Spokane County taxpayers will pay more than $1.5 million extra in taxes next year as a result of a state settlement with Qwest Corp.
The extra tax is the result of a suit Qwest filed in Kittitas County in 2003 that claimed the company was paying too much in property taxes because the state Department of Revenue overvalued the business.
The company sought $44 million statewide. In December, the state and Qwest settled the dispute, and the department agreed to return $14.7 million for property taxes the corporation paid for 2002 through 2005 to numerous tax districts across the state.
“Ultimately, the amount has to be paid back by the taxpayers,” said Harold Smith, a Department of Revenue levy specialist.
The settlement has been divided among all the taxing districts in the state based on the locations of Qwest assets. The tab for taxing districts in Spokane County is $1.55 million.
Tax districts can eat the tab or cut a check now and tax citizens to pay it back next year, said Mike Gowrylow, Department of Revenue spokesman.
Last week, Spokane County commissioners decided to use the taxing option and paid for the settlement on behalf of all the taxing districts temporarily from its investment fund until the money can be repaid.
The money will be taxed on top of what normally would be paid. Officials say that while the total tab is significant, divided up, it may not be noticeable on tax bills.
“It’s not going to be a lot of money in any one spot,” said county Chief Deputy Treasurer Bob Wrigley.
State officials claimed no wrongdoing in the settlement and say they settled because therisk of paying more was too great. However, they say, the decision may not affect the amount Qwest pays in the future.
“These cases are expensive,” said David Hankins, an assistant attorney general who fought the case for the state. “Nobody knows when you go into court what’s going to happen.”
The Department of Revenue is examining procedures to better document values to prevent future refunds, Gowrylow said.
Qwest spokeswoman Shasha Richardson said company officials would not be able to answer questions on the topic Friday afternoon. However, she read a prepared statement: “We were able to reach a settlement that adjusted taxes we had paid on property valuations that we thought to be incorrect.”
Hankins said that Qwest argued that its value dropped in recent years as the telecommunications industry suffered several economic hits. It also claimed that some of its assets, such as telephone lines, weren’t worth as much because cell phones and cable have made traditional phone service less profitable, Hankins said.
Unlike most property, the value of assets owned by utility companies and railroads is determined by the Department of Revenue. After the value of a company is set, the department distributes the value to areas where the company has assets to determine what districts get to collect.