Managing that lump-sum property-tax payment

Most bills arrive monthly, making them manageable if not welcome. But consumers have no say over the timing of what is typically the granddaddy of them all – our regressive property tax.

Under Washington state law, the taxman cometh twice a year [4.7 MB PDF], demanding cash on the barrelhead. For the typical Seattle home in 2007, that meant ponying up $4,000, not exactly chump change for most people.

Still, for 295,000 county taxpayers, or 45 percent, the hit is doable because it's rolled into monthly mortgage payments, with the property tax held in an interest-bearing escrow account maintained by the mortgage holder. The lender keeps the interest and forwards the tax to the county when it's due on April 30 and Oct. 31.

But for some 360,000 residents, King County's annual love card (taxpayers usually receive their tax bills around Valentine's Day) is a far more challenging bite to budget. Those billed directly include people who prefer to earn interest on their money until the tax is due, and those who have paid off their mortgages.

For them, relief may be coming.

"It's difficult, at best, making those payments twice a year," said state Sen. Joe Zarelli, R-Ridgefield, ranking Republican on the state Senate Ways and Means Committee.

Zarelli told Crosscut he plans to introduce a bill this coming session that would allow counties to set up monthly or quarterly payment plans to pay property taxes. Zarelli, who said he is working with fellow committee member Brian Hatfield, D-Raymond, stressed that the legislation would be permissive, meaning it would not impose an unfunded mandate on unwilling counties. To avoid credit-card fees that would otherwise apply, Zarelli envisions "bank-to-bank" transactions tied to the taxpayer's checking account. Already, Sen. Darlene Fairley, D-Lake Forest Park, has dropped in the hopper a bill that would allow quarterly payments [12KB PDF].

County treasurers, especially those in smaller counties with limited resources and staffs, have generally been cool to the idea of shifting to more frequent property tax collections, partly because their computer systems could not handle it. King County is in the early stages of a major upgrade that will allow its system to process monthly payments, as well as gaining the flexibility to adjust to other changes, according to finance director Ken Guy.

Switching to monthly payments "makes sense, from a taxpayer convenience point of view," said Guy. "I'm all for what we can do to address the demands and preferences of our customers."

He also noted, as did Zarelli, that allowing earlier payments could avoid revenue spikes and give counties the chance to earn interest, which in turn could help pay for system upgrades.

King County has moved past the "conceptual phase" for such an upgrade and is at work on a "detailed, specifications phase" to carry out a new information-systems project, Guy said. He estimated the price tag from $12 million on the low end to $25 million on the high end. He is hoping for budget authorization in 2008, and a new system in place by 2011-12.

Taxpayers looking for relief before then do have options. You can:

• Do the math to figure out how much you need to set aside each month to meet the April and October deadlines.
• Ask your bank or credit union if they have a bill-payer service you can sign up for that would automatically set aside a sum each month and then pays the county when the bill is due; there may be a charge for this service.
• Pay your property tax with a credit card, but be warned – you will incur an additional 2.5 percent charge for the privilege, because unlike private merchants the county cannot absorb the fees charged by credit-card companies.

Interestingly, an increasing number of King County residents are choosing the credit-card option. In 2006, the first full year the county made it available, 5,367 people chose to pay their property taxes by credit card; in 2007 there were 7,568, a 41 percent jump. Over the two years combined, they incurred a collective total of $615,567.14 in "convenience fee" charges, according to county figures.

Phil Sanders, who serves as the county's unelected treasurer, noted there's also an "electronic" check option, which costs 95 cents per transaction. In 2006, 9,597 people chose that option to pay their property tax, as did 11,580 in 2007, up nearly 21 percent.

There was "phenomenal" demand from taxpayers, Sanders recounted, to move toward credit-card payments, despite the extra cost. He quoted one taxpayer as saying: "If I charge it on my credit card, I can get air miles."

Guy believes it's just a matter of time before monthly property-tax payments become reality as part of a growing trend toward e-commerce. "Taxpayers are getting more sophisticated and the county has to head in the direction with them," he said. "It's the type of service I support and believe in."

• Peter Lewis is a Seattle freelance writer and former Seattle Times reporter. You can reach him in care of editor@crosscut.com.