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Divided Port commission puts property tax to test

By J. Martin McOmber
Seattle Times business reporter

DEAN RUTZ / THE SEATTLE TIMES The Yuguhe arrives at the Port of Seattle with its load of cargo last spring. After a decade of stagnation, Port officials expect the next decade to bring significant increases in cargo.

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Until last week, the gentle needling by the former investment banker seemed as hopeless as stopping the tide from rising in Elliott Bay.

But in the middle of a divisive debate Wednesday over raising property taxes for the fourth year in a row, commission President Paige Miller took a surprising step: She ordered the Port's financial staff to take a long, hard look at Fisken's proposal early next year.

Miller hopes the study will end once and for all what she considers a risky idea. The Port needs the $62 million it will collect next year to compete in the fast-changing shipping industry, she says.

The move also sets the stage for an election-year showdown that could have far-reaching consequences not only for the commission, but for jobs, taxes and the future of the city's 94-year-old seaport.

Fisken argues Seattle has the most heavily subsidized port in the country and that it could easily do away with the property tax over the next 15 to 20 years with a dose of fiscal responsibility.

"(Port officials) have lived for decades in the belief that this is the way all similar organizations operate," Fisken said. "It isn't true, but to agree to my characterization is to say, 'Gee, I've done a terrible job managing this place.' "

The Port and property taxes The Port's proposed tax levy for next year is 25 cents for every $1,000 of assessed property value, or $25 per $100,000 of assessed property value. The tax is about 2.3 percent of the overall property-tax bill. Although the Port would keep the rate the same next year, the amount it collects would increase $2.9 million, or about 5 percent, to $62 million. Most of that is due to rising property values in King County. But the increase also is well above the 1 percent limit set by voter-passed state Initiative 747. The Port is able to exceed the limit because it has taken less than the maximum property-tax increase in previous years, essentially banking the difference for future use. If the Port had raised taxes to the maximum each year, it would be collecting about $76 million next year.

No luxury tax

Commissioner Patricia Davis, who plans to run for a fifth term next year, scoffs at the idea that the property tax is a luxury the Port can forgo. Without money to spend on cargo terminals and other waterfront projects, the working waterfront would struggle to survive, she says.

"No growth and new investment means we eliminate jobs, and we don't invest in our terminals, and we slowly wind down to be, what? I don't know — a maintenance port and a bicycle path?" Fisken and fellow first-term Commissioner Lawrence Molloy opposed the Port's proposed $1.1 billion budget for 2005 during an initial vote Wednesday. It wasn't enough to stop the spending plan, which is expected to win final approval tomorrow. But it was a rare display of division for the five-member group.

The budget calls for a $2.9 million property-tax increase next year, up 5 percent. The Port's tax rate, however, would stay the same at about 25 cents for every $1,000 of assessed value.

The additional money would come mostly from rising property values in King County and new developments that expand the tax base. Taxpayers with rising property values would pay more, others would not.

The Port tax is a sliver of a property owner's King County tax bill — 2.3 percent of it, compared with the roughly 30 percent that goes toward schools.

Much of the budget for the Port's seaport division comes from cargo-terminal rents and cruise-line fees. The Port also runs Seattle-Tacoma International Airport, which gets much of its budget from the landing fees airlines pay.

The $62 million in property taxes collected next year would pay for new cargo cranes, waterfront-terminal renovations and expansions, environmental clean-up, job-training programs and transportation projects. Most importantly, it would pay down debt from previous waterfront projects.

Sea-Tac policy

Under a long-standing Port policy, property-tax money cannot be used to pay for anything at Sea-Tac, although some pays for a noise-insulation program in the nearby Highline School District.

The Port's property tax has been a fixture since the agency was created in 1911 to wrest control of the waterfront from railroad companies. Unlike major ports in Southern California, which were given land by the state, Seattle had to buy the 1,500 acres that now make up the seaport.

Today, it is the only major cargo port on the West Coast outside of Tacoma that relies heavily on local taxpayer support. Tacoma collected about $9 million in property taxes last year, while the Port of Portland took in just over $7 million.

None of California's major container ports, including the twin giants in Los Angeles and Long Beach, receive any property-tax revenue. In Vancouver, B.C., the port actually paid other governments $2.8 million last year.

For Fisken, the question is, if those ports can prosper with little or no tax help, why does Seattle need so much?

Campaign message

Fisken hammered the theme during last year's election, when he ousted incumbent Clare Nordquist. His call for greater fiscal responsibility came on the heels of a Port decision to increase property-tax revenue 45 percent in 2003.

While most freshman commissioners have little effect at the Port, Fisken — who once ran a shipping-industry magazine, Marine Digest — kept raising the property-tax question in conversations with other commissioners.

He says the Port could do away with the tax within the next two decades through a combination of budget cuts and fee increases totaling $3.5 million a year. That is less than 1 percent of the Port's annual $400 million operating budget.

Fisken says he would start by cutting out the $5 million a year the Port is spending on plans to redevelop property at Terminal 91, possibly into offices and housing. He proposed charging cruise lines higher rates and allowing rents on the Port's three main cargo terminals to increase as scheduled in 2008.

"If you start going through the budget item by item, you can find those amounts of money pretty easily," Fisken said. "There is no question in my mind that you can do it."

Molloy has been Fisken's closest ally on the commission this year. While he's not sure whether the Port should eliminate property taxes altogether, he said it has not done a good enough job making the case for why the money is needed.

Firm position

But Fisken's rough calculations have done little to change Miller's mind. Reducing the tax, she says, would require deep cuts in the maritime industries — the very businesses Fisken has criticized the Port for not supporting.

"I don't buy it," Miller said. "We've had this discussion over and over again in the year he has been here, and it is time to have a serious, in-depth look rather than a 'he-said, she-said.' "

It should take Port staff until sometime this spring to develop options for weaning the agency off the property tax, Miller said. She suspects the proposals will not be pretty.

"You would have to look at the places the Port is losing money and radically change those lines of business or get out of them altogether," she said. "And I think you would be looking at not making significant new investments in much of what we do, which I don't think is where he wants to go."

Commissioner Bob Edwards says he, too, is concerned the Port would have difficulty staying competitive if it couldn't tap the property tax for major projects.

Davis paints an even darker scenario for a taxless Port.

Such a plan, Davis says, could drive major shipping lines to competing ports in Tacoma and Vancouver, crippling a container business that provides 80 percent of the seaport's revenues.

Threat to progress

It would take money away from environmental-cleanup and road projects designed to ease congestion around the region, Davis said. And it would undermine years of work building Seattle into a successful cargo port at the time a record number of containers are headed our way.

"(Fisken) says he does his calculations on the back of a napkin and it is easy," Davis said. "But we have a great financial team, and they don't do it on the back of a napkin. They are very realistic."

Fisken isn't the first commissioner to propose reducing the Port's reliance on the tax rate. But no one has been as adamant as he has, Miller said.

That fact that the subject will get its first serious hearing during an election year raises the stakes even higher.

Miller, Davis and Molloy are up for re-election. Miller hasn't said whether she plans to run, but Davis and Molloy are gearing up for the campaign.

Maybe people will support an end to the tax, Davis said. "But I'm sticking up for it."

Fisken is confident the study will validate what he has been saying all along. The question for now is whether it will change enough minds on the commission or help another tax critic win election to the board.

"Ask me in November, and we can easily be there at that point," Fisken said.

J. Martin McOmber: 206-464-2022

Copyright © 2004 The Seattle Times Company

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