Spokane to annex Costco area

City maps are about to be redrawn.

The Spokane City Council on Wednesday decided to make April 1 the day 120 acres along North Division Street – including tax-rich Costco – are absorbed into the city.

Last month, Spokane County commissioners decided to give up legal efforts to stop the proposed annexation and both county and city leaders agreed to a two-year revenue-sharing plan to ease the expected loss of more than $1 million annually in sales taxes to the county.

The agreement marks a win for former Mayor Dennis Hession, who pledged from the beginning of his administration at the end of 2005 to take a more aggressive approach to annexing urbanized county land.

City leaders hailed the agreement as a way to put an end to costly litigation while putting a large strip of commercial property within city borders.

“It’s a significant victory for the city,” said City Council President Joe Shogan.

From the beginning, Hession argued the change was about following state growth law that says urbanized land should be governed by cities.

But county leaders argued it was more of a get-rich-quick scheme at their expense. County Commissioner Todd Mielke said he remains unconvinced that the city pursued annexation on principle.

“I believe this is about the money and not about what makes good legal boundaries,” Mielke said. “At some point you just get to the point of being tired of litigating.”

In September, the county’s lawsuit fighting the annexation in Spokane County Superior Court was dismissed.

Under the agreement approved last month, the county will receive 55 percent of the city’s sales tax cut on the property for two years. The city will keep all property, real estate, utility or other taxes, which are worth about $300,000 annually.

The annexation is bad news for Aces Casino, which moved to the corner of Francis and Division in 2006 to escape the city’s higher gambling tax rates. County commissioners lowered the county gambling tax to 2 percent. Starting April 1, Aces will have to pay the city’s gambling tax of 10 percent.

Jack Duncan, owner of Aces, said moving city borders to include his casino could put Aces out of business. He said he employs 60 people.

“If they feel in good conscience that they can put that many (people) out of work, maybe they can sleep at night, maybe they can’t,” said Duncan, adding that he might pursue legal action to prevent annexation into the city.

An analysis performed for the city in 2006 showed that annexing the land would bring an extra $1.2 million a year to the city after subtracting expenses, such as hiring an additional police officer to make up for increased call volumes.

The Spokane County Boundary Review Board lopped off about 14 acres of the city’s annexation request earlier this year. City officials say they believe their projected tax collections won’t dip significantly as a result.

Most of the city’s new revenue will be raised through sales taxes and most of that is generated by the Costco store. Assistant City Attorney James Richman said the city would benefit financially from the annexation even if Costco moves from the site.

The city is expected to collect about $160,000 a year in property taxes as a result of the expanded boundary. But most of that, $120,000, will be turned over to Spokane County Fire District No. 9, which serves the land. That’s because a 1994 agreement the city has with the fire district says the city will maintain the district’s tax base lost through annexation as long as the fire district exists. Even so, the Spokane Fire Department and Spokane Police Department will be the primary responders to emergencies on the annexed land.