2025 Tax Year Island County Levy Audit

Overview

Purpose

The primary purpose of this review by the Department of Revenue (Department) is to assist the Island County Assessor (Assessor) in their processes and procedures to ensure compliance with state statutes and regulations.

Method of Calculation

The Department calculated the levy limitations and levy rate for several of the taxing districts for the 2025 tax year. To determine whether an error occurred, the Department compared the amount levied for the district with the lesser of the levy limit, the statutory rate limit, the amount authorized by each district’s resolution, and the certified levy request amount.

Information Reviewed

The Department used the following information during the review:

• Resolutions/Ordinances adopted by the districts.
• Levy certification from the county legislative authority (RCW 84.52.070(1)) and/or individual taxing district (RCW 84.52.070(2)) and the Department.
• Tax roll certification to the county treasurer and abstract of the tax roll to the county auditor.
• Ballot measures.
• Levy limit worksheets.
• $5.90 aggregate and 1 percent constitutional limitations.

We audited regular and excess levies of approximately 40 percent of the taxing districts in the county. The scope of the audit did not include the review of earmarked funds.

Taxing Districts Selected

The Department reviewed the following taxing district levies:

• City/Town(s): Coupeville.
• Fire District(s): No. 2 and No. 3.
• Hospital District(s): Whidbey Health.
• Cemetery District(s): No. 1 and No. 2.
• School District(s): South Whidbey No. 206.
• Other district(s): North Whidby Park and Recreation, Port of Coupeville, and State School Part 1 and 2.

Executive Summary

Introduction

The primary purpose of a levy audit by the Department is to assist the county assessor in successfully performing the duties associated with levying property taxes for the districts within the county.

An effective audit of levy calculations consists of gathering information from the assessor’s office to determine the level of compliance with laws and rules, the accuracy of levy calculations, and the effectiveness of record keeping.

Categories of Results

The Department has completed its review and grouped the results into two categories:

• The first category, Requirements, is of the greatest urgency for effective administration by the assessor. A change is required to adhere to the law.

• The second category, Recommendations, requires the attention of the assessor. The Department believes the assessor could improve their performance and service to the public by making voluntary changes in procedures.

The Department bases requirements and recommendations in our reports on our review of the administrative procedures employed, existing state statutes and regulations, and areas where we saw opportunities to improve processes, procedures, and communication.

Results

The Department identified six requirements and one recommendation directed toward improving the accuracy of the levy process.

We have listed a summary of these items in the Requirements and Recommendation sections.

Requirements

1. The Assessor is required to calculate a levy rate necessary to collect the property taxes for Part 1 of the State School levy as certified to his office by the Department.
2. The Assessor is required to use the district’s statutory maximum levy rate when calculating the statutory maximum dollar amount a taxing district may levy.
3. The Assessor is required to levy an amount no more than the district’s statutory maximum rate limit, unless a levy error correction is implemented and the levy error was at no fault of the district.
4. The Assessor is required to calculate the levy limit by applying the appropriate limit factor to the taxing district’s highest lawful levy, based on the district’s population and resolutions or ordinances authorizing an increase in property tax.
5. The Assessor is required to review the $5.90 aggregate limitation. When these limits are exceeded, the rates must be reduced or eliminated until the limitation is no longer exceeded.
6. The Assessor is required to certify both local and state assessed values to the taxing districts once the certified state assessed utility values are received, and the value has been distributed to the individual taxing districts.

Recommendation

1. The Department recommends the Assessor provide additional education to the Island County Legislative Authority regarding the certification of levy request amounts.

Requirement 1– State School Part 1

Requirement

The Assessor is required to calculate a levy rate necessary to collect the property taxes for Part 1 of the State School levy as certified to his office by the Department.

What the law says

Every year the state of Washington must levy a property tax for the support of common schools. The levy rate cannot exceed $3.60 per $1,000 market value (RCW 84.52.065).

The Department is required to determine the levy limitations for the state school levies. The Department must recompute the previous year’s levies imposed for Part 1 and Part 2 of the state school levies and the apportionment to correct for changes and errors in taxable values reported to the Department in the county’s Abstract of Values report in October of the preceding year and adjust the apportioned amount of the current year’s state levies for each county (RCW 84.55.100 and 84.48.080).

An adjustment is made to the certification amount for Part 1 and Part 2 of the state school levies to the county assessor representing the unpaid/delinquent property taxes for the fifth preceding year for that county. The Department will close the accounts for each county for the fifth preceding year and charge the amount of delinquency to the tax levies of the current year. Once the account is closed, any property taxes paid on or after July 1 belong to the county and the county treasurer must distribute those taxes to the county current expense fund (RCW 84.48.110).

The county assessor must calculate a levy rate using the Department’s reported levy amount and the county’s assessed value and extend that amount on the county tax roll. The tax roll cannot include more than a five percent surplus over the total amount certified by the Department (RCW 84.48.120).

County treasurers may refund property taxes for many reasons. One of those reasons is when the property tax was paid because of a clerical error in extending the tax rolls. Refunds may be made by checks or if when making the refund on a tax code basis, the county treasurer may make an adjustment on the subsequent year’s property tax payment due for the amount of the refund (RCW 84.69.020(3) and 84.69.060).

When an error has occurred in the levy of property taxes that has caused all taxpayers within a taxing district, other than the state, the assessor must correct the error by making an appropriate adjustment to the levy for that taxing district in the succeeding year (RCW 84.52.085).

What we found

2022 tax year:

In November 2022, it came to the attention of the Department the Assessor overlevied Part 1 of the state school levy due to an error in calculating the Island County levy rate. Specifically, the 2021 tax year levy rate was carried forward to the 2022 tax year instead of calculating a new rate based on the certified levy amount.

Department’s certified levy amount	Amount levied by Island County	Difference	Percentage Difference
$34,793,566	$35,984,776	$1,191,210	3.4236%

The difference was less than the five percent allowable amount and was forwarded to the Office of the State Treasurer.

2024 tax year:

In December 2024, the Assessor notified the Department of an overlevy for Part 1 of the state school levy due to an error in calculating the Island County levy rate. Specifically, the 2023 tax year levy rate was carried forward to the 2024 tax year instead of calculating a new rate based on the certified levy amount.

Department’s certified levy amount	Amount levied by Island County	Difference	Percentage Difference
$36,189,472	$40,599,411.98	$4,409,939.98	12.1856%

The allowable five percent surplus represents $1,809,473.60 to be forwarded to the Office of the State Treasurer, leaving an overlevy of $2,600,466.38 for the 2024 tax year that needs to be returned to the Island County taxpayers.

2025 tax year:

In an email dated January 15, 2025, to the Department, the Assessor stated his office reduced the total 2025 tax year levy by the total difference between the amounts certified to the Assessor and what was actually levied for the 2022 and 2024 tax years, $5,601,149.98.

The Assessor’s actions resulted in the following:

Department’s certified levy amount	Amount levied by Island County	Difference	Percentage Difference
$39,820,179	$34,219,029.23	$5,601,149.77	14.0661%

The Assessor certified the 2025 tax roll to the Treasurer on January 15, 2025, levying $34,219,029.23 for the State School Part 1 levy.

The Assessor’s reduction to the 2025 tax roll results in an underlevy of property taxes. The difference between the Department’s certified levy amount and what is actually collected from the taxpayers is considered delinquent property taxes and will be added back into Island County’s 2030 tax year property tax levy.

See Appendix A for 2025 tax year levy rate calculation details.

Action needed to meet requirement

The Assessor is required to take the following actions:

• Levy the amount certified to his office for the 2026 and subsequent tax years.
• Notify the Department yearly, in writing, the amounts that will be included in the 2027 through 2030 tax rolls for both Part 1 and Part 2 of the State School levies at least 10 business days before the tax roll is certified to the Treasurer.

Why it’s important

Levying the correct amount of taxes each year ensures taxpayers are paying the correct amount of property taxes.

The Department’s previous guidance to the county to refund or make an adjustment to the individual 2025 tax year property tax statement, to account for the $2,600,466.38 levy amount greater than the allowable surplus, was the most fair and equitable way to correct this error while being compliant with applicable laws.

The Assessor’s reduction of the 2025 tax year levy amount is not supported by law. It is also not providing the correct amount of refund to the taxpayers who paid the incorrect amount of taxes for the 2024 tax year. For example, any new construction added to the 2024 assessment roll for tax collection in 2025 is seeing a property tax reduction for the 2025 tax year when they were not subject to taxation for the year in which the levy error occurred, 2024 tax year.

The Department issued Special Notice – Correction of state school errors on May 14, 2026. This Special Notice details the Department’s policy on what to do if the amount collected for state school levies is different from the amount the Department certified to a county assessor.

As referenced in the Special Notice the state school levies are excluded from the levy error correction process outlined in RCW 84.52.085. This is the process the Assessor used by reducing the 2025 tax year levy amount.

Requirement 2 – Island County Fire District No. 2

Requirement

The Assessor is required to use the district’s statutory maximum levy rate when calculating the statutory maximum dollar amount a taxing district may levy.

What the law says

To carry out the purposes for which fire protection districts are created, the board of fire commissioners of a district may levy each year an ad valorem tax on all taxable property located in the district not to exceed three levies of $0.50 each per thousand dollars of assessed value, for a total maximum levy rate of $1.50 per $1,000 assessed value Since the state school levies are excluded from the levy error correction process outlined in RCW 84.52.085, following the Department’s required actions ensures the correct taxpayers receive the correct refund or adjustment of property taxes as required by law. (RCW’s 52.16.130, 52.16.140, and 52.16.160).

In 2017, the requirement to have a full-time paid employee or contract for a full-time employee to use the third $0.50 levy was removed, allowing all fire districts to have a statutory maximum levy rate of $1.50 per thousand dollars of assessed value (HB 1166).

When the voters of a taxing district approve a levy lid lift, the proposition must contain the levy rate for the first year the 1% growth limit is exceeded (RCW 84.55.050(1)).

What we found

The voters in Island County Fire District No. 2 approved a single-year, permanent levy lift for the 2021 tax year. The lid lift authorized a levy rate of $0.77 per $1,000 assessed value for tax year 2022. The Assessor used the voter approved rate from the 2022 tax year to determine the statutory maximum levy amount for the 2025 tax year. The correct statutory maximum rate limit is $1.50 per $1,000 assessed value.

The use of the incorrect statutory maximum rate limit did not result in an underlevy. See Appendix B for levy calculation details.

Action needed to meet requirement

The Assessor is required to take the following action:

• When calculating the 2026 tax year, and subsequent levy years, use the statutory maximum rate of $1.50 per $1,000 assessed value, unless the voters approve another lid lift. No additional follow-up is required for this requirement as the Assessor calculated the 2026 tax year levy limitation using the $1.50 levy rate.

Why it’s important

To ensure that taxing districts do not levy more or less than their maximum levy amount allowed by law and taxpayers pay the correct amount of property tax.

Requirement 3 – North Whidbey Park and Recreation District

Requirement

The Assessor is required to levy an amount no more than the district’s statutory maximum rate limit, unless a levy error correction is implemented and the levy error was at no fault of the district.

What the law says

Park and recreation districts may impose a regular property tax levy up to $0.60 per $1,000 assessed value for six consecutive years with voter approval. The ballot proposition must conform with RCW 29A.36.210 (RCW 36.69.145).

The ballot proposition must contain the following information:

• Name of the taxing district.
• Maximum levy rate.
• Maximum number of years the levy will be made.
• Yes or no question to approve or reject the property tax levy (RCW 29A.36.210).

When a levy error has occurred, the assessor must correct the amount of the error by making appropriate adjustments to the levy for the taxing district in the succeeding year. If the error correction will cause hardship for either the district or taxpayers, the district may choose to make the adjustment on a proportional basis over a period of not more than three consecutive years. The correction of an error cannot be made for any period more than three years preceding the year in which the error is discovered.

When the levy error is at no fault of the taxing district and the correction will result in exceeding the district’s statutory maximum levy rate, the correction must be made over a period of three years. The levy rate during the three years of the correction may exceed statutory maximum rate limit. The rate greater than the statutory maximum rate is not subject to the $5.90 aggregate limit. The rate greater than the statutory rate limit is subject to early reduction or elimination under the 1% constitutional aggregate limit (RCW’s 84.52.085, 84.52.043, and 84.52.010).

What we found

2025 tax year levy:

The voters in the North Whidbey Park and Recreation District approved a new six-year regular levy, with a maximum levy rate of $0.20 per $1,000 assessed value for tax years 2025 through 2030.

In Resolution C-64-24 the Island County Legislative Authority certified a total general levy amount of $1,683,153.87 on behalf of the park and recreation district to the Assessor. The certification includes a refund levy amount of $3,153.87.

Since the 2025 tax year levy is the first year of the new levy, the only applicable levy limitations are the certified levy request amount from the county legislative authority and the voter approved statutory maximum rate limit. The voter approved rate generates a levy amount of $1,412,169.24. The inclusion of the refund levy request amount added to the voter approved levy amount based on the levy rate of $0.20 per $1,000 assessed value exceeds the new voter approved levy rate.

The Assessor correctly calculated the levy amount based on the statutory maximum rate but then added the $3,153.87 refund amount to this amount, for a total levy of $1,415,323.11, and a levy rate of $0.2004466701, which is greater than the voter approved maximum statutory rate of $0.20 per $1,000 assessed value.

The use of the incorrect levy rate results in an overlevy of $3,153.76. See Appendix C for levy calculation details.

2026 tax year:

Due to the timing of the draft levy audit report in December 2025 to the Assessor, it appears the Assessor was unable to coordinate the 2025 tax year error correction with the taxing district. The incorrect certified levy rate of $0.200466701 was carried forward to the 2026 tax year levy limit calculations and the $3,153.76 underlevy correction was not implemented.

The use of the prior year’s levy rate that contained an error, results in a new overlevy amount of $3,184.35 for this district.

Action needed to meet requirement

The Assessor is required to take the following actions for the 2026 tax year:

• Notify the taxing district of the levy error. If the correction in the succeeding year will cause hardship for either the taxing district or taxpayers, the district may request the correction be made on a proportional basis over a period of no more than three years.
• Begin the levy error correction with the 2025 levy limit calculations for the 2026 tax year. When calculating the district’s levy capacity due to new construction, etc., use the levy rate that would have been certified if the error had not occurred in the prior year, $0.20 per $1,000 assessed value.
• Use the actual amount levied from the 2025 tax year of $1,415,323.00 in the levy calculations for the 2026 tax year when calculating the taxing district’s authorized increase over the prior year’s levy. This amount includes the levy error.
• Use the levy’s correct highest lawful levy of $1,412,169.24 when calculating the 2026 tax year levy limit.
• Due to the timing of the final audit report, if the Assessor does not have time to coordinate the overlevy error correction with the taxing district, implement the levy reduction during the 2026 levy calculations for the 2027 tax year.

The Assessor is required to take the following actions for the 2027 tax year:

• Notify the taxing district of the levy error. If the correction in the succeeding year will cause hardship for either the taxing district or taxpayers, the district may request the correction be made on a proportional basis over a period of no more than three years.
• Beginning the levy error correction with the 2026 levy limit calculations for the 2027 tax year - When calculating the district’s levy capacity due to new construction, etc., use the levy rate that would have been certified if the error had not occurred in the prior year, $0.1990230134 per $1,000 assessed value.
• Use the actual amount levied from the 2006 tax year of $1,442,094.00 when calculating the 2027 tax year levy limit.

Why it’s important

By calculating the levy limitations as required by law and levying the lesser of those limitations, it will ensure the assessor is not levying more or less than statutes allow on behalf of the taxing district and taxpayers pay the correct amount of property taxes.

Requirement 4 – Port of Coupeville Industrial Development District

Requirement

The Assessor is required to calculate the levy limit by applying the appropriate limit factor to the taxing district’s highest lawful levy, based on the district’s population and resolutions or ordinances authorizing an increase in property tax.

What the law says

A port district may create an industrial development district within their port district under certain conditions. Certain port districts may levy up to three levy periods. The first two levy periods consist of a 20-year period. During these periods, the district is limited to levying no more than what could have been levied based on the first six years of the levy period under RCW 84.55.010. Also, the yearly statutory maximum rate cannot exceed $0.45 per $1,000 assessed value (RCW 53.36.160 and WAC 458-19-05001).

No increase in property tax revenue may be authorized without a public hearing and an ordinance or resolution that specifically states the increase in revenue, in both dollars and percentage of change. Exceptions to this requirement are increases of revenue due to the following additions: new construction, construction of wind turbines, solar, biomass and geothermal facilities, improvements, increment value, and state assessed property (RCW 84.55.120).

The limit factor for a district with a population less than 10,000 is 101%. The limit factor for a district with a population of 10,000 or more is the lesser of 100% plus the implicit price deflator (IPD) and 101%. When the IPD is less than 1%, the district may adopt a substantial need resolution authorizing a limit factor up to 101% (RCW 84.55.005 and 84.55.0101).

When a levy error has occurred, the assessor must correct the amount of the error by making appropriate adjustments to the levy for the taxing district in the succeeding year. If the error correction will cause hardship for either the district or taxpayers, the district may choose to make the adjustment on a proportional basis over a period of not more than three consecutive years. The correction of an error cannot be made for any period more than three years preceding the year in which the error is discovered (RCW 84.52.085).

What we found

The Port of Coupeville created an industrial development district starting with the 2022 tax year.

The Assessor’s levy limit calculation worksheets indicate the district adopted a resolution or ordinance authorizing a zero dollar increase and zero percentage increase above the prior year’s levies for the 2023 and 2024 tax years. The Assessor correctly applied the limit factor of 101% to the highest lawful levy for the 2023 and 2024 tax years.

The Port of Coupeville adopted Resolution/Ordinance No. 314 for the 2025 tax year authorizing a zero dollar increase and zero percent increase over the prior year’s levy. By adopting this document, the correct limit factor applied to the district’s highest lawful levy since 1985 is 101%. The Assessor incorrectly applied a limit factor of 100%. The use of the incorrect limit factor did not result in an underlevy. It did result in an incorrect maximum levy amount for the 2025 tax year that will be carried forward to the 2026 tax year levy limit calculations and the calculation determining the total amount the district can levy in this 20-year period.

See Appendix D for levy calculation details.

The table below contains the maximum levy amount allowed under RCW 84.55.010, for the first four of six years of this levy period, and the amount levied for those tax years. The Assessor must continue to track this information for the 2026 and 2027 tax years to ensure the total amount levied in this 20-year period does not exceed the amount allowed under RCW 84.55.010.

Tax Year	Allowable levy under RCW 84.55.010	Amount Levied
2022	$1,346,585.08	$1,346,585.08
2023	$1,374,389.97	$1,374,539.40
2024	$1,401,758.94	$1,388,727.45
2025	$1,426,525.38	$1,416,296.00
2026	$1,439,137.92	$1,442,196.16
2027	TBD	TBD
Total	$6,988,397.29	$6,968,344.09

Action needed to meet requirement

The Assessor is required to take the following action(s):

• Notify the taxing district of the levy error.
• Use the levy’s correct highest lawful levy of $1,426,525.38 when calculating the 2026 tax year levy limit. The Assessor carried forward the correct highest lawful levy to the 2026 tax year levy limit calculations. No additional follow-up action by the Department is required for this requirement.
• Use the correct maximum levy amount of $1,426,525.38 when calculating the district’s maximum levy amount for this period’s industrial development district’s levy.

Why it’s important

By calculating the levy limitations as required by law it will ensure the assessor is not levying more or less than statutes allow on behalf of the taxing district and taxpayers pay the correct amount of property taxes.

Requirement 5 - $5.90 aggregate levy limit

Requirement

The Assessor is required to review the $5.90 aggregate limitation. When these limits are exceeded, the rates must be reduced or eliminated until the limitation is no longer exceeded.

What the law says

When levies imposed by taxing districts exceed the $5.90 aggregate limit, levy rates must be reduced or eliminated until the limitation is no longer exceeded.

The aggregate of regular levies for most junior taxing districts and senior taxing districts may not exceed $5.90 per $1,000 assessed valuation. There are some exceptions to this limitation, including, but not limited to, levies for emergency medical care or emergency medical services (EMS) imposed under RCW 84.52.069 and conservation futures imposed under RCW 84.34.230 (RCW 84.52.010).

What we found

The Assessor included the levy rates for Island County Conservation Futures and Whidbey Health’s EMS levy when reviewing the $5.90 aggregate limitation. Both levies are excluded from this limitation.

The inclusion of these levies did not result in a tax code area exceeding the $5.90 limitation.

Action needed to meet requirement

The Assessor is required to take the following action:

• Do not include the conservation future and EMS levies in future $5.90 aggregate rate limit verifications.

Why it’s important

Accuracy in the verification of the aggregate levy limitations ensures taxing districts do not levy more or less than their maximum levy amount allowable by law and the taxpayers pay the correct amount of property tax.

Requirement 6 – Assessed value certification to taxing districts

Requirement

The Assessor is required to certify both local and state assessed values to the taxing districts once the certified state assessed utility values are received, and the value has been distributed to the individual taxing districts.

What the law says

It is the duty of the assessor of each county, after receiving the certificate of assessed value for state assessed property from the department, to apportion and apply that value to the county assessment roll. The assessor must certify the total assessed value of property in the district to the officers authorized by law to estimate expenditures and/or levy taxes for each taxing district in the county the total assessed value of the property in such taxing district (RCW 84.48.130).

What we found

The Assessor timely certified the state assessed utility value to the taxing districts on November 15, 2024. This certification did not include the local assessed values. The Assessor did certify the total taxable value of the districts, along with the district’s levy rate and total levy amount on January 15, 2025.

Action needed to meet requirement

The Assessor is required to take the following action:

• Certify both the local and state assessed values to the taxing districts once the certified state assessed utility values from the Department are received and apportioned to the proper taxing districts.

Why it’s important

Providing the taxing districts with a timely certification of assessed values will assist the taxing districts with their budget process.

Recommendation 1 – Certification of levies to assessor

Recommendation

The Department recommends the Assessor provide additional education to the Island County Legislative Authority regarding the certification of levy request amounts.

What we found

The Island County Legislative Authority certified the levy request amounts for county purposes and for other taxing districts located in Island County to the Assessor on December 10, 2024.

RCW 84.52.070 requires the certifications to occur on or before the first Monday in December for non-county purpose levies and December 15 for county purpose levies.

Action recommended

The Department recommends the Assessor take the following action(s):

• Continue his education efforts with the Island County Legislative Authority and encourage them to timely certify the levy request amounts to the Assessor’s office in the future. The certification can be completed in two separate steps if the county purpose levy request amounts have not been finalized by the first Monday in December.
• Provide the Island County Legislative Authority with a copy of the Department’s PTA 21.1.2021 titled Levy Certification Requirements.

Why it’s important

Timely certifications provide the county assessor with ample time to complete the levy limit calculations and certify the tax roll to the county treasurer on or before January 15. It also reduces the risk of someone questioning the validity of the late certification.

Next steps

Follow-up

The Department is committed to the success of the Assessor by ensuring the levies comply with state statutes and regulations.

The Department will conduct a follow-up review in 2026. This will give the Assessor an opportunity to implement the required changes, recommended changes, and to provide information to the Department about any issues encountered during the implementation process.

Appendices

Appendix A

Appendix B

Appendix C

Appendix D