Homeowners taking on tax burden

The biggest property owners in Spokane County will pay fewer taxes in 2008 as the tax burden continues to shift to homeowners.

Companies including Avista, The Spokesman-Review and NorthTown mall received tax bills that dropped by 15 percent or more from 2007. Officials say the trend of lower taxes likely includes other commercial property as well, not just for the richest companies.

The shift of the tax burden toward residential property owners began in Western Washington and has moved east to Spokane in the past few years as residential property values began to rise at record levels, as commercial property values largely held steady.

In 2005, the top 20 taxpayers in Spokane County paid $24 million in property taxes. This year, the top 20’s bills are down to $19 million – an overall 20 percent drop.

County Treasurer Skip Chilberg said he’s concerned by the fact that homeowners are shouldering more of the tax burden.

“It would raise the question in my mind about whether commercial properties are being properly assessed,” he said.

But, he added: “I don’t have any reason to think that (County Assessor Ralph Baker) is not trying to do that as professionally as possible.”

State figures show that residential taxpayers will pay 65 percent of the property taxes in Spokane County this year. That’s up from 57 percent in 2002.

Residential taxpayers, however, have a smaller tax burden in Spokane County than the average residential burden statewide: 69 percent this year.

Baker said booming residential real estate markets don’t necessarily coincide with similar valuation increases in commercial markets. Instead, business property values often catch up after residential booms end, he said.

Baker said he expects the shift to residential payers to begin to wane. This year, residential values likely will increase by 8 percent or 9 percent, he said, but that would follow a few years of double-digit increases.

“Commercial values seem to be rising relatively quickly in value,” he said. “We are seeing that trend starting to pick up, just as it has in the past.”

The large increases in residential property values aren’t the only reason some of the top taxpayers have lower bills. Some of those companies’ values have fallen in recent years.

A few years back, the assessor’s office changed the way it valued Inland Empire Paper after it was discovered that some of the company’s equipment had been mistakenly double-taxed because of an assessor’s office error in 1988, Baker said. The new method puts emphasis on the company’s income and resulted in a lower value, he said. Inland Empire Paper is owned by the Cowles Co., which also owns The Spokesman-Review.

“We do feel like we’re doing it fairly,” Baker said.

In 2005, Qwest settled a lawsuit with the state that significantly reduced its value. The Department of Revenue assesses most utility company property. Qwest argued that its properties were declining in value because cell phones had taken away some of its land-line business. That settlement is a major reason Qwest’s tax bill in Spokane County is about half what it was in 2005.

In the past year, Avista also questioned its valuation, arguing that its future earnings were overestimated by the state, said Avista spokesman Hugh Imhof. Its recent valuation decrease helped lop $1 million from its 2008 Spokane County tax bill.

“We convinced them that our future earning potential is really regulated by the state,” Imhof said.

Department of Revenue spokesman Mike Gowrylow said Avista didn’t formally challenge the state’s valuation. Because of the complexity of valuing utility property, department employees often discuss the valuations with the companies. Gowrylow said the biggest factor in determining a utility company’s value is its income.

Avista reported net income of $38 million in 2007, down from $73 million in 2006. The company’s performance is expected to rebound this year thanks to rate increases in Washington state.