Question and Answers about the Fire Levy, by David King, City Councilor

In last month’s newsletter article, I gave information and background on the Council action to place a fire service levy vote before the voters in November. I provided this information as a City Councilor and member of the joint oversight board of East Jefferson Fire Rescue (EJFR).

Fire and emergency medical service is provided by East Jefferson Fire Rescue (EJFR), formed by contract between the City and Fire District No. 1. The proposed $0.43/$1,000 assessed value combined with the current City funding for fire and emergency service of $0.57/$1,000, would match the $1.00/$1,000 assessed value being paid by County residents in the Fire District for the same service the City residents are currently receiving (but only paying $0.57/$1,000 assessed value).

This article addresses some questions on the proposed levy that citizens have presented since my article. Because the article dealt with both the pending levy and with a possible future annexation, which are separate though related measures, I address questions related to the levy first, and then questions about annexation and fire service generally. Separately, a newsletter article from City Manager David Timmons provides information about the City’s financial circumstances both as to cuts that will be needed just to address the current downturn in revenue, and the deeper cuts that would be needed if the fire levy does not pass. Also, as requested by citizens, I prepared a brief summary of key points, which is in the October newsletter.
These articles are all posted on the City website - cityofpt.us.

SPECIAL FIRE SERVICE LEVY

Will this proposition measure increase my property taxes?
Yes. The measure will establish a new additional levy rate of $0.43 per $1,000 assessed value. For a house and property assessed at $300,000, the increase of $0.43 cent/$1,000 assessed value is $129 per year ($43/$100,000 X 3), or about $10/month. You can contact the assessor’s office (385-9105) with questions about how assessments would apply.

What is the basis for requesting this increase?
The EJFR joint oversight board (3 City Councilors and 3 Fire District Commissioners) identified that increased revenue is needed to meet firefighter/EMT staffing needs and capital equipment needs, including replacement of out-of-date capital equipment, in order to ensure adequate service levels and fulfill mandated requirements. A $1.00/$1,000 assessed value levy was approved by Fire District voters in April of 2010. A related measure was not approved by City voters. (The City measure also provided for additional monies to fund capital projects.) This resulted in the imbalance or shortfall in funding that the current levy measure would equalize.
The $0.43/$1,000 assessed valuation proposed levy measure, with the current City contribution of $0.57/$1,000 assessed valuation, matches the contribution being paid by property owners in the District. The money collected will go towards maintaining or enhancing both fire and emergency medical services. Money collected through EMS levies must be used only for emergency medical services; money collected for and dedicated to fire service can be used for both.

A citizen questioned if the District was “subsidizing” emergency services in the City. Isn’t it less costly to operate within the City because shorter distances result in greater efficiency?
Emergency service is infrastructure, like roads or water, and must meet certain standards within the organization’s service area. EJFR and all emergency services are rated by Washington Survey and Rating Bureau (WSRB) which establishes standards for fire service. One of the principal standards is response time for emergency calls. EJFR has facilities and staff allocated within the City and District to in order to minimize response time and comply with those standards. For instance Station 1-5, located by the county recycling center in the District, is in a better position for servicing much of the City than the uptown fire station within city limits. Avoiding duplicate facilities in the City and the District is one of the realities that drives consolidation. Because of the current imbalance of contribution by City and District property owners, the District is paying a disproportionate share of maintaining this emergency “grid” for our community.

What happens to the fire service levy if an annexation of City fire service to the Fire District occurs in the future?
The $0.43/$1,000 assessed valuation levy authority in this ballot measure terminates if annexation occurs, and this is made explicitly a part of the ballot measure itself.

What would be the consequence if the City paid for the $0.43 to match the Fire District’s contribution of $1.00 out of the City budget instead of asking the voters for a tax increase?
This option would require approximately $625,000 to fund the equivalent of $0.43/$1,000 assessed valuation. In 2011 the City will receive approximately $2.98 million in property tax receipts. From that total:
• The library will receive approximately $950,000 (pursuant to the 2008 library levy – this money is legally restricted by the terms of the levy and cannot be re-directed for any other purpose).
• The fire service will receive approximately $831,000 (equivalent to $0.57/$1,000 assessed value).
• The balance of approximately $1.2 million for the most part funds basic services (including police) and community services (including parks). The sum of $625,000 represents 41% of the balance.
As stated in my September article: “The City Council has looked at meeting the $625,000 funding shortfall with service cuts in police, public works, parks, and other programs. However, at town meetings and in City Council meetings, the City Council has heard strong support for maintaining services, and for not cutting services without public input and process. Therefore, the City Council has determined that to maintain existing services, and to pay the City’s fair share for fire service, the voters should be requested to vote on the $0.43/$1,000 assessed value. If the measure fails, then reductions in other (non-fire/emergency) services by up to $625,000 would need to occur to make up the shortfall in funding for fire service.”
The City is already facing reductions in budget and services in response to reduced tax revenue. The Council has not identified what additional programs would be cut or eliminated if the levy does not pass. In October, the City Manager will be providing some options for consideration under both scenarios. Those decisions (which takes place in the fall of 2011) will occur as part of establishing the 2012 budget.

Aren’t public safety sales tax receipts available to meet the imbalance?
In order to reduce the $625,000 shortfall in contribution to fire service between the City residents and the residents of the Fire District, the City agreed in 2010 it would pay to the Fire District an amount equal to the debt service for the Fire District’s Capital Bond program. This represents annual payments of approximately $355,000 beginning in 2011 and continuing for twenty years. To meet this obligation, the City is allocating to the Fire District 50% of the sales tax receipts the City receives from Proposition 1 (approved county-wide by the voters in 2010). Proposition 1 increased the sales tax by 3/10th of one percent. Under state law, the County receives 60% of the increase and the City receives 40%. The City has agreed to commit, through mid-2015, half of this 40% to the County in order to help the County operate and rehabilitate Memorial Field and the recreation center on Lawrence Street. The other half of this 40% is paid to EJFR for debt service on the bond. One-half is about $212,000 in 2011. While these receipts lessen the current $625,000 shortfall, and would lessen the future shortfall, they don’t make up the shortfall.
Upon passage of the $0.43/$1000 levy, the City’s obligation to cover EJFR’s debt service would terminate and the sales tax money allocated by the City for that purpose would be freed up for other uses (although some or all of it would still be restricted by state law for public safety purposes).

What is the effect of property revaluation on how much I pay in taxes if the levy passes?
Though individual taxpayers may experience adjustments based on changes in the value of their property relative to average property valuations, there will be no overall effect in tax receipts to the city from revaluation. The election would establish a RATE increase ($0.43/$1,000 assessed value) that is applied to the valuation of property in the City to establish a new DOLLAR AMOUNT that can be levied. It is that dollar amount that limits what the city can levy and which is carried forward into subsequent years, and which can only be increased by the Council by 1% per year (plus an amount based on the value of new construction). The dollar amount can be increased beyond 1% only by a voter-approved levy (as happened in 2008 with the library levy). The rate (and dollar amount) are subject to decrease if the rate exceed levy limits set by state law.
If the fire service special levy passes in 2011, the County Assessor will, after performing the new valuation of assessed property value for the City in 2013, calculate a new levy rate to reach the same total dollar amount resulting from the 2011 levy. The $0.43/$1000 fire levy would generate approximately $625,000. If assessed values go down (or up), the City can still only collect the $625,000 authorized by the levy (plus 1%/year, plus an amount based on the value of new construction). If an individual’s property goes down (or up) more than the average reduction (or gain), there could be a decrease (or increase) in the amount of the tax paid following revaluation.
I recommend contacting the County Assessor (385-9105) with questions on this complicated subject.

We’re spending $500,000 on Fort Worden. Why can’t we use that money for Fire Service?
Until annexation occurs, support of Fire and EMS services is an ongoing expense to the City that must be met out of the City’s general fund revenues. The City’s one-time $500,000 contribution to the restoration of Building 202 in Fort Worden for education purposes will be paid by proceeds from the Limited Tax General Obligation Bonds that were authorized by City Council on December 6, 2010. Money from these bonds can only be used for capital projects as specified by Bond Ordinance 3050 (although the project list can be changed by City Council).
The contribution for Fort Worden (which was specified in the Bond Ordinance) was projected to be leveraged by matching state contributions of nearly $4.3 million. With State Parks under enormous pressure due to State budget cuts, the future of Fort Worden as a state park was, and still is, in doubt. Fort Worden with its array of resident organizations and activities, and its location within the City, is not like other state parks that are largely single purpose. The City Council acted because Fort Worden, besides being such an exceptional recreational setting, is of critical importance to Port Townsend's economic future. The restoration of Building 202 is part of a plan to establish a permanent college campus within Fort Worden in order to ensure the park’s future vitality and viability. The City’s contribution was essential to securing nearly $4.4 million matching funds that have been allocated by the state since the passage of the Bond Ordinance. Results of this effort are also seen in the commitment of Goddard College to locate a campus at Fort Worden.
The Bond Ordinance does not require additional taxes or separate authorization by the voters and must be paid for out of existing revenue sources.

ANNEXATION AND EMERGENCY SERVICES

Why didn’t the Council place an annexation vote on the ballot?
There is a timing issue with significant tax impacts if annexation goes forward at this time. Properties in the Fire District (namely, properties served by EJFR that are outside the city) are currently being revalued by the assessor and are projected to be devalued by up to 20%. This will result in a higher property tax RATE in the Fire District to collect the same dollar amount from Fire District taxpayers. Properties in the City won’t be re-valued until 2013. If annexation were to occur before both jurisdictions are re-valued, the District RATE would be applied to the city values prior to revaluation in the City and a tax imbalance would result. Based on this, the City and Fire District determined to postpone annexation until there was uniform valuation to ensure fairness to city and district property owners.

Doesn’t the special levy move us closer to annexation?
No. Approval of the special levy ballot measure will simply match Fire District and City property owners’ property tax contributions for emergency services.

Why did the City choose to consolidate fire service with the Fire District?
Consolidations manage costs, increase efficiencies, and allow greater service levels at the same or lower costs. Instead of having two chiefs, two secretaries, etc., a consolidated operation with a single command structure operates at less cost. And the increased number of Firefighters, EMTs and Paramedics after consolidation enables EJFR to better manage the highly variable demands for emergency services. As noted in my previous article, many jurisdictions around the state have consolidated to achieve these results.

Why weren’t City voters allowed to vote on the contract to consolidate?
The process for consolidation has been going on for a number of years as an effort to manage cost, fulfill mandated requirements for emergency services, and increase service levels. These actions were taken by multiple City Councils at numerous public meetings each with an opportunity for public input. Direct voter approval by a majority of voters in the District and in the City, in separate elections, would be required for annexation, and if approved by voters in both jurisdictions, would complete the process of consolidation.

Won’t annexation create “banked capacity” of $0.57/$1,000 assessed value?
Yes. Annexation if approved would “free up” the $0.57/$1,000 assessed value the City currently contributes to fire service (resulting in “banked capacity,” namely, capacity to levy that amount in the future).

Banked capacity would not be created by passage of the special levy in November since all the levy funds transfer to the Fire District, the levy does not free up any existing funds being paid to the Fire District, and the levy terminates if there is a future annexation. The City Council investigated the possibility of returning to the voters the authority to levy or not levy the banked capacity that might be created by annexation.

At the City Council meeting on July 5th, the City Finance Committee, consisting of Mayor Michelle Sandoval, councilmember Mark Welch, and myself, recommended that the City Council place a measure before the voters that would afford them an opportunity to “roll back” (eliminate) the banked capacity that would result from annexation so that it could not be levied by this or future city councils without additional approval by the voters. This recommendation was based on the premise – from the 2008 library levy – that voters could impose restrictions on levies. (The tax from the library levy is specifically limited to and can only be spent for library services.)

However, after review with officials at the State Department of Revenue and the County Assessor, we learned that while the City Council may choose to levy LESS that the amount authorized by state law, and voters may INCREASE levy authority, there is no authority under state law that allows voters to REDUCE the City’s capacity to levy taxes. Consequently, if annexation is approved in the future (requiring voter approval in both the City and the Fire District), then the current City contribution for fire service, currently $0.57/$1,000 assessed value, becomes “banked capacity” and may be levied for other purposes subject to approval by the City Council.

A further complication of the situation is that, under state law, the maximum rate as a percentage of property valuation the City can levy is reduced if the City is not providing for emergency services from the general fund. At the current property valuation in the City, annexation would result in banked capacity of the $0.57/$1000 assessed value that is currently allocated for fire service. However, revaluation of city property will result in a new RATE at which taxes are levied by the City, based on the DOLLAR AMOUNT that is actually collected from property owners. If the VALUATION of city property goes down as expected, the new RATE will be higher for the same dollars. In the event that valuation in the City is reduced to the same degree that is projected to take place in the Fire District, this reduces or eliminates any banked capacity because the new City maximum rate under state law will be exceeded. This is not a permanent change, however, and the banked capacity would be restored if valuation increased in future years.

Tax levy law is very complicated. Information on this subject comes from the County Assessor (385-9105), and he is the best person to ask for further detail.
The City Council has stated that funds freed up by annexation (if annexation is approved by the voters) would be used only for capital projects and not for operations and the current Council has demonstrated a desire to have the voters participate directly in any decision to use banked capacity that would result from annexation.

Annexation requires a majority approval by City voters (and also separately by Fire District voters), which will provide further opportunity to consider this complicated issue. There is no guarantee that annexation will occur.

CONCLUSION
I hope this information proves useful as you consider the options before you. These issues are complex and the economic times are challenging and I hope you read the City Manager’s article with information about the City’s financial circumstances.