Court to decide whether city can exempt some residents from 2014 tax levy

OLYMPIA – The Washington Supreme Court is weighing the legality of Spokane’s efforts to give seniors and disabled veterans a break on a change in property taxes as it attempts to settle a three-year argument between the city and Spokane County.

The justices grilled attorneys for the city, the county and the state Revenue Department for about an hour Thursday over arguments about who has the authority to approve such a tax break, and what’s the right way for a court to intervene.

Mike Connelly, attorney for Spokane County, urged the high court not to “open a can of worms … to allow a city to create a nonuniform exemption, just because they choose to.” If the court agrees with the city, however, the county would sit down with the city and “work something out.”

Laura McAloon, attorney for the City of Spokane, argued a city has the power to tax – in this case to raise revenue for street maintenance – so it has the power to create exemptions. When Justice Debra Stephens asked if that means a city had all powers of taxation, McAloon replied it does, “within its local boundaries.”

But Callie Castillo, an attorney for the Revenue Department, argued the state doesn’t allow an exemption for the way the city raised its property tax.

In 2014, city voters approved a higher property tax levy for street repair; because a separate property tax levy was expiring, the campaign promised individual homeowners they wouldn’t see an increase in their bills. But the Department of Revenue told the Spokane County Assessor’s office that although the expiring levy had be eligible for a statewide exemption for seniors and disabled veterans, the new levy was not. The decision affected about 4,600 property owners.

The City Council passed an ordinance creating its own exemption for the new tax for those seniors and veterans. The state and county said the city couldn’t do that. A trial court judge agreed with the city and ordered a refund. The state Court of Appeals, in a 2-1 vote last fall, agreed with the state and county, with the majority saying the city’s actions were “laudable” but not legal, and struck down the exemption.

The Supreme Court is expected to rule in the coming months.