The Federal Way City Council is preparing to pass an ordinance that will increase 2010 property tax rates.

The city council, on Dec. 15, is scheduled to adopt its 2010 property tax levy. Accompanying the levy will likely be a declaration of substantial need. This will raise Federal Way’s property taxes from the current rate of $0.97 per $1,000 assessed property value to approximately $1.13 per assessed property value in 2010.

However, homeowners will not see a large increase in the tax amount they pay. The owner of a home assessed at $250,000 will pay roughly $2.26 more in property taxes over the amount paid in 2009, financial services administrator Bryant Enge said. If the ordinance is not adopted, property tax rates are scheduled to increase to $1.11 per $1,000 assessed property value, Enge said.

Proposed need

The substantial need ordinance comes in direct response to the city’s decrease in revenue sources due to the continuing economic climate. If adopted, the ordinance means the city will not have to cut services, Enge said. The proposed rate is already reflected in the 2009-2010 biennium budget, which is also scheduled for a final council vote on Dec. 15.

“Our ordinance speaks to the cuts we made in June and November and that a further cut would have a major impact on our ability to meet current services,” Enge said.

In 2009, a total of $2.625 million has been transferred from the General Fund to the operating budget to keep it balanced. The long-term plan reflected a $1.8 million transfer from the fund and the 2009-2010 biennial budget reflects another $825,000 adjustment from the fund. If the ordinance is not adopted, the city will need to make an additional $176,000 in cuts, Enge said.

Calculating rates

The declaration of substantial need permits the city to calculate the 2010 tax levy using a method not recently applied in Federal Way. To calculate next year’s rate, the 2009 levy basis of $9,527,443 will be multiplied by a 1 percent increase over current rates. The City will bring in an additional $176,000 in 2010 property taxes by calculating its levy using the 1 percent increase method, versus a method used in recent years.

Recently, Federal Way’s property taxes have been calculated using the implicit price deflator (ipd). This is a national consumer price index which takes into consideration inflation rates. By state law, of the two methods, the one generating the lesser amount of property taxes is adopted by a collecting jurisdiction. An ordinance declaring substantial need sidesteps the law.

The city council is scheduled to issue a final vote on the 2010 property tax levy at its 7 p.m. Dec. 15 council meeting at City Hall, 33325 8th Ave. S. The measure must pass with a majority, plus one, vote.

The ordinance is part of the 2009-2010 biennial budget and will appear on the council’s consent agenda. Anyone interested in speaking about the proposed tax increase will have the opportunity to publicly address the city council during the public comment section of the meeting. Public hearings were held regarding the matter on Nov. 17 and Dec. 1.