Property tax break adds perk to downtown Spokane living

People moving to upscale condominiums being constructed in downtown Spokane are giving up suburban lifestyles and yard work in favor of living close to the theater, cinemas and other attractions.They’re also giving up paying property taxes for 10 years.

A law on Spokane’s books since April 2000 says new construction of multi-family housing downtown, and in Browne’s Addition, West Central and Peaceful Valley, is exempt from paying property taxes for 10 years. The exemption can apply to owners of apartment buildings as well as owners of individual condominium units.

Though they haven’t been used much in the past five years, a spate of proposals for new housing downtown will soon apply.

The goal of the law is to promote more housing density in the city’s core, said city Chief Financial Officer Gavin Cooley.

“You’re looking at an investment in the future,” Cooley said. “You’re giving up something now to promote a broader tax base in the future. We have to look at ways to increase the density in this urban setting if we want to succeed as a city.”

It’s a common tool used by cities nationwide to encourage downtown living, which is thought to add vibrancy to a community. Spokane adopted the law following action by the state Legislature.

About one-third of property taxes collected in the city go to the city, Cooley said. The rest go to other taxing entities, including Spokane County and public schools. The exemption is not automatic; an owner must apply to the city to receive the tax break.

Cooley said the city isn’t losing any income. Properties are still added to the tax rolls and help determine the overall tax rate. But because of the exemption, the tax burden of the new properties is redistributed to all other property owners.

The owner of a $500,000 condominium would pay $8,000 in property taxes every year, Cooley said. That’s the starting price for two new luxury condominium developments that have recently begun construction downtown.

Developer Don Barbieri is building the 32-unit Upper Falls Condominiums on the north bank of the Spokane River, which range in price from $500,000 to more than $1 million. Barbieri also is buying one of the 4,000-square-foot penthouses for his personal residence.

CPC Development is transforming the old J.C. Penney building across from River Park Square into the upscale West 809 building, with 21 loft condominiums ranging in price from $550,000 to more than $1 million. Three have already been sold.

CPC Development is owned by Cowles Publishing Co., which also owns The Spokesman-Review.

The proposed projects will quickly increase the total value of property receiving tax exemptions. Since the program began, $7.8 million worth of property has received the property tax exemptions. Cooley said Barbieri’s project alone is valued at $10 million.

In addition, Rencorp is building the eight-unit Jefferson Street Auto Lofts at 152 S. Jefferson, which would be eligible for the tax exemptions. Those units range in size from 800 square feet to 2,500 square feet and in price from $154,000 to $250,000. And developer Ron Wells plans to convert the old city fire station site into the Carnegie Square Townhouses, 10 luxury units ranging in size from 1,900 square feet to 3,200 square feet and starting at close to $500,000.

“I think it’s a pretty significant incentive in that downtown doesn’t have that many units and the idea is to try to jump start more people to move downtown,” said Wells, who includes the property tax exemptions in his real estate sales ads. “When you have an unproven market, it takes a while for people to take the leap.”

However, attorney and former city councilman Steve Eugster, who also recently developed seven lofts for rent downtown – and doesn’t plan to use this particular exemption – said the city should look at phasing out the exemption because it has accomplished its original goal.

“The idea was to encourage development,” Eugster said. That has now happened, he said.