San Juan Island’s affordability crisis is often framed in terms of rising home prices, labor shortages, or the difficulty of attracting and retaining essential workers. While these are all real pressures, there is a quieter force at work that receives far less attention. The structure of local property taxes, how they are divided, adjusted, and increased over time, is a fundamental driver of the rising cost of living on the island. Understanding how this system operates is critical to understanding why affordability continues to erode, even when the island’s population and economy remain relatively stable.
Property taxes in Washington State are assessed and collected by the County. Homeowners and landlords receive a single bill from the County Treasurer. However, the money collected does not go to a single entity. Instead, it is divided among multiple taxing districts, each with its own authority to claim a portion of the total. These include San Juan County’s general fund, the State school levy, the Town of Friday Harbor if the property is within town limits, and a variety of local special-purpose districts such as the fire district, hospital district, library district, school district, park district, and cemetery districts.
Each of these districts operates independently and receives a share of the property tax bill based on its voter-approved levy rate. When a property owner makes a payment, that money is split up and distributed among these various jurisdictions. To the taxpayer, it appears as a single bill. In reality, it is a collection of many small governments, each drawing from the same property tax base.
State law limits how much property tax revenue a district can collect from existing properties. The cap is set at one percent growth per year. This means that even if property values double, a district can only increase its total revenue by one percent unless it takes further action. That further action comes in the form of a levy lid lift. A lid lift allows a taxing district to ask voters for permission to increase its levy rate beyond the one percent limit. If approved, the higher rate becomes the district’s new permanent base for future collections.
The Fire District and Library District have both recently been successful in passing lid lifts. The Hospital District is currently seeking one, and the Town Administrator has quietly introduced the idea to the Town Council for consideration. Each of these requests is made independently. Each district presents its own case for why additional funding is necessary. But all of them draw from the same limited pool of property tax revenue.
An important detail that often goes unmentioned in levy lid lift campaigns is that districts will not lose any existing funding if a lid lift fails. Their current budgets are secure, and they are still allowed to increase their revenue by one percent per year. Additionally, many districts have the option of utilizing what is known as banked capacity. This refers to levy increases that were legally available in previous years but were not taken. Districts can bank this unused capacity and access it later without requiring voter approval. The Town of Friday Harbor recently exercised this option, using its banked capacity to increase revenue without placing a lid lift on the ballot.
Despite these mechanisms, lid lift campaigns are often presented to voters as urgent decisions. Districts frame them as necessary to avoid service cuts, to prevent layoffs, or to ensure that essential services like fire protection, emergency medical care, or library operations can continue. The messaging is designed to create a sense of immediacy. Voters are told that without additional funding, vital community services will be in jeopardy.
This approach places emotional pressure on voters. It encourages them to view their ballot as a moral choice rather than a policy decision. The discussion rarely includes the fact that the district will continue receiving its full current funding plus a guaranteed one percent increase even if the measure fails. The option to use banked capacity is also seldom mentioned. The narrative tends to present the lid lift as an all-or-nothing proposition.
There is a deeper issue at play. Each time a lid lift is approved, the district’s revenue base permanently increases. These increments accumulate over time. In a small community with a stable population and limited new development, the tax base itself does not grow significantly. Therefore, every new lid lift adds to the per-property burden. The system is structured in a way that allows local government budgets to scale up steadily, even when the broader community is not experiencing similar growth.
This creates direct consequences for housing affordability. Consider a small single-family home in Friday Harbor. It is 1,200 square feet and assessed at $540,000. The property tax bill for this home is $3,500 per year. Water, sewer, and garbage services cost approximately $300 per month, adding $3,600 annually. Electricity averages $200 per month, which is another $2,400 per year. Homeowners insurance adds roughly $1,500 per year. Before the owner even begins to pay a mortgage or set aside money for maintenance, the fixed cost of owning this property is over $11,000 per year, which equates to about $915 per month.
For homeowners and landlords, these are non-negotiable expenses. In Friday Harbor’s rental market, tenants typically are able to pay between $1,500 and $2,500 per month. If $1,000 or more of that rent is immediately consumed by property taxes, utilities, and insurance, the landlord is left with a narrow margin to cover mortgage payments, property upkeep, and any return on their investment. When levy lid lifts are passed and property taxes increase, that fixed cost rises, and landlords are forced to raise rents to keep pace.
It is important to understand that this is not a speculative chain of events. It is a direct and mechanical relationship. Every approved lid lift becomes a permanent part of a taxing district’s future collections. These increases, stacked across multiple districts, directly affect the monthly costs faced by property owners and renters.
The conversation around lid lifts is often framed as a decision about supporting or cutting services. What is less visible is the broader structural effect these measures have on the affordability of housing and the economic pressures placed on the community. The process encourages taxpayers to act as if they are job creators, responsible for funding public sector payrolls through permanent tax increases. In most sectors of the economy, wage and service levels are constrained by what customers or the market can bear. In the case of taxing districts, this balancing mechanism is replaced by a direct appeal to the taxpayer, who is asked to fund rising costs through emotional campaigns rather than market dynamics.
San Juan Island’s population has grown only modestly over recent decades, but the nature of that growth tells a deeper story. The island’s appeal as a destination and lifestyle choice has driven property values sharply upward, especially in the years since the pandemic. As housing costs have risen, many long-term residents and working families have been priced out, replaced by new arrivals who are often wealthier or who do not rely on the local economy for their livelihoods. This quiet process of gentrification creates the illusion of prosperity through escalating property values, even as the island’s economic base remains flat. Meanwhile, local taxing districts continue to expand their budgets through levy lid lifts and banked capacity withdrawals. Each increase is spread across a static pool of taxpayers, many of whom are already struggling to keep up with the rising cost of living. The result is a structural mismatch where government operations scale upward, not because of genuine economic growth, but through mechanisms that magnify affordability pressures on the community’s remaining middle class.
This dynamic is not unique to San Juan Island. Communities across Washington State face similar pressures. However, the effects are more pronounced in small, isolated markets where the tax base cannot expand through growth. In these settings, the property tax system becomes a feedback loop, where districts increase their budgets to keep up with rising costs, and the resulting tax burden drives up the cost of living for everyone. Some states have addressed similar issues through statewide initiatives that place firm controls on how quickly property taxes can grow. California’s Proposition 13 is an old example of such a model. Whether Washington State will pursue a similar path remains an open question. What is clear is that when voters are asked to approve levy lid lifts, the decision is not simply about preserving services. It is also a decision about accepting higher property taxes and, in turn, higher housing costs. Voting no on a levy can be difficult, especially when campaigns appeal to emotions and community values. But each “yes” vote is a vote for higher rents and a vote to increase the fixed costs that continue to push affordability further out of reach.
Jeremy Nash
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