Friday, January 22, 2010

The 2010 Seattle tax rate is up a whopping 13.4% (but our tax bills will be down!)

The King County Assessor’s Office this morning certified the 2010 property tax rate for Seattle, and property owners will be seeing the implications when they get their tax bills in early February. The 2010 rate is $9.04 per $1,000 of assessed value, which compares to the 2009 rate of $7.97. While this is a huge rate increase--13.4% to be precise--it doesn’t mean that Seattle property owners will be getting tax bills that show a big hike in their tax obligation this year. And depending on where they happen to live in Seattle, many homeowners will actually end up with a significantly lower tax bill.

But not those of us who live in Madison Park. Our property taxes will be down just slightly-- essentially unchanged.

This is one of those good news/bad news situations for most homeowners in Madison Park, Madrona and Leschi. Our three neighborhoods share the same tax-assessment area (see map); and as I reported in June, our section of the City had the lowest decline in property values of any area: 12.8%. This is the good news part of the story, since in the opinion of the tax assessor at least, our property values held up better than the values elsewhere in Seattle.

Now here’s the bad news: since we had the lowest decline in property values, the typical property owner here will not see the kind of decrease in absolute tax obligation that the typical property owner living anywhere else in Seattle may experience. This is the bottom line: for the vast majority of us in our area of the City, our 2010 tax bill will be about the same as last year (assuming we made no improvements to our homes). The reason is essentially this: the decline in the value of our properties was pretty much offset by the amount of the rate increase.

Homeowners in the rest of the City “lucky” enough to see bigger declines in their property values will have a lower tax burden in 2010 than they had in 2009. In this respect, some neighborhoods are really benefiting in tax terms from big declines in property values.

Seattle Neighborhoods with the Biggest Declines in Property Values

Beacon Hill (down 22.4%)
Queen Anne (down 21.3%)
Rainier Beach (down 19.1%)
E. West Seattle/Georgetown/South Park (down 19.0%)
Central Area (down 18.5%)

These neighborhoods all come out ahead for tax purposes since their property declined in value to a much greater extent than the amount of the 13.4% tax-rate increase.

Seattle Neighborhoods with the Smallest Declines in Property Values

Madison Park/Madrona/Leschi (down 12.8%)
Rainier Valley (down 12.9%)
Ravenna/University District (down 13.1%)
Mapleleaf/Wedgewood/Bryant (down 13.5%)
Capitol Hill (down 14.0%)

These neighborhoods came out the worst for tax purposes, since their property-value decreases were effectively offset by the 13.4% tax-rate increase.

Although Madison Park and our two neighboring communities had an overall decline of 12.8% in property values, that’s not the decrease in value that any of us saw reflected on the 2010 property assessments we received last year. For reasons too involved to go into, most Madison Park, Madrona, and Leschi property owners (94% of us, to be precise) received an actual downward property-value adjustment from the Assessor of 12.3% for the 2010 tax year. (If you want to know why it’s not 12.8% you can email me for an explanation).

To understand why Madison Park has not come out ahead in terms of taxes this year we can compare our situation to that of property owners on Beacon Hill, where property values (again, in the opinion of the King County Assessor) declined the most of any Seattle neighborhood. The Assessor adjusted property-tax values downward by 22.4% for about 89% of homeowners on the Hill. That’s not quite twice the level of decline experienced in Madison Park.

This is how that difference between the two Seattle neighborhoods results in a far different tax outcome in 2010 for a house valued at $500,000 in 2009 in each of the two neighborhoods. I picked the house value based on what the King County Assessor’s Office tells me was the “average” assessed value for houses in Seattle last year (give or take a couple thousand).

In 2009 the tax obligation for a $500,000 house on Beacon Hill was $3,985 ($500,000 x .00797). For 2010, the house was reduced in value by 22.4% to $388,888. The 2010 tax obligation for the Beacon Hill house is $3,507 ($388,000 x .00904). That’s a decrease of $478, or 12%.

In 2009 the tax obligation for a $500,000 house in Madison Park was also $3,985. But for 2010, the house was decreased in value by 12.3% to $438,500. The 2010 tax obligation for the Madison Park house is $3,964 ($438,500 x .00904). That’s a decrease of $21, or less than 1%.

Like I say, it’s a good news/bad news situation. At least we’re not paying a big increase in taxes as a result of our property values holding up better than those in the other parts of town. I'll have more on Madison Park's tax situation next week.

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