Washington State Property Tax System–How it Works

Editor’s note: The following is Part 1 of a two-part series by San Juan County Assessor, Paul Dossett, on the Washington State property tax system.

There appears to be confusion among taxpayers throughout the state of Washington about how our property tax system works. A person needs to understand how property taxes are levied by taxing districts and how each district’s tax is passed on to the taxpayer.

Washington’s property tax system is based on two distinct components:

1. Taxing districts and their authorization to levy property taxes;

2. Distribution of property taxes among property owners.

Please keep the above components of the system separate in your mind. Most confusion among taxpayers about the property tax system is the co-mingling of these two parts. Our discussion for Part 1 of “Washington State Property Tax System–How it Works” deals with taxing districts and their ability to levy property taxes.

Regular Taxing Districts

When San Juan County came into existence in 1873, prior to statehood in 1889, property taxes at the county level were limited to County Road and County Expense (current). With the exception of the state levy, the other San Juan County taxing districts were formed by a vote of the electorate. Voters can only establish certain taxing districts according to state law. There is a “laundry” list of available districts that may be formed in each of the 39 counties of the state.

By law, every regular taxing district is an entity to itself. In other words, each district has commissioners and provisions by law that allow the district to function in providing public services. When voters approve the formation of a district, they also approve the geographic boundary of the district and the beginning property tax revenue amount allowed for collection by the authorities of the district. Every taxing district authorizing the collection of property tax revenue will have its own tax rate. There are additional taxing district limitations mandated by the Constitution and state law.

Districts have property tax limitations that restrict their allowable tax amount increase from year to year. Each year, the district’s allowable property tax amount can be increased by 1%, plus additional revenue from new construction and improvements to property. Other limitations include a tax rate cap for the district. For example, the library district tax rate cannot exceed $.50 per $1,000 assessed value. Every taxing district has a tax rate limit, per $1,000 assessed value, which is articulated in state law.

District Tax Rate

The district’s tax rate is important because it is applied to a property owner’s assessed value to determine the amount of taxes each property owner pays. The tax rate is established by dividing the assessed value of the geographic area of the district into the authorized budget amount. Because the rate is applied per $1,000 assessed value, a decimal point is applied to the thousand portion of the district’s assessed value. The product of this calculation is the tax rate. The following is an example of calculating a district’s tax rate:

District authorized budget amount = $350,000.

District’s assessed value = $1,425,000.000 = a tax rate of = $.24 (rounded) per $1,000 A/V.

The tax rate for all taxing districts is added together for a consolidated tax rate. For instance, the 2004 San Juan Island consolidated tax rate is $7.40 (rounded).

Overlapping Taxing District Boundaries

Many of the county taxing district geographic boundaries are the same or nearly the same and may overlap each other. Where your property is located will determine what taxing districts will be allowed to issue a property tax levy to your parcel.

As an example, on San Juan Island, not including the Town of Friday Harbor, there are eleven different property tax districts that collect taxes from each parcel owner. That is because the SJI property is included in the eleven taxing district’s geographic boundaries.

Other taxing entities may ask voters to approve additional excess revenue for bonds, maintenance and operation levies. Voter approved excess levies are subject to different limitations than regular taxing districts. Schools, as an example, are not a “regular taxing district” that have authority to levy a property tax every year. These districts may ask voters to approve excess levies to assist in the financing of the schools in addition to what tax revenue is allowed from the state.

Property Owner’s Responsibility

The citizens of San Juan County should be aware of what services your taxing districts are providing you. It is important to become involved in voicing your opinion regarding the taxes you pay for services rendered. I hope this explanation of the how the property tax system works will assist you in your endeavors.

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