Olympia will look at a levy lid lift to increase property taxes to address the issue of its fire department funding if voters do not approve the proposed Regional Fire Authority, Olympia council member Lisa Parshley announced in a joint council work session meeting on Tuesday, October 25.
The Olympia City Council hosted the joint meeting, where council members from Tumwater joined them and discussed the RFA plan.
According to Parshley, without the RFA, they need to go back to the public for a levy lid lift to either fund the general fund or the fire department because of increasing fire service costs.
A levy lid lift vote is required to collect additional property tax revenue, which is limited to a maximum statutory levy rate. In Washington, the yearly increase in revenues from property taxes is limited to 1%. So as property tax assessments increase, like they did this year by about 30%, the effect on increasing revenues is limited to just 1%. This will lower the tax rate for Olympia, which is currently at $2.33, to avoid collecting more revenue than allowed by the 1% limit.
"Yes, at some point, the tax will go up. We need to be honest with people. If we want the level of service that we currently have, or even better, we have to pay for it," she said.
In the previous Finance Committee meeting, Olympia City Manager Jay Burney said if the RFA does not pass, they need to talk about levy lid lift or other mechanisms for the fire services. During the meeting, it was pointed out that even if the RFA does pass, the RFA will have to go to the voters for a levy lift of their own a few years after formation, as their planned $1.00 rate will be reduced to $0.93 by 2026.
In addition, Burney said the plan for southeast annexation would mean additional service for the people and the potential need for another fire station. He said they need to do some course corrections to keep pace with the community's growth.
Regressivity and equitability
Tumwater council member Charlie Schneider questioned the regressivity in the Fire Benefit Charge, an annual fee based on the size and type of structures (residences, apartments, mobile homes, and commercial buildings) that would be collected from Olympia and Tumwater property owners.
However, no one from the Regional Fire Authority planning committee could answer Schneider's inquiry.
Using the RFA examples presented at the joint meeting, Schneider pointed out that a small property pays more than a larger property in terms of square footage cost.
"So if you got 1500 square feet, you are paying 22 cents per square foot. But when you go to 2500 square feet, you only pay 17 cents per square foot. I would think that would be the other way around. Why are you charging most that have the lowest [structure]? It doesn't make sense to me."
He also asked if the public would pay more if they approved the RFA or if it would cost them more if they turned it down. "What hard figures am I going to give them?" Schneider said.
RFA may cost more
Olympia council member Jim Cooper admitted fire services would cost more regardless if the voters approve the RFA or not. "But if we don't do it as an RFA, it will cost much more in the short term because we won't achieve the economies of scale that we would achieve through blending the two departments. There is an immediate savings that allows us to go further with a smaller increase."
In defending the increased fee for property owners that FBC may bring, Olympia Firefighter Union president Steven Busz said the fire engine cost has exponentially doubled in the last five years. He said the other factors driving the costs up are fuel prices, labor costs, and the increasing call volumes they have to respond to, which puts more wear and tear on the vehicles.
"When we talk about property taxes, we are capped at those. When we have FBC that can provide us with a supplementary budget, it is a fixed rate that we can collect to supplement what we need," Busz said.
Reiterating the question
Tumwater council member Joan Cathey reiterated Schneider's question about FBC's regressivity. "Charlie is asking an equity question that never gets answered. We use this term a lot in our decision-making in our council. I think that is something we want to pay attention to."
Cooper shared that two-thirds of the RFA revenues - fire levy collections and the FBC - comes from the least regressive source. From the FBC, one-third is coming from the commercial sector.
"We tried to reduce the amount of extra funding that residential people are paying as a whole," Cooper said.
According to Burney, the planning committee spent about three to four months addressing the regressivity of the FBC formula by creating new tiers, adjusting weights, shifting fees from the residential sector to the commercial sector, and exempting mobile homes from paying the FBC fee.
If RFA passes on the ballot in April next year, voters must reauthorize FBC after six years.
RFA implications in Olympia and Tumwater
In creating an RFA, Burney said people's property tax would not go up, and the only increase would come from the fire benefit charge.
When fire departments become regional, the RFA gains $1 per $1,000 of property assessed value, and the cities each lose $1 per 1,000 assessed value.
If the RFA passes, the two cities will be relieved of their current fire costs. Burney said they thought that the revenue loss from the $1 property tax, which is less than Olympia current spends on fire, would leave a $4.3 million favorable variance to Olympia and help offset the city's bow waves for new spending initiatives that they have undertaken.
For example, he said the city is implementing body cameras for police officers, expanding Crisis Response Unit to 24 hours a day, responding to the climate emergency, and supporting equity initiatives.
However, he said the assessed value went up by 32%. It means a 50 cents decrease in the levy rate. "It shrinks our levy rate every year that assessed value goes up."
"In the first year that [RFA] would be created, it only leaves about $1.6 million in favorable variance [to Olympia]," he said, adding that in 2024 it may further shrink to half a million dollars if the assessed value increases another 10%.
"It is going to be a cost-neutral proposition for the cities. We will not be experiencing any large levels of additional revenues for moving to RFA," Burney said.
In Tumwater, City Administrator John Doan said the dramatic increase in assessed valuation would negatively impact them in 2024.
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