25% property-tax deferral proposed

OLYMPIA — State lawmakers during a special session Thursday will consider helping struggling homeowners by letting households earning up to $57,000 a year defer part of their property tax.

Gov. Christine Gregoire called the special session to reinstate a 1 percent cap on property-tax increases that was recently thrown out by the state Supreme Court.

The governor on Monday outlined a second measure that would let some homeowners who meet income guidelines defer up to 25 percent of their annual property-tax bill, with restrictions. Copies of the legislation weren't available.

The governor noted the deferral would be temporary. "When the house is sold, the state will be reimbursed," she said.

Homeowners also would have to pay interest on the deferred tax. The interest would be based on federal rates. Gregoire said people would pay about 7 percent interest currently.

Democratic leaders in the House and Senate support the proposal. Their party holds large majorities in both chambers.

But Senate Republican Leader Mike Hewitt, R-Walla Walla, wasn't impressed with the idea, noting the hefty interest. "I don't know what it's going to do for people," he said. "I'm not particularly fond of deferrals."

House Majority Leader Lynn Kessler, D-Hoquiam, said the measure could help some people in a bind keep their house. She said the income cap would be high enough to help the middle class.

The cutoff of $57,000 is roughly the current median household income in Washington. The state estimates about 7,500 people would take advantage of the program. Gregoire said local governments would not lose any money because the state would cover the lost revenue.

The Senate is expected to take up the bill first. Senate Majority Leader Lisa Brown, D-Spokane, said she's hopeful it will pass. "I think there'll be widespread support for it," she said.

Gregoire said she expects the 1 percent cap on property taxes to be reinstated by the Legislature, noting that "there is absolute agreement" among Democratic and Republican leaders in the House and Senate.

Voters in 2001 overwhelmingly approved Initiative 747, a Tim Eyman-sponsored measure that limited increases in property-tax collections to 1 percent a year. The state estimates the cap has saved taxpayers more than $1.6 billion since it was put in place.

Earlier this month, the state Supreme Court overturned I-747. In its 5-4 decision, the court said the tax cap is invalid because people were not fully informed about what they were voting on.

Without a new cap, local governments could begin increasing their annual property-tax collections by as much as 6 percent — the amount the law allowed before I-747.

The court ruling sparked an uproar among Eyman, Republican lawmakers and Dino Rossi, the GOP candidate for governor. They called on Gregoire and the Democrat-controlled Legislature to convene a special session to immediately reinstate the 1 percent cap.

Gregoire has urged local governments to continue heeding the 1 percent cap. The governor said Monday that she decided to call the Legislature into session because a handful of local governments said they planned to take advantage of the Supreme Court decision and raise taxes above the cap.

"I'd hoped that local governments would feel as I did. They couldn't give me the guarantee, and that was the tipping point," she said.

Gregoire noted that I-747 was overwhelmingly approved by voters. "So I think the people of the state of Washington made their point," she said. "I'm not putting my opinion instead of the local governments'. I'm just saying the will of the voters has to be carried out."

Andrew Garber: 360-943-9882 or agarber@seattletimes.com.

Seattle Times reporter David Postman contributed to this story.