Washington State Property Tax System–How it Works

Editor’s note: The following is the final article in the Washington State property tax system series by San Juan County Assessor, Paul Dossett.

In Part One of Washington State Property Tax System–How It Works, we discussed how taxes are levied by taxing entities. Now we will discuss how those taxes are distributed to the affected property.

The Assessment Process

The major role of the assessor is to assess real and personal property, for tax purposes, at 100% of market value as mandated by state law. The distribution of property taxes authorized by all taxing districts is based on the assessed value of real and personal property of those districts.

In San Juan County, as well as 22 other counties in the Washington, the assessor re-values property in a cyclical manner. San Juan County’s total land area has been divided into three revaluation areas with an approximately equal number of parcels in each area. Once every three years, the assessor establishes 100% market value for every parcel within a revaluation area, which constitutes one-third of the county.

In performing assessment appraisals, it is imperative the appraisal reflect 100% of market value as of January 1st of the revaluation year, and that the property assessment be uniform to other similar property. It is through uniformity of assessments that everyone pays their fair share of the tax burden. In fact, the State Constitution mandates that the revaluation of assessments be uniform. The State Supreme Court has ruled that uniformity is more important than establishing market value of property. Uniformity is the very cornerstone of the state property tax system and the lack of uniformity would compromise the integrity of the system.

Cyclical Revaluation

San Juan County has over 400 miles of unique diverse waterfront property that comprises 40% of the parcels in the county and represent approximately 55% of the total taxable assessed value of the county. Along with inland property that varies in attributes from one parcel to the next, appraising these different types of unique parcels uniformly is a challenge.

Because two-thirds of the properties in the county are not assessed every year, property taxes in those areas may lower for a few years. The reason for this is one-third of the county is revalued at 100% of market value, while two-thirds of the county assessments may remain static until their next revaluation cycle. That means those parcels that have been recently reassessed to reflect market value will shoulder a greater share of the tax burden the following tax year than the rest of the county. Then the following next two years taxes will subside for that particular revaluation area. This phenomenon will exist as long as the real estate market continues to escalate and voters approve no additional taxes.

One way to explain the three-year revaluation cycle is to compare it to an ocean wave. When property is revalued at 100% of market value, the assessment is at the crest height of the wave shouldering a higher tax burden. The following year, that assessment is now halfway down the real estate market wave, shouldering a smaller tax burden, and the third year that same assessment is in the trough of the market wave, with taxes subsiding even more. Then when the property is reassessed, it moves to the crest of the wave again reflecting 100% of market value. This process repeats itself every three years as long as the real estate market continues to escalate.

However, it is important to note that shifting a higher tax burden to a revaluation area for the following tax year does not raise additional taxes to taxing districts. As we have learned in Part One, taxing districts are limited to the amount of property tax they may collect. Again, re-assessing property once every three years does not raise additional revenue to taxing districts, not a penny.

When voters approve new taxes, property owners can generally expect higher individual property taxes the following year(s) regardless of whether their property has been reassessed or not.

Assessment of New Construction and Improvements to Property

The assessor may value certain property “out-of-cycle,” which are not part of the revaluation area. State law requires the assessor to value new construction and newly created parcels each year throughout the county. The value of the newly constructed buildings and new parcels allows a one-time opportunity to collect additional revenue for those taxing districts where the new buildings and parcels are created.

Distribution of Taxes

Individual property taxes are based on the consolidated tax rate, which is sum of all the district’s tax rates affecting a parcel, multiplied by the total assessed value of the property. After a revaluation area has been reassessed, the over-all consolidated tax rate per $1,000 assessed value has historically decreased due to real estate values escalating at a higher percentage than the district’s ability to raise property taxes. Revaluation of property will most likely mean higher taxes the following year but a lower consolidated tax rate applied to the revalued property. Since taxing districts can only raise their budgets by 1% per year, and since the market escalates more rapidly than that, the consolidated tax rate continues to decline. Therefore taxes do not go up in direct relationship to the increase in assessed value.

It is vitally important that taxpayers understand the state property tax system. We, as taxpayers, have decided to provide certain services to ourselves through the election and establishment of county taxing districts. As we have discussed, each district has authority to tax property owners within limitations. However, you, the taxpayer, need to be involved by attending district hearings normally scheduled in the fall of each year. It is through required district hearings that the budget, and thus the taxes you pay, are decided for the following year. I encourage you to become involved! It is your government.

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