Seattle Sales Boost Tax Revenues

A series of billion-dollar sales involving the Seattle housing market’s tallest tower and other prominent buildings has produced an unexpected windfall of tax money for state and local government.

The multi-step deal began in February, but it wasn’t until this month that municipal finance officials tallied the full impact.

For Bellevue, taxes collected from the sale of this one large portfolio almost match what the city expected to take in all year from both commercial real estate and residential property sales.

For Seattle, the take tops $13 million.

The bounty highlights the boost state and local treasuries have enjoyed from a strong commercial real estate market the past few years. But can Seattle home prices sustain that boost?

While officials celebrate this one-time budget surprise, many say slower Seattle mortgage demand and house price appreciation ultimately could offset the gains from record office-building sales.

Nearly three months ago, the Blackstone Group of New York bought Chicago-based Equity Office Properties Trust, then the area’s largest landlord.

Equity Office, which owned more than two dozen office buildings including the 76-story Columbia Center, valued its Seattle-area portfolio at $2 billion when it transferred ownership to Blackstone.

Just two months later, Blackstone turned around and sold most of the local buildings to real-estate investors in Boston and Texas for $2.76 billion.

Here’s how that benefits the state and local governments:

Each time a commercial or residential property changes hands, it’s taxed at 1.78 percent of the value or sale amount. Most of the property tax revenue goes to the state, the rest to cities or counties where the building is.

Bellevue received $4.5 million in tax money from Equity Office, and soon it will receive $5.7 million from Blackstone, said finance director Jan Hawn. The city had 16 properties change hands twice in as many months.

That $10.2 million nearly covers the $11.5 million Bellevue had projected it would receive from the real estate excise tax during its entire fiscal year. No longer will it be as dependent on applicants for Washington mortgages.

“We’re going to way exceed budget” in this category, Hawn said.

The state puts revenue from real estate excise taxes into the general fund, which primarily pays for education and social services. Local governments use the money for capital projects, such as road and park improvements.

Seattle is due $5.6 million from Equity Office and another $7.8 million from Blackstone, according to documents filed with the King County Recorder’s Office and the state Department of Revenue.

That’s a quarter of the city’s expected real-estate excise tax collections - filed every time there is a home loan transaction - for 2007.

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