County suing city for utility payments

Spokane County is suing the city of Spokane for $2 million in back sewer utility payments, saying the city illegally collected a utility tax from the county for the past six years.

Commissioners voted unanimously Tuesday to sue Spokane for the payments, because they say the city can’t impose a tax on wholesale customers like the county as it can for its own residents.

“We believe it’s not legal for one municipality to tax another municipality unless we give them consent,” said Spokane County Utilities Director Bruce Rawls.

The county has an agreement with Spokane to send its sewage to the city’s treatment plant. Last fall the county began deducting 17 percent of its sewer bill – the tax amount the city assesses its utilities, Rawls said.

Technically the city doesn’t tax the county or its own residents for sewer, water or trash collection. The tax is imposed on the utilities themselves, said Spokane Deputy Mayor Jack Lynch.

But customers still end up footing the bill because the utilities factor the 17 percent tax into their costs of doing business and set rates accordingly.

The county has continued to charge its sewer customers the same rates and is holding the money in reserve in case it loses its legal case and is forced to pay the city, said Rawls. So far it’s added up to about $500,000.

If the county wins, it won’t reimburse its customers, but will delay future rate increases by using the funds to pay increased costs, Rawls added.

The city relies on utility taxes to pay for general fund services like police, fire, libraries and parks.

“In total, our assessment on utilities is about $35 million, both internal and external. It’s equal roughly to the cost of our police department,” Lynch said.

Lynch said that he hopes the city and county can come to an agreement on the issue rather than taking it to the courts.

“We’re talking to several folks at different levels to try to resolve this without the added cost to the taxpayers of going to court,” he said.

That might be an overstatement, said Rawls. “I had a conversation with (Spokane City Attorney) Mike Connelly as we walked across the Post Street Bridge one day,” said Rawls, who added that three letters have comprised the bulk of the communication between the city and county on the subject.