Significant Changes Coming to Levy Lid Lifts in 2026

It may have been a ’short’ legislative session, but that does not mean it was slow! There are many legislative changes impacting local governments, but today I’m starting with HB 2442—what has been called the local government “fiscal flexibility” bill.

HB 2442 makes many changes affecting local government finances—see this helpful summary from the Association of Washington Cities—but arguably the biggest impact is found in Section 501 of the bill, which pertains to levy lid lifts. This section of the bill takes effect on July 1, 2026.

The levy lid lift changes have the potential to impact many local governments that rely on property taxes—not just cities, towns, and counties, but also fire districts, public hospital districts, library districts, park districts, and more.

What is a Levy Lid Lift?

RCW 84.55.010 establishes a “levy lid” for taxing districts that restricts the growth of property tax revenues.

Generally speaking, the total dollar amount of regular property tax levies that a taxing district collects cannot increase more than 1% annually, plus an additional amount for certain ‘add-ons’ such as new construction or annexations. This levy lid is often referred to as the “101% levy limit.” (Originally the levy lid was 106%, but this was reduced to 101% following the passage of Initiative 747 in 2001.)

Over time, this has created significant financial challenges for many local governments, as the cost of personnel benefits and other expenses has been rising faster than property tax revenues. Since Initiative 47 was approved in November 2001, the Seattle-Tacoma-Bellevue CPI-W inflation index has doubled (a 101% increase), while property tax revenues would have been limited to a 28% increase over that same timeframe.

The complicated nature of property taxes in Washington State also means that the levy lid causes the levy rate per $1,000 assessed value (AV) to keep dropping year-over-year for many districts.

However, if a taxing district is levying less than its maximum allowable levy rate per $1,000 AV, RCW 84.55.050 allows taxing districts to temporarily exceed the 101% levy limit with voter approval. In other words, a taxing district may 'lift' the levy lid and significantly increase its property tax revenues.

There are two general types of levy lid lifts: single-year and multi-year.

Single-year levy lid lifts

A single-year levy lid lift under RCW 84.55.050(1) allows a taxing district to exceed the 101% limit for one year only and reset its property tax levy rate per $1,000 AV.

For example, a city might increase its levy rate from $1.07 per $1,000 AV to $1.50 per $1,000 AV. The 101% limit in future years is then calculated based on the increased levy amount collected in Year 1.

The taxing district must choose whether to make the levy lid lift temporary—in which case the levy increase will expire after a certain number of years—or permanent, in which case all future 101% levy limitations will be calculated based on the increased levy amount.

Multi-year levy lid lift

A multi-year levy lid lift under RCW 84.55.050(2) allows most taxing districts to exceed the 101% limit for up to six years. The taxing district resets its property tax levy rate per $1,000 AV in Year 1—for example, increasing the levy rate from $1.07 to $1.50—and then chooses a limit factor to replace the 101% limit in Years 2-6.

Some agencies select a fixed limit factor (such as 103% or 106%), while others index it to inflation (such 100% plus the increase in the appropriate Consumer Price Index).

The taxing district must choose whether to make the levy lid lift temporary—in which case the levy increase will expire after a certain number of years—or permanent, in which case all future 101% levy limitations will be calculated based on the amount collected in the final year of the levy (typically Year 6).

How do these compare?

Below are simplified examples showing how single-year and multi-year levy lid lifts might appear on the ballot. The exact levy rates, duration, and language (as well as limit factors for multi-year lid lifts) will vary between agencies and must be written by the city/town attorney or county prosecuting attorney, as appropriate.

How Will Single-Year Levy Lid Lifts Be Changing?

Section 501 of HB 2442 amends RCW 84.55.050(1) concerning single-year levy lid lifts. Instead of a single-year lid lift, agencies will now have the option of either a one- or two-year levy lid lift.

As noted above, agencies pursuing a single-year lid lift previously would seek to establish a new levy rate per $1,000 AV in Year 1. The resulting levy amount (dollar value) in Year 1 would then be used to calculate the 101% levy limit moving forward (either permanently or until the expiration of the levy lid lift).

A one-year lid lift will still be an option under HB 2442, but after July 1, 2026, agencies may choose to do a two-year levy lid lift if they want to. This means the agency can establish a levy rate per $1,000 AV for two consecutive years. The resulting levy amount (dollar value) in Year 2 would then be used to calculate the 101% levy limit moving forward.

Below are two simplified examples contrasting these approaches. Again, remember that either of these approaches will be allowed starting July 1. The exact language, levy rates, and duration will vary between agencies and must be drafted by the appropriate legal counsel.

How Will Multi-Year Levy Lid Lifts Be Changing?

Section 501 of HB 2442 also amends RCW 84.55.050(2) concerning multi-year levy lid lifts. This change is easier to explain but perhaps even more impactful. The new legislation extends the maximum length of a multi-year levy lid lift—the number of years that a jurisdiction can exceed the 101% limit—from 6 years to 10 years, although taxing districts can choose a shorter timeframe if they want to.

This will allow agencies to sustain their property tax revenues further into the future and reduce the number of times they have to seek voter approval moving forward—providing more financial stability while also reducing election costs.

Below are two simplified examples contrasting these approaches. Again, remember that either of these approaches will be allowed starting July 1. The exact language, levy rates, duration, and limit factors will vary between agencies and must be drafted by the appropriate legal counsel.

Conclusion

The 101% levy limit has created local government fiscal challenges for a quarter of a century now, so these legislative changes may provide some relief for many agencies—assuming they can get voter approval.

You can get a more detailed understanding of how levy lid lifts work on our Levy Lid Lifts webpage or in our City Revenue Guide or County Revenue Guide. (While we will need to update these resources to reflect HB 2442, the basic concepts are still largely the same.)

If your jurisdiction is planning a levy lid lift, I would also encourage you to review our Local Government Ballot Measures webpage, which contains a wealth of information regarding election timing, voter’s pamphlets, ballot titles, pro/con committees, prohibited campaign activities, and much more.

We also might have to re-think what we call the various levy lid lift options, as the “single-year” levy lid lift can now optionally extend to two years—but a “two-year” levy lid lift should not be confused with a “multi-year” levy lid lift, which uses different mechanisms and can last for up to 10 years. If you have any suggestions or other feedback, I’m all ears! You can reach me at shawley@mrsc.org.

And finally, remember that there are many other fiscal changes in HB 2442. I encourage you to review AWC’s summary of the bill, and MRSC will provide more updates soon.