Washington lawmakers could reopen the debate over how much cities can collect in property taxes

If the Association of Washington Cities prevails, lawmakers will adopt a proposal in January to increase the amount cities can collect in property tax revenue from their constituents. Currently, cities can contribute up to 1% of property tax revenue to their budget. The group, which advocates for cities, is seeking a legislative sponsor for a proposal that would increase that figure to 3%, which the association says would help cities fund law enforcement and keep pace with inflation.

“It’s not a magic bullet to pay for everything a community needs; all the police they need. It’s just hopefully about creating a little better balance between property taxes and other revenue sources to help fund those community needs,” said Candice Bock, director of government relations for the Association of Washington Cities.

The 1 percent limit on how much cities can currently charge dates back to 2001. At the time, anti-tax activist Tim Eyman led the passage of Initiative 747. When it took effect, it limited tax district levies to a 1 percent increase in property taxes collected. Anything beyond that had to be approved by voters during an election. Before Initiative 747, cities and other taxing districts could increase their revenue by up to 6% annually.

The impact of this legislation has been felt in cities like Vancouver, where rapid growth has put pressure on local budgets. In November, city officials tried to persuade voters to pass a tax levy “cap repeal” to increase property tax revenues above the 1 percent cap so they could pay for 80 new police officers and other public safety services. Residents rejected the proposal, even though the Vancouver Police Department claimed it was among the lowest-staffed departments in the state compared to the population.

“That 1% is just extremely limiting,” said Vancouver City Manager Lon Pluckhahn.

Pluckhahn said the city’s current property tax revenues can’t keep up with inflation, but an increase to 3% would make a difference over time.

“If inflation is below 3%, then at least you can keep up with the rising costs of electricity, utilities, vehicles and all the other things we need to buy,” he said.

According to the Association of Washington Cities’ initial proposal, raising the property tax cap to 3% would cost the average homeowner less than $20 per year. Increasing that limit has proven stubbornly difficult over the years. Democrats introduced a similar bill in 2024 to raise the cap to 3%, but later withdrew it after it was attacked in the media by Republicans and lost voter support. This came after a 2017 proposal that would have allowed governments to increase property tax revenue by up to 5% a year also failed.

Ed Orcutt, R-Kalama, is one of the Republican lawmakers who opposed the earlier bills. He argues that property tax revenue is less important than Washington cities portray because they also collect money from sales and utility taxes. Instead of cities resetting the bar for how much money they can collect from property taxes, they should instead rely on voters to get voter approval of funding needs in the ongoing voting process.

“If counties and cities are leaving and they’re not able to get the cap lifted, it’s because they don’t have the trust of the people, and they’d better do the work to earn that trust,” Orcutt said.

Amid this potentially renewed debate in the Legislature, Washington state faces a projected budget deficit of $10 billion to $12 billion over the next four years due to lower-than-expected revenues and increased costs of maintaining current state programs . It’s unclear how much of an impact this deficit could have on cities like Vancouver. Gov. Jay Inslee’s budget will be released in mid-December.

Pluckhahn said the deficit could have downstream effects if the state starts providing more taxes for its projects, leaving cities with less, but first they need to see the governor’s budget proposals.

“We don’t know exactly what the impact of this will all be, but the fact that it’s a very large number is concerning,” he said.