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Federal Way predicts pain if Eyman's I-1033 passes
In a unanimous vote, the city council opposed Initiative 1033, saying it will do more harm than good in Federal Way.
The measure — known for its attempts to lower property taxes and limit government revenues — was discussed during a public hearing Sept. 1. Mayor Jack Dovey was absent. Representatives from both sides of the measure were invited to participate and speak their views.
"This really hurts cities like ours that have been proactive and conservative," council member Dini Duclos said.
The Washington State Office of Financial Management estimates that I-1033, if passed by voters in November, will reduce the state's general fund by $5.9 billion, the counties' general funds by $694 million and cities' general funds by $2.1 billion by 2015, said Bryant Enge, City of Federal Way financial services administrator.
The initiative is expected to increase Federal Way's projected $15 million general fund deficit in 2015 to $17.3 million, Enge said. It will also limit the city's ability to respond to emergencies, emerging issues and opportunities, he said.
I-1033 is co-sponsored by Tim Eyman, Jack Fagan and Mike Fagan. The three promise to lower property taxes and limit state, counties' and cities' abilities to spend wildly by putting restrictions on the amount of revenue directed to each entity's general fund. It strikes balance between governments' and citizens' needs, Eyman said. It will end a pattern of government overextending itself during prosperous times and compensating by raising taxes during trying times, he said.
"They need to realize taxpayers just don't have bottomless wallets," Eyman said.
I-1033 will impose a cap to general funds. Caps for any one year will be based on the previous year's total revenue to the general fund, plus a percentage reflecting inflation and growth.
"(Governments are) going to get just as much as you got the previous year, plus a bump," Eyman said.
If the general fund cap is met, additional revenue will go into another fund to be used to lower property tax levies. Currently, property taxes cannot exceed one percent. That legislation will remain. Citizens will have the chance to vote for higher taxes to bolster the general fund, if they feel there is a need to do so.
"It's always got that safety valve that says if government needs more, all they have to do is ask," Eyman said. "What's wrong with going to the voters?"
The initiative sounds splendid, but will not work to residents' advantage, council members said.
"This type of initiative, for our city, will impact us for many years," city council member Linda Kochmar said. "We are going to end up with some pretty dire circumstances."
I-1033 will restrict Federal Way's capability to provide and restore public services, said Federal Way chief financial officer Bryant Enge. Fiscal impacts will be seen beginning in 2011. Expenditures will outweigh revenues, he said.
"We'll get to a point where fundamental government functions will not be provided," city council member Jim Ferrell said.
The city anticipates general fund revenues will grow $1.7 million in 2011. Of that, $1 million is money the city will reallocate from its capital fund to its general fund. This reallocation is part of the city's long-term plan, approved earlier this year, to continue providing necessary services during and after the recession. Much of the money comes from a transfer of utility taxes. The reallocation will allow daily operations, such as the current level of police services, to continue.
Based on projections, $969,385 of the $1.7 million would be available for spending, Enge said. The remaining amount over and above the cap is expected to be $826,632, he said. This would be directed toward lower property taxes in 2012.
Meanwhile, the city's operating expenditures are expected to grow by $3 million, which includes a planned restoration of $500,000 worth of police cuts and freezes to vacant positions that were made during this year's budget cycle, Enge said.
The initiative is similar to one that was enacted in Colorado in 1992, said Aisling Kerns with the "vote no initiative 1033" campaign. The Taxpayer Bill of Rights (TABOR), like I-1033, limited revenue growth by imposing a cap based on the previous year's earnings, plus a bump based on population and inflation growth, according to the Colorado Fiscal Policy Institute. It also required voter approval of tax increases, according to the institute.
Between the years of 1997 and 2002, $3.2 billion was refunded to property taxpayers, according to the institute. TABOR and the Gallagher Amendment, which capped residential assessment rates at 21 percent, adversely affected education spending. At one point, the state could not afford to provide immunizations for school children, Kerns said.
In 2005, Colorado voters suspended the initiative due to its fiscal impacts.
"The problem with these (types of) initiatives is they look good at first," Federal Way resident H. David Kaplan said.
Visit permanent-offense.org to read more about I-1033. Here, Eyman and Jack and Mike Fagan explain their initiative.
Visit www.secstate.wa.gov/elections/initiatives/text/i1033.pdf, to read the full legislative text of the initiative.
Visit www.cclponline.org/pubfiles/BW09_ColoradosUniqueConstraints.pdf to read a report of how TABOR and the Gallagher Amendment affected Colorado's fiscal stability.
Visit www.no1033.com to learn more about the "vote no initiative 1033" campaign.