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What is Banked Capacity?
Beginning in 1986, the Legislature allowed local governments to levy less than the maximum increase in property taxes allowed under law without losing the ability to levy higher taxes later if necessary.  This provision encouraged districts to levy only what they needed rather than the maximum allowable.  Prior to that, districts that took less than the maximum, at that point 6 percent annually, permanently lost some of their levying capacity.  Therefore, districts tended to use it or lose it.  The banked capacity concept allowed districts to be more fiscally conservative without being penalized.

How much banked capacity do local taxing districts have?
The amount of banked capacity varies widely by district.  Some districts have consistently levied less tax than allowable and have built up substantial banked capacity.  Many others have little or no banked capacity.  Statewide, banked capacity totals about $108 million, or 3.4 percent more than current local regular levies.  Not all districts have this capacity, and of those that do, not all of them will choose to use it.  Moreover, districts have maximum statutory rate limits, which precludes many of them from using much of the banked capacity they do have.

How did Initiative 747 affect banked capacity?
Initiative 747 did not address banked capacity.  The initiative limited taxing districts to 1 percent annual increases in property taxes (not counting any tax revenue from new construction).  Taxing districts could continue to accumulate it or use it under I-747, though the maximum amount of banking was reduced to 1 percent from up to 6 percent annually should a district take no increase at all.

How does the invalidation of I-747 by the Washington State Supreme Court affect banked capacity?
The court decision would have allowed local districts to recover some additional banked capacity during the period I-747 was in effect, 2002 through 2007, except the Legislature re-enacted the provisions of I-747 during a Nov. 29, 2007 special session.  This means local districts will receive no additional banked capacity.

Do taxing districts need voter approval to use banked capacity?
No.  Taxing districts are limited in the amount their levies may increase each year.  As long as the district stays within the limit, no voter approval is required.  Banked capacity is simply unused levy authority that is within the district’s levy limit.

If a district uses its banked capacity, how will that affect my taxes?
The effect on the tax bill for an individual property depends on a number of factors, including the value of the property.   The amount of tax paid to the district using the banked capacity may rise, but there could be corresponding reductions in the levies of other districts.  This is because state law limits overall property tax rates applied to individual properties.  The amount of property tax that you will pay depends on the value of your property in relationship to the total assessed value of property in the tax district.