Spokane City Council considers tax increase on water, sewer and trash bill and extra rate increase to pay for it

The Spokane City Council is poised to raise utility taxes and rates by half a percent for the next year, the second tax increase proposed to help fill a projected $13 million budget deficit in 2026.

The city’s tax on its own sewer, trash and water systems already is 21%, second highest among the five largest cities in Washington.

The council is scheduled to vote on Monday on proposals to raise that tax to 21.5%, and utility rates would also increase by 0.5%.

Seemingly every council member agrees that increasing utility costs for residents is a regressive way to shore up the budget, hitting the city’s wealthiest households no more than those who can least afford it. But at least five members of the council appear ready to pinch their noses, arguing that they need more revenue to balance the budget as they have already proposed close to as many spending cuts as they are comfortable with. And if they have to balance the budget with regressive tax revenue, at least the effect on individual households will be minimal, as most people’s bills would only go up by less than a buck per month.

“This is a clear path to supplement some revenue for a very small amount for people,” Councilman Paul Dillon said in an interview. “But it’s not a sustainable path. That’s the bottom line; we have to look at different levers to pull in revenue that don’t burden working families.”

The city’s tax on water, sewer and garbage remains relatively hidden from customers. It does not appear as a line item of their bills. Officials argue that is because under state law, the tax is technically on the total revenue collected by the city, not on a customers. Even so, the taxes are passed on to customers in the form of rates.

Utility rates set the price paid for water, sewer and garbage by city customers; utility taxes determine how much of that payment is diverted from the utility departments and into the city’s general fund, which pays for nonutility functions like police, fire, planning, parks and libraries.

The proposed tax increase, along with a proposed tax on parking in commercial lots, is aimed at shoring up the general fund as the deadline looms to balance the budget.

While there would be a sunset on the 0.5% tax rise, ending automatically in 2027 unless the council approves an extension, it follows another “temporary” 1% tax hike proposed by former Mayor Nadine Woodward to help fill a $20 million hole in the 2024 budget. That “temporary” tax hike continued without much fanfare in the 2025-26 biennial budget. The 0.5% rate increase on customers’ bills the council will consider on Monday would not sunset even though the tax would.

The increase in rate and tax would be on top of an increase already baked into the 2026 rate schedule, when utility bills were expected to rise by 5.47% for a “representative customer” next year.

Sewer and garbage rates are more or less static throughout the year, while water rates fluctuate depending on use; a typical resident using 15,000 gallons of water in a month in 2025, saw an overall utility bill of $153.41. The same household in 2026 would pay $162.62 if the rate hike is approved, about 82 cents higher than would otherwise be the case.

The council proposed the sunset utility tax largely in response to a Monday amendment to the 12% parking tax pushing the parking tax’s date effective to April 2026 if it is approved. City Hall initially projected the parking tax would bring in $2 million; it is not clear how much would be lost next year from the three-month delay, given seasonal fluctuations in parking lot use and expected spikes during major events mostly during late spring and the summer.

The utility tax boost would more than make up for the lost revenues of the delayed parking tax collection, while also providing more wiggle room for items like hiring a new public defender or shoring up the budget of the public library system, which has warned of significant service cuts without additional funding.

In 2025, utility taxes are slated to bring in $56.5 million. Public Works Director Marlene Feist said the additional 0.5% tax would divert $1.4 million to the city’s general fund, bringing 2026 revenue projections to $60.9 million.

Regardless of the outcome of the utility tax vote, senior and disabled customers will see their bill discounts jump to $20 per month next year, up from $10 per month in 2024. Over 3,000 users qualify for this discount, and any senior who qualifies for any property tax discount through the county can apply. The lowest water users will also see a $10 credit applied to their accounts in 2026, up from $5.

“So if you are a small household – so you’re a senior living on fixed income, and often you were one of our lower indoor water users – you would see up to $30 a month in discounts as a result of the changes,” Feist said. “So those are the kinds of things that we’re trying to balance: how we cover our costs, but at the same time also acknowledge that these are lifeline services that all of our citizens need.”

The utility tax hike has at least one opponent on the council: Councilman Michael Cathcart, who argued Thursday that he would have only approved the tax increase if the utility departments agreed to eat the cost without passing it on through a rate hike. Mayor Lisa Brown stopped short of casting herself as an opponent, but neither does she support the tax or rate increase, she said Thursday.

“It’s a tough time for people, from an affordability perspective,” Brown said. “I prefer my budget to the changes council is making, but that’s just the way it works with an executive branch and legislative branch.”

The utility tax would allow the council to provide enough additional funding to the library system to avoid service cuts; Brown’s budget maintained a 5% cut to the public library budget that had been approved last year.

“I’m a very big supporter of libraries in our system; it’s an awesome system, but this was just a question of needing to get to a balanced budget and having all departments in the city participate in that,” Brown said.

The council will vote on the utility tax and parking tax on Monday.