It probably isn’t smart for a would-be politician to start a discussion about property taxes, but recent letters to the editor show there is a lot of concern and confusion out there about recent tax bills. For a lot of us, our assessed value has skyrocketed in the last couple of years. There seems to be a general assumption that when assessed values increase, so do property taxes.

The fundamentals

Kitsap County levies a fixed amount of property taxes to fund: 1. its general operations like law enforcement, courts, parks, assessor and others, and 2. roads. If you look at your tax bill, you will see two lines for county property taxes; one just says “County” and the other says “County Road.” Both operate the same way.

The county cannot increase this fixed amount of dollars each year without voter approval. So if the county collects $100 in property taxes per year the county cannot increase that amount without approval of the voters. The voters have control of county taxes. Think of the county taxes as a pie. The size of the pie cannot get bigger from year to year without voter approval.

There are two exceptions to this rule. First, the county collects taxes from new construction (homes and businesses) to cover the cost of providing services to them. If we didn’t, all the rest of us would have to pay for serving the new construction. This helps make sure that growth pays for some of the costs it creates. The pie gets bigger as a result of growth, but so does the county’s workload.

Second, the county can automatically increase property taxes to cover increased costs for everything from fuel to supplies to health care and wage increases. In the “old days” the county could increase the size of the pie without voter approval as much as 6 percent each year to cover increased costs. With the passage of Initiative 747 in 2001, this automatic increase to cover increased costs was limited to 1 percent per year. So now, the size of the pie can only grow 1 percent bigger per year without voter approval.

The only way that the county can get significant increases in its property tax levy is to ask voters for an increase. That’s it.

What about that big increase in assessed value I just received?

Attaching value to individual properties is the way we divide up the pie among all the properties in the county. The assessor is required to make certain that the “assessed” value of each property is as close to market value as possible so no property pays more or less than its share of the pie.

We all know that the market has shot up in recent years. If everyone’s property value increased at the same rate, then our share of the pie would stay the same. But we also know that some properties are more sought after than others – for example, those on the water. So their value has increased more than properties without water views. The properties that increase faster get a bigger slice of the pie. Their share of the value of all properties increases slightly and so do their taxes. That means someone else gets a smaller slice of the pie and their taxes go down.

But even an increased slice of the pie may not mean much. My own assessed value went up 20 percent for next year but my taxes only went up 1 percent and my total county taxes increased by only 2 percent or a little over $20!

While it’s only natural to go into shock when we see big assessed value increases, the only thing that really matters is the actual tax bill. I’ve seen some letters to the editor lately suggesting that the county uses assessed value increases as a back door way to get more taxes. That simply is not true. Assessment changes just change our shares of the pie – they do not make the pie bigger.

Where does the property tax rate fit?

Believe it or not, the property tax rate doesn’t really mean much. It is simply a way to help folks figure out their own tax bill. It also helps the county calculate how much to charge each property in the county.

Here’s how it works. Take the total amount of taxes and divide it by the total assessed value in the county. That produces a rate of x dollars per thousand of assessed value. So if your property is valued at $250,000 and the rate is $1 per thousand of value, then your bill is $250.

Now, if assessed value increases in the county, then the rate gets smaller. For example, if the total assessed value doubles and the size of the pie stays the same then the tax rate is cut in half. The rate itself does not drive property tax bills; it is just used to calculate them.

It would be less confusing if the county could just ask voters for a dollar amount in taxes as some states do, but then everyone would want to know how much they would pay. That is the reason for showing the rate on the ballot. In fact, since the pie does not grow, the rate will almost always get smaller as the assessed value grows.

So both the county and the taxpayer just use the rate to make other calculations. It has no meaning by itself.

There are lots of ways to make this more complicated but, really, there are only a few things to remember:

1. Voters decide the size of the pie.

2. The only ways the pie can get bigger without voter approval is to have new construction pay its share and a 1-percent increase to cover increased costs.

3. Not everyone’s property goes up or down in value at the same rate.

4. Assessed value does not increase the size of the pie, but it does affect our share

of the pie (how much we pay). As a result some folks will see tax increases and others will see tax decreases while the size of the pie stays the same.

5. The property tax rate is just used for calculating taxes owed by each property. If the rate goes up or down, it has no effect on the size of the pie.

Next month I’ll write more about the effect of the 1-percent limitation on the county’s budget and some tough decisions we will all face in the near future. If you want to see more detail about your own taxes you can look them up on the county’s Web site. In the meantime, if you have questions or comments you want to share with me, you can reach me at sbauer@co.kitsap.wa.us or (360) 337-7146.