Does free land come at a price?

Wednesday in this space, we considered the recent donation to the city of a million-dollar Ferncliff parcel, given for the purpose of developing low-cost housing. Simultaneous with our comments, a letter writer asked if we might also address the impact of removing such land from the local tax rolls as it comes into the public domain.

After all, if there’s less land being taxed, don’t we all pay more?

It’s a fair question, and one upon which we’ll try to offer some insight here (with thanks to county Assessor Jim Avery and city Finance Director Elray Konkel for helping us with the math).

At Bainbridge Island’s present aggregate tax rate of $9.09 per $1,000 valuation, that $1 million parcel would generate $9,090 in property taxes. So in that sense, yes, taking that land off the rolls is indeed unrealized potential tax revenue for the city, schools and other local public agencies, and yes, everyone else will have to make up the difference. But to put that in perspective, islanders paid a collective $31 million in property taxes last year – so that “lost” $9,090 represents only about three one-hundredths of 1 percent of the total burden.

In a moribund community, such shifts would be more of a concern. On Bainbridge Island, though, the tax rolls are not static; in fact, new wealth from land is created all the time. Since 2001, new construction has added between $75 million and $139 million in value to the local tax rolls every single year. The invisible hand of the real estate market (i.e. demand for island homes) and the watchful eye of the county assessor have also combined to raise local valuations. Island properties have increased in value between 8 percent and 19 percent every year since 2001 (with the exception of 2004, when for some reason there was no revaluation).

The growth of the local property tax base in that time? Dramatic. Six years ago, Bainbridge Island homes, land and commercial properties were valued together at $2.73 billion. Last year: $4.75 billion. Today: $5.66 billion. In that context, the revenue loss represented by that $1 million parcel donated to the city is, in a word, small. In fact, if you own a $500,000 home, your property taxes went up all of 55 cents. Hopefully, you can afford that.

Can too much land be taken off the proverbial tax rolls, through retirement for public housing, parks and open space? We suppose. But keep things in perspective.

We just made up that “lost” $1 million in taxable land about 900 times over.

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Addendum: If there’s a downside to recent increases in the local property tax base, it’s this: the increase is almost entirely residential rather than commercial, meaning the tax burden falls overwhelmingly on the backs of homeowners rather than businesses and the sales tax. If the island had a bigger retail base or developed more in the way of light industry, the local tax burden would shift a bit.

But as a community, we’ve tended to oppose commercial development, so this is our lot.