The Department of Revenue recently released its estimates of distributions to be made in 2018 under ESSB 6050. View your city’s estimate here.
How are distributions calculated?
The distribution mechanism for cities is similar to the former sales tax equalization formula and is based on a formula that looks at per capita sales tax revenues, per capita property tax assessed values, and 2005 MVET backfill funding.
Depending upon the amount of funds available in the city-county assistance account for distribution, the formula follows a one or two step process outlined below. If revenues are insufficient to fund all distributions in step 1, distributions are ratably reduced. If revenues exceed what is needed to fulfill step 1 distributions, the formula moves to step 2. (Note step 1 of the city distribution formula has only been fully funded once.)
Step 1
| |
Distribution formula
|
Exceptions
|
|
Cities under 5,000 population
|
Greater of:
- 55% sales tax equalization on first 0.5% local sales tax, or
- 55% property tax equalization based on per capita assessed values per $1,000 assessed value, or
- 2005 MVET backfill.
|
Cities with twice the statewide per capita assessed value not eligible for funding.
|
|
Cities over 5,000 population
|
Greater of:
- 50% sales tax equalization on first 0.5% local sales tax, or
- 55% property tax equalization based on per capita assessed values per $1,000 assessed value, or
- 2005 MVET backfill (calendar years 2006 and 2007 only).
|
Cities with assessed value per capita above the statewide average not eligible for funding.
|
This step of distributions for both groups of cities is capped at $100,000 per city (plus inflation). (Distributions for 2016 are capped at $$122,357, but the amount of funding available limits the maximum distribution to $86,634.)
Step 2
Once all distributions outlined in step 1 have been met, excess funds are ratably divided based upon population among cities receiving funds in step 1 and imposing the second 0.5% (or optional) sales tax.
How is the account funded?
The city-county assistance account is funded by a portion of the state’s real estate excise tax (REET), which is imposed on real estate sales. Distributions are based on actual collections.
Why aren’t cities receiving the full distribution?
The amounts needed to fully fund step 1 of the distribution formula is $8.8 million for 2016. These amounts reflect distributions to qualifying cities with a cap that increases annually by the rate of inflation.
The amount collected in the city-county assistance account from the REET has only fully funded step 1 of the distribution formula once, for year 2006 with an excess distribution taking place in January 2007. The REET is a volatile funding source. Whereas this revenue source was initially strong, it has fallen sharply due to a downturn in real estate sales.
For more information
Please visit the Department of Revenue’s City-county assistance page.