If citizens’ Initiative 1033 had passed in 2003, the cities of Longview and Kelso would have had to refund a combined $8.9 million to citizens over the last five years, according to the cities’ finance directors.

The number was reached using a formula developed by the state Office of Financial Management to calculate the potential impact of I-1033, which will be put to voters in November’s election.

Co-sponsored by political activist Tim Eyman, “Lower Property Taxes Initiative 1033” would cap government revenue growth to the rate of inflation plus population growth. Any taxes collected above the revenue cap would be refunded to citizens in the form of lower property taxes the following year. If the government needed more money than the automatic increase provides, it could either dip into reserves or ask voters for additional revenue.

The initiative would mean more money in property owners’ wallets — in Longview, the owner of a $200,000 home would have saved $200 in property taxes in 2008.

But local government leaders say that savings for citizens would result in fewer services, department closures, city layoffs and less incentive for economic development. That’s because if the initiative passed, the baseline for future revenue would be based on this year, which was dismal. Inflation is less than 1 percent. Both cities have cut services and are using reserve funds to bridge budget gaps.

“I would have a hard time envisioning us keeping all the current services going right now,” said Longview City Manager Bob Gregory. “It would be pretty devastating to the budget process.”

In August, the OFM issued a fiscal impact statement estimating that under I-1033, the general fund reductions by the year 2015 would be $5.9 billion for the state, $694 million for counties and $2.1 billion for cities.

Longview and Kelso finance directors decided to look back instead because they could use real numbers. If the initiative had passed in 2003, when the area was sunk deep into a recession, Kelso would have refunded $903,600 between 2005 and 2008, which the local economy grew. (The city’s revenue dropped further in 2004.) Kelso’s general fund budget, which covers most city operations, is $7.3 million for 2009 and $7.4 million for 2010.

Longview would have had to refund $7.9 million over that same time period. (See chart for breakdown of each year). That’s the cost of about 60 city workers’ salaries and benefits, Gregory said. The city has about 300 employees now and a general fund budget of $31 million for 2009 and $32.5 million for 2010.

“You would be cutting employees, no doubt about it,” he said. “That’s such a big number — you’d have to discuss closing the library completely, closing the engineering division …”

The city would be forced to ask voters every year for annual operating levies, he said.

Another drawback is if the government has to roll back property taxes every time it gains new revenue, there’s no incentive for economic development, he said. That means no new jobs.

“What’s the encouragement to bring in tax base any more if you can’t benefit from the revenue from that tax base?” he asked. “I just really hope that people understand this initiative and what it does.”

Eyman says the point of the initiative is to force the government to limit itself to a predictable rate of growth it can sustain through bad times, instead of expanding during a boom and cutting during busts. Giving the government an automatic tax increase each year based on the economy’s growth is “totally reasonable” and would force governments to be fiscally disciplined, Eyman told The Daily News in July.

Estimated Refunds

If I-1033 had passed in 2003, the following amounts would have been refunded to citizens in the form of lower property taxes:

Year           Longview             Kelso

2004           $0*                         $0*

2005           $1,176,525           $0

2006           $1,947,278           $57,251

2007           $2,580,443           $372,000

2008           $1,679,608           $500

Total           $7.9 million           $903,000

*Cities lost revenue in 2004.

Source: Cities of Longview and Kelso

I-1033 property tax relief in Longview*

(assumes $200,000 assessed value)

2008 levy without I-1033: $2.88 x 200 = $576

2008 levy with I-1033: $1.88 x 200 = $376

Savings on a $200,000 home: $200

*Kelso did not calculate this.

Source: City of Longview

Related articles:

Judge rejects effort to change ballot wording for Eyman initiative  (AP, Sept. 11)

Latest Eyman initiative has governments worried  (Columbian, Sept. 7)

Eyman's I-1033 targets budgets  (Columbian, Sept. 6)

Gregoire says Eyman initiative would 'make things worse'  (Olympian, July 29)

Local officials express concern over pending property tax initiative  (TDN, July 23)

Property tax initiative will be on ballot  (AP, July 15)