Property Tax Would Decline

The property taxes for homeowners in a new city at Liberty Lake will decrease if voters agree to incorporate, but residents could see a slight jump in their overall bill if city taxes are passed.

Most of the taxes paid by Liberty Lake residents would remain unchanged if a new city is formed, according to a report released this week to the state Boundary Review Board for Spokane County. Former acting Spokane city manager Pete Fortin prepared the financial analysis of the proposed city.

The city of Liberty Lake is expected to annex to the Spokane County Library District and must annex to Spokane Valley Fire District No. 1 for at least the first year, so those property tax assessments and special levies would stay the same. Also, residents will continue to pay the same amount for sewer services, the state school levy, the Central Valley School District and the Spokane County Conservation Futures program.

Residents will also pay the same amount of property taxes to Spokane County.

Here is what will change:

Residents of the new city will no longer be assessed property taxes for the Spokane County road fund. That means homeowners in the proposed city would save $191 on a $100,000 home or $382 on a $200,000 home.

However, the city of Liberty Lake would be able to levy municipal property taxes - up to $160 a year on a $100,000 home. Cities are also able to levy a utility tax of up to 6 percent for electricity, natural gas, telephone and solid waste - or about $103 a year for homeowners.

If the new city passed both taxes, Liberty Lake residents’ overall tax bill would increase slightly, according to the report. Owners of a $100,000 home would pay an additional $72. While those who own a $200,000 home would pay about $41 more than they now pay.

Susan Winchell, director for the Boundary Review Board office, said new city officials would have to decide what local taxes it would need to levy. The estimates were included in the incorporation study so homeowners would have a good idea of how the proposed incorporation could affect them, and what revenues would be available to the new city.

What is unclear right now is whether any new taxes could be passed by the city council, or if it would require a vote of the city residents.

Initiative 695, passed last year, would have required a vote of citizens on all new taxes or tax increases.

The law was struck down in March by a King County Superior Court judge, who issued an injunction blocking the part of the initiative that required local governments to get voter approval for tax increases.

The Washington state Supreme Court heard arguments on June 30 on whether the initiative is constitutional. It is expected to rule on the case within six months.

If Liberty Lake incorporates, businesses could see the same changes in their tax bills. Owners would no longer pay property taxes to the county road fund, but would pay any new taxes passed by the city.

Cities are also legally able to levy business and occupation taxes, which can be based on gross business income, the number of employees, the square footage of business space or other factors.

Winchell said the tax was not considered as a revenue source for the new city.

“No other city in Eastern Washington has imposed the tax, including the city of Spokane,” Winchell said.”