Deputy city manager briefs council on Pasco property and sales tax mechanics, banked capacity and revenue drivers

Deputy City Manager Sigdell provided a primer to the council on property and sales tax mechanics at the Sept. 23 workshop, explaining the 1% ad valorem levy-lid limit in Washington state, the concept of banked capacity and how rapid post-2001 growth affects Pasco’s effective tax rate.

Sigdell said the city cannot increase property taxes by more than 1% in a given year under state rules except where voters have approved additional levies or bonds, and that an inflation index (implicit price deflator) can affect the allowed increase. She explained “banked capacity”—the cumulative tax increase the council could have taken in prior years but chose not to—and warned that banked capacity can be lost if county or state audits show filing errors for those years.

Sigdell said Pasco’s assessed valuation (land and buildings) was over $12 billion and is high relative to neighboring cities, but that Pasco collects less property tax overall than some neighbors because of timing and historical levy-setting differences. She noted last year’s city portion of the property-tax rate was about $1.08 per $1,000 of assessed valuation and that banked capacity currently sits near $600,000 — a potential revenue source the city could sweep but with audit and administrative risk.

On sales tax, Sigdell said about 8.9% sales tax applies locally but only roughly 1 percentage point flows to the city; she reported retail trade accounted for about 47% of regular sales-tax receipts in 2023 and construction for about 17% (noting that construction-driven receipts can be volatile). Sigdell said auto sales make up a large share of retail trade receipts and advised staff and council will return when assessor numbers are finalized to complete revenue and rate calculations.

Ending: The presentation was informational; staff will return with final assessed-valuation numbers for formal budget and rate work ahead of public hearings.