Property taxes play an essential role in financing the operations of the City of Mercer Island, accounting for 41% of the City's total budgeted revenues in 2017 in the General Fund. In 2017, Mercer Island property owners will pay $13.02 million in property taxes to the City to help fund the following:
- 24/7 police services
- 24/7 fire suppression services
- 24/7 emergency medical aid services
- Park, path, trail, and public building maintenance
- Street, roadside, and median maintenance
- Recreation program support for youth and seniors
- Community planning, development code regulations, and code enforcement
- Televised Council meetings, public communications, and records management
- Fire apparatus replacement
Types of Property Tax
There are two types of property taxes collected by the City: 1) regular levy, and 2) voter approved levy. The regular levy, which is $11.41 million in 2017, represents the base amount of property tax dedicated to funding the Cityís general government operations, which are noted above. There are two types of voter approved levies, which represent property tax increases over and above the regular levy: 1) excess levy, and 2) levy lid lift. An excess levy is dedicated to paying the principal and interest on debt issued for capital projects or purchases. Currently, the City does not have any excess levies. A levy lid lift is dedicated to funding specific general government operations and/or capital improvements. The City has two levy lid lifts currently in effect: 1) Parks Maintenance and Operations levy approved by voters in November 2008 for 15 years ($936,260 levy amount in 2017); and 2) Fire Station and Fire Rescue Truck levy approved by voters in November 2012 for 9 years ($668,620 levy amount in 2017).
Each November, the City Council sets the property tax levy for the coming year based on forecasted expenditures, other revenue sources, and state law limitations. The regular levy is annually limited to a 1% increase or the rate of inflation as measured by the Implicit Price Deflator (IPD), whichever is less. The IPD is not the same as the Consumer Price Index for Urban Wage and Clerical Workers (CPI-W), to which annual cost of living adjustments for City employees are tied. A levy lid lift is annually limited to a 1% increase as well, unless the voters approved a higher annual levy increase in the ballot measure. The City is also provided an allowance for new construction, which entitles the City to the property tax revenue generated by newly constructed and improved residential and commercial properties.
It should be noted that prior to 1998, Washington State law allowed taxing districts to increase their regular levies by 6% per year. Such an increase was needed by taxing districts that did not have significant retail sales tax bases.
A breakdown of the City's 2017 total levy relative to the prior year is provided below:
Prior Year Regular Levy
Plus 1% Optional Increase
| Plus New Construction Levy*
Plus Refund Levy**
|Total Regular Levy
|Levy Lid Lifts:
2008 Parks M&O
2012 Fire Station & Fire Truck
|Total Levy Lid Lifts
|% Change over Prior Year***
*The new construction levy, which is not subject to the annual 1.0% limitation, relates to the new and improved properties that have been added to the property tax roll.
** The refund levy represents the amount that was refunded to property owners who successfully appealed their property valuations by the King County Assessorís Office. To make the City whole, the amount of those refunds is re-levied in the following year.
*** The percentage change comparison of the total levy amount excludes the new construction and refund levies.
For the owner of a $1.09 million home, which is the median assessed value on Mercer Island for the 2017 tax year, the 2017 levy rate (per $1,000 assessed valuation), the 2017 levy amount, and the 2017 percentage breakdown by taxing jurisdiction are presented below.
% of Total
|State School Fund
|City of Mercer Island
Of the $8,841 total levy amount in 2017, 54.6% relates to education, with 29.6% going to the Mercer Island School District and 25% going to the State School Fund. King County is the next largest taxing jurisdiction, receiving 17.0% of the total property tax bill in 2017. The City of Mercer Islandís share of the total property tax bill in 2017 amounts to 13.2%.
A common misunderstanding surrounds the property tax levy. When the assessed value of Island properties increases significantly, there is not a corresponding increase in the amount of property tax received by the City. Instead, the Cityís levy rate actually decreases to ensure that the Cityís regular levy amount (which is calculated by multiplying the Islandís total assessed valuation by the Cityís levy rate) does not exceed the 101% annual limitation noted above.
For the period 2003-2017, the total assessed value of Mercer Island and the percentage change relative to the prior year is summarized below.
For more detailed information on property taxes, see the Revenue Sources and the Budget Policies sections of the 2017-2018 Budget document.