballots by April 23, when results will be tabulated. Ballots can be returned by mail or deposited in drop boxes located at the Civic Center on Grandview Street and at the library at 4424 Point Fosdick Dr.