Tax cut sends message, council members say
Savings would amount to $2 a year on $200,000 home
Several Spokane Valley City Council members have been making a big deal out of a proposal to lower the 2011 property tax rate by 1 percent. What has been left unsaid is that the cut amounts to only one cent per $1,000 in assessed value, saving the owner of a $200,000 home only $2 a year.
Councilman Dean Grafos, who has been vocal in his praise for the decrease, said it doesn’t matter that residents won’t be saving much. “I think it makes a difference,” he said. “Maybe it doesn’t make a difference to you and me, but to someone who is struggling in our city it makes a difference.”
Councilman Bill Gothmann said it wasn’t so much the amount of the decrease but the fact that the city is trying to be responsive. “The reason we’re doing it is to be responsible people,” he said. “It’s the right thing to do.”
Gothmann said he likes the 2011 budget overall and is pleased that the council is meeting the goals of having a 15 percent carryover at the end of each year and maintaining a $5.4 million contingency fund.
Grafos said he was upset last year when the previous council voted to declare an emergency and to raise property taxes by 2.9 percent shortly before granting nonunionized staff a 5.5 percent raise. “I’m not opposed to spending money on services that our city needs,” he said. “I don’t think that tax increase was warranted. If it was a true emergency, they shouldn’t have given anyone a raise.”
The previous council voted for the pay raise to give the non-unionized employees the same raise the unionized employees were getting. Grafos said he had no problem with the raises themselves. “It’s not the wage issue so much as the fact that the first thing that they went to is a tax.”
A new or increased tax should be the last resort, Grafos said. “You should strive for efficiency in government, that’s the first thing you do,” he said. “The second thing you do is cut all unnecessary spending. The last thing you should do is increase taxes.”
Councilwoman Brenda Grassel said she agrees with Grafos’ concerns about the former council raising property taxes just before granting pay raises and said that is why she’s in favor of a property tax cut, no matter how small. “I don’t think it’s so much the amount they’re getting back, I think it’s the principal,” she said. “I do support going ahead with the reduction.”
The proposed 2011 budget shows general fund spending of just under $35 million with $24 million in reserves left at the end of the year, said finance director Ken Thompson. So far this year the city has cut $1 million by having all departments reduce their budgets by 3 percent and $350,000 by eliminating most unfilled positions. Additional cuts to department budgets are planned for 2011. “Actual expenditures are down $400,000 or $500,000 from the prior year,” he said.
The property tax amount will not be finalized until December when Spokane County gives the city its total assessed value, but it is projected to be at about $1.54 per $1,000 in assessed value. That number is actually up from the $1.50 per $1,000 currently being paid by residents because assessed values are dropping. In 2011 homeowners will be paying a smaller dollar amount in taxes, but the dollar amount per thousand is going up because home values are dropping, Thompson said.
“As that rolls back, our assessed value will fall a little bit,” Thompson said. “How much is a little bit? We don’t really know.”
The 1 percent property tax cut will remove about $100,000 from the city’s coffers, but the city could take a bigger hit if one or both of the state initiatives to privatize liquor sales passes in November. If they pass, the city would probably gain $200,000 in increased sales tax revenue, said Thompson. But that increase would not cover the $1 million the city would lose in shared profits and excise tax money from the state.
Grafos said even if those initiatives pass he would not be in favor of reconsidering the property tax decrease. “We can find those funds someplace else, through efficiencies and consolidation of departments,” he said. “I don’t know if it will pass, for one thing. We’re just going to have to work on that.”
Gothmann said he’s not sure if he would reconsider the property tax decrease if the initiatives pass. “I think the prudent thing to do is go back and look at the budget at that time,” he said. “I confess I have not looked at alternatives.”
It is probably a good idea for the council to develop a “what if” plan that could be implemented if the initiatives pass, Gothmann said. “I think it’s important to lay everything on the table and see what that approach would be.”