SB 5770 was introduced late in the legislative session last year but wasn’t enacted. As introduced, it would have increased the statutory property tax limit factor from 101% to 103% for all taxing districts—including the state. Under current law, property tax collection growth is generally limited to the lesser of 101% or 100% plus inflation, plus the value of new construction and certain other increases in assessed value. (For more on SB 5770 as introduced—and historical property tax growth data—see this post.)

 On Jan. 18, the Ways & Means Committee heard a proposed substitute to SB 5770. PSSB 5770 would change the property tax limit factor for all taxing districts except the state. Under the proposal, the growth of property tax collections for non-state taxing districts would be limited to 100% plus inflation and any banked inflation, up to 103%. (They would also still be able to add on the value of new construction and certain other increases in assessed value.)

Banked inflation is defined as “the accumulated amount of annual inflation that is in excess of three percent from prior years.” Additionally, the measure of inflation would be changed from the implicit price deflator to the consumer price index (CPI), which is generally higher. (The switch to CPI would apply to both local and state property tax collection growth.) As a result, taxing districts could easily make it to the 103% limit for many years to come.

PSSB 5770 would also exempt certain senior citizens from 25% of the original state property tax. It includes language that would require state property taxes to be reduced so that the exemption would not shift property taxes to other taxpayers.

PSSB 5770 would also fold in parts of two standalone house bills. First, PSSB 5770 includes the text of HB 2044. It would remove statutory language that levy lid lifts in King County cannot be used to supplant existing funds. (HB 2044 was approved by the House Finance Committee on Jan. 23.)

Second, PSSB 5770 includes parts of HB 2348. Current law allows counties to levy up to $0.50 per $1,000 of assessed value for the maintenance of a county-owned hospital. Under HB 2348 and the relevant part of PSSB 5770, the county tax could also be used for hospital operation, capital expenses, and debt service. Apparently, these provisions are about Harborview, the state’s only county-owned hospital. In 2020, King County voters approved a $1.74 billion bond measure for Harborview. Since then, costs have increased. According to a September 2023 status update, the cost of the projects that were to be funded by the bond measure (including building a new tower and new behavioral health building and making other renovations) have increased by $888.8 million. HB 2348 and PSSB 5770 would give the county a potential way to fund these cost overruns. (HB 2348 was approved by the House Local Government Committee on Jan. 26 and was heard by the Finance Committee this morning.)

The fiscal note for PSSB 5770 estimates that it would reduce general fund–state revenues by $2.6 million in 2023–25, by $10.0 million in 2025–27, and by $10.5 million in 2027–29. The proposal would increase local revenues by $62.0 million in 2023–25, by $413.0 million in 2025–27, and by $792.0 million in 2027–29.