Concerns don’t damper property tax raise

POULSBO — More research, more legal advice and more self-reflection has led the City of Poulsbo back to where it started.

But the consensus is still that raising property taxes was the right thing to do.

Prompted by letters from current and former city employees, Finance Director Nanci Lien said she’s been looking into a decision made at the Nov. 10 Poulsbo City Council meeting. That unanimous vote supported a one-time 27 percent increase in property taxes that was allowed through a banked levy amount.

The rise means the owner of a $150,000 home would have an additional $33 on his or her property tax bill this year. But it’s not the amount so much as city history that has dogged the council’s decision.

Recent opposition to the raise has contested that the same Fire District 18 annexation that created the banked capacity also promised voters lower taxes. But Lien said her research has shown that not only is the raise legal, it fits with promises made to voters.

“I think there was this discussion about what the property taxes would look like separately as opposed to together,” Lien explained of the discussions that occurred prior to the Poulsbo Fire Department becoming its own taxing district. “I don’t know if everyone totally understood. It’s complicated. I don’t know if (voters) ever really understood what it meant.”

In 2000, the Fire District 18 was created as a separate entity from the City of Poulsbo’s government. Prior, the district had been part of the city’s structure and Poulsbo’s total tax levy was $1.475 million. Without the fire department, that number dropped to $879,773. In 2002, when Initiative 747 was passed, it limited each jurisdiction’s property tax to 1 percent of its highest-ever levy amount. Lien explained that each year, the Kitsap County Assessor’s office would send Poulsbo a statement of its assessed value and then Finance Department staff would crunch the numbers to come up with what they believed was the “real” assessed value under the restraints of I-747. That assessed value was always based on the levy the first year without the fire department, rather than on the highest levy, which was the year before the fire department pulled away.

“We’d always get these numbers from the assessor but we’d always say, ‘But that’s not our real number,’” Lien recalled.

City staff discovered this year in conversations with the assessor’s office that it was the real number and Poulsbo had “banked capacity” held over from never having reached its levy lid. In November, Lien presented this finding to council and members unanimously agreed to take the whole levy available and use the extra money for street reserves and maintenance, which took a $300,000 hit through the fire district annexation.

Councilman Ed Stern, who sat on the city’s negotiation team in 1999, said while he believes the annexation still would have happened, he recalled being disappointed to find out after the fact that Poulsbo’s street funds would suffer.

“Where we took a $300,000 hit, that’s not just $300,000 each year, it’s our ability to go out for bonds and if you add it up over 10 years, that’s $3 million,” Stern said.

The 1999 interlocal agreement between the City of Poulsbo and Kitsap County Fire District 18 includes no reference to a pledge for lower taxes nor a promise to avoid raising taxes. But PFD Chief Jim Shields recalled the information that went out to voters during the special election that November to ratify the annexation did contain some wording to that effect.

“It was not written in the formal agreement,” Shields said. “The promise was not made to the fire district, it was to the voters. We figured if we didn’t agree to that, the voters would worry about the ability for double taxing.”

Shields said fact sheets for the voters signaled that property taxes for City of Poulsbo residents would be lowered by the amount levied by the fire district and by the library. But what has actually happened is that if the fire district does not charge the full $1.50 per $1,000 assessed value it is entitled to, the city is able to use that amount to raise its levy. Shields said while he wasn’t sure voters in 1999 were fully aware of this fact, he has spoken with County Assessor Jim Avery who said this practice is legal.

“We’re on the sidelines of this one,” Shields added. “It doesn’t affect us one way or the other.”

But Lien said in her interpretation, what was promised to voters was delivered. State law limits cities to a tax rate of $3.60 per $1,000 assessed value. If that city is annexed by a fire district, that city must lower its rate up to $1.50. In taking the banked levy amount in 2005, Poulsbo’s total levy rate will be $1.92 per $1,000, combined with the fire department’s $1.24 levy, that means $3.16 per $1,000 will be levied between the two.

“(Shields) and I talked last week and he had a copy of a flier and the reference is that the city will reduce its taxes by that rate that the fire district would take,” Lien explained. “That, in fact, did happen.”

“We’re still operating at the $3.60 levy lid lift, what I’m happy about is we’re able to fulfill a promise we made to voters 10 years ago to address pedestrian and traffic safety,” Stern added.

Lien added that if there was a promise made to voters that property taxes would actually go down with the annexation, there is a much larger problem. Every year since the fire district broke off, the total property taxes collected by Poulsbo and PFD have been higher than they would have been if the department stayed a part of the city’s taxes.

“Legally, what we did is within the legal process,” Lien said. “I can’t argue the promise because if there was a promise, that hasn’t been followed through.”

Above all Stern said he felt council still agreed with the logic behind taking the banked capacity in 2005. Prior to the realization, he said Poulsbo had all but run out of capacity to do necessary projects to keep up what he believes is the highest and best use of taxpayer dollars behind police and fire — pedestrian and traffic safety. Without the levy, he commented, even the State Route 305 project that just received its last bit of funding may not have been able to go through on schedule.

“Every penny is going to go into asphalt and concrete for sidewalks,” Stern commented. “This is probably the best dollar for dollar investment the community will get. If there is a political cost, then that’s one I’m happy to bear. We’re not sitting on council just to be sitting there, we’re there to get things done for the public.”


Poulsbo Property Tax Levies in Perspective

2001 2002 2003 2004 2005

With PFD $1.52 M $1.59M $1.66M $1.74M $1.8M

Without PFD* $1.66M $1.73M $1.85M $1.95M $2.34M

*Number is sum of City of Poulsbo and Fire District levies after annexation occurred

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