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Editorial: Levy issue resolution worth going to courts, Legislature

Tue., Feb. 24, 2015

Not often do you see public officials distracted by property tax increases on the order of $22, but a possible misinterpretation of Washington law that provides tax breaks for the elderly, disabled and poor is keeping some up at night.

Spokane officials were caught off guard by an unexpected three-way conflict between the city, county and state over the distinction between a levy lid lift and excess levy. The latter allows exemptions for elderly, disabled and a limited selection of other taxpayers who might be driven out of their homes without the relief.

Spokane officials supporting new road taxes last fall were adamant that the restructured levy would not increase rates for anyone, including those benefiting from the exemptions. In part, their confidence was based on information on Spokane County’s website and conversations with county officials.

The levy passed overwhelmingly; an affirmation of the city’s diligent follow-through on commitments made when a 2004 road bond issue was passed. Thanks to careful management and a recession that sharpened bidding for city projects, the money went further than expected when those bonds were approved.

The 2014 levy refinances the bonds at a lower rate, and uses the difference in debt service costs between the old and new bonds to pay for ongoing road maintenance.

The refinancing is typical of the innovative approach to upgrading Spokane’s infrastructure under Mayor David Condon and Utilities Division Director Rick Romero.

Innovative and, from the state Department of Revenue’s perspective, a little free in its interpretation of Washington law. When Spokane County asked about the nuances of the changed levy, DOR rejected the city’s position that the restructured road levy is an excess levy that carries over exemptions that applied to the 2004 bonds.

DOR considers the 2014 measure a levy lid lift that does not provide for those exemptions.

The county, caught in the middle but bound to accept the DOR definition, mailed out tax notices last week that billed 4,700 city taxpayers who had received some relief from the 2004 levy. Without the relief, they will pay an aggregate $107,000 in additional taxes.

That’s an average of about $22 per year for each taxpayer, hardly worth noting in most household budgets. But city officials have taken their commitment that the new levy would not raise taxes as a pledge not to be broken.

A City Council move to provide for the exemptions at the municipal level was rejected by the state, which reserves the power to define tax classification. State courts may have to determine whether the DOR or city interpretation is correct, should the City Council decide to file a lawsuit.

Or, the city could seek relief from the Legislature, a potentially faster course if officials can get the attention of lawmakers with their own budget challenges.

The issued needs resolving, judicially or legislatively. The $22 per year may be small change, but it’s a big promise.