Spokane Valley demands say in debate over utility tax

The city of Spokane and Spokane County are wrestling over a new utility tax on county residents – and Spokane Valley officials want to enter the fray.

Spokane Valley Mayor Ben Wick sent Spokane Mayor Nadine Woodward a sharply worded letter last week, demanding that the Valley’s voice be heard in what has quickly become a complex intergovernmental squabble.

The city is considering imposing a 20% tax on revenue generated at Spokane County’s Regional Water Reclamation Facility, which is located in Spokane but serves residents outside its borders.

About 80% of that tax revenue would come by way of Spokane Valley’s businesses and residents, Wick noted in his Feb. 23 letter, which was endorsed by the Spokane Valley City Council.

“Despite that, Spokane has apparently not bothered to include our council or our city manager in these discussions,” Wick wrote.

Spokane County Commissioner Josh Kerns, who opposes the tax, said he would welcome Spokane Valley officials into the ongoing discussions. If the tax is imposed, it could lead the county to take legal action against the city of Spokane, Kerns warned.

“It’s extremely short-sighted on their part; I would hope that the city doesn’t jeopardize the years of relationship-building and collaboration,” Kerns said.

Brian Coddington, a spokesman for Woodward’s administration, said she has no qualms with Spokane Valley officials joining the conversation.

“Her interest is really in bringing people together, and in this case that looks like the county, the Valley and (Spokane City) Council Members discussing first the code that’s on the books and second the legal interpretation of the requirements to (collect the tax),” Coddington said.

While the Valley is the largest community impacted by the tax, it would also affect some residents of unincorporated Spokane County, Liberty Lake and Millwood.

“If our citizens are getting taxed, it should be through their representatives,” Wick told The Spokesman-Review.

Like Wick, Kerns takes issue with the city of Spokane imposing a tax on residents outside its borders. Those residents don’t have a vote in the city elections, and therefore have no way of holding those officials accountable.

Spokane officials note that the city’s laws call for the collection of a 20% tax on revenue generated by utilities within its borders. The city of Spokane’s ratepayers already pay the tax, and its imposition on the county facility, they argue, would simply put the county and city ratepayers on level ground.

If the city of Spokane’s code requires it to collect the tax, Wick’s argument is simple – change the code or ignore it.

“The city of Spokane Valley respectfully requests that you dismiss this concept and find revenue within your own boundaries,” Wick wrote.

Depending on how it’s calculated, the tax would amount to between $8 and $20 on the average Spokane Valley homeowner’s monthly sewer bill, Wick estimated.

The Spokane City Council hoped to use potential revenue from the utility tax as an alternative to imposing a one-tenth of 1% sales tax, which would be used to fund the development and logistical support of affordable housing projects.

Spokane City Council President Breean Beggs said the utility tax has been an issue for years but never taken up by the previous administration or council. It became a more frequent topic of conversation last year, thanks in no small part to the pandemic.

“The mayor was new and in the middle of a financial crisis,” Beggs said.

Although the tax has been eyed by some members of the Spokane City Council as a way to fund affordable housing, Beggs said the city doesn’t have to horde the revenue.

“We have regional problems that are going to take regional money,” Beggs said. “We can sit down and negotiate how to use this money on regional projects. It’s a win-win.”

Those issues could include homelessness, criminal justice reform, infrastructure repair and mental health services. For example, Beggs suggested the tax revenue be used to fund repairs on Havana Street, which marks the border between Spokane and Spokane Valley.

Beggs acknowledges that the utility tax is regressive but said “it’s the same regressive tax that our city residents are paying.” The challenge of municipal finance in general, he added, is that it’s based on “deeply regressive taxing.”

Beggs argues the county facility should have been taxed since it opened in 2011. The revenue generated by the utility tax would be between $5 million and $6 million per year, Beggs estimated, and that lost opportunity still stings.

“For seven years, we had been leaving $5 million a year on the table,” Beggs said. “Every problem that we’ve had was within, cumulatively, that $35 million.”