Mukilteo fraternity-watch salesman Tim Eyman’s third try at reforming government in Washington would cause pain to local government, but the impact wouldn’t be immediate.

Initiative 747, which will be on the November ballot, would limit the growth in property-tax revenue to a maximum of 1 percent annually without voter approval.

Both the city and the Bainbridge Island Fire District say constraints of that magnitude would show up first in capital budgets for new projects, rather than day-to-day operational budgets.

“We’re going to make our best guess on the conservative side and budget as though 747 passes,” Mayor Dwight Sutton said.

Presently, growth in property-tax revenue is limited to 6 percent annually. If property valuations increase more than 6 percent, the taxing district must lower the tax rate to stay within the revenue limitation.

The revenue-growth limitation does not include valuation increases caused by new construction and improvements, which are calculated separately and taxed at the same rate as the pre-existing valuation base. So overall, revenue can grow by more than 6 percent.

Initiative 747 changes the so-called “limit factor” to 1 percent or the rate of inflation, whichever is less.

That’s not enough of an increase to maintain government operations, according to Bainbridge Island city finance director Ralph Eells.

“Our labor contracts call for a 3.2 percent cost of living increase next year – that’s fixed,” he said. “And we’re looking at double-digit increases in health insurance premiums, which we also pay.”

In dollar terms, Eells estimates that 2002 property-tax revenue would be $246,000 less if I-747 passes than if it does not.

Sutton is preparing a 2002 budget that anticipates a 5 to 8 percent drop in revenue from 2001, caused not only by the possible passage of I-747 but by the slowing economy. The impact of such a cut, he said, will be to defer some capital programs such as road maintenance, and possibly to rule out new spending initiatives.

“We’re in the process right now of seeing how far the money will go towards the project priorities the city council has set, then we’ll go back and ask them if they want to revisit their priorities,” he said.

The problem, he said, is that as projects are deferred, they tend to become more expensive.

“Rather than replace a road, you can resurface it and get by for the short term,” he said, “but that’s not very cost-effective in the long run.”

The fire district is looking at a similar picture, according to Executive Director Ken Guy.

“It would have an impact on our ability to carry out our capital programs of equipment purchases and station maintenance, and in the long run would effect our ability to maintain our levels of service,” he said.

The fire district’s long-standing practice has been to take the maximum revenue boost allowed each year, but to use that for capital programs as well as operations, sparing the voters any special bond elections.

The current year’s revenue, Guy said, is roughly $3.2 million, and operational expenditures are $2.75 million, so for the present, operations could be maintained under the I-747 constraints.

While the 1 percent revenue limit could be lifted by the voters, both Guy and Sutton say there are costs involved above the relatively nominal cost of conducting an election.

“It takes quite a lot of time and effort to get ready for an election,” Guy said. “It’s a question of how you want to focus your efforts – delivering services or getting ready.”

Sutton said that voting on revenue issues decreases the accountability of elected officials to the voters, and he also worries about a loss of consistency.

“City officials are not more intelligent than voters, but we get a lot more information and take more time to study it than the average voter would,” he said.

Both Sutton and Guy said that if I-747 passes, they would explore going to two-year instead of annual budgets to reduce the number of elections.

Eyman again

I-747 is Tim Eyman’s third attempt to cut Washington taxes by initiative. In 1999, voters passed his I-695, which eliminated the value-based Motor Vehicle Excise Tax. While that measure was later declared unconstitutional by the Washington Supreme Court, the legislature itself eliminated the MVET.

Then last year, Eyman sponsored a multi-prong property-tax rollback measure, I-722. That measure was also challenged on constitutional grounds by a number of jurisdictions, chief among them Bainbridge Island, where voters decisively rejected the measure.

Last week, a unanimous Washington Supreme Court affirmed a lower-court ruling that I-722 was unconstitutional because it combined several subjects, leaving a court unable to determine whether voters would have approved any or all of the various separate provisions individually.

Eyman this week said the supreme court’s ruling would boost I-747’s standing at the polls.

“I think the Supreme Court just wanted to give Initiative 747 a boost at the ballot box,” Eyman said. “This decision has really put the wind in our sails.”

Noting that I-747 contains only one subject, Eyman said that “even our opponents acknowledge that it’s legal and constitutional.”

Eyman’s claim may be premature. Attorney Tom Ahearne, a Bainbridge Island resident who spearheaded the legal challenge to I-722, agrees that conceptually, if a 6 percent revenue lid is constitutional, a 1 percent lid is no less so.

But he points out that the text of I-747 asks the voters if they want to substitute a 1 percent limit for a 2 percent limit. That 2 percent limit was the figure contained in I-722, which never took effect.

“He’s essentially asking the voters to amend a law that doesn’t and never has existed,” Ahearne said. “I don’t know what the courts would do with that.”

Staff Writer Amy Crumley

contributed to this report.