Spokane City Council OKs property tax hike

Remember last year’s no-new-taxes approach to drafting Spokane’s city budget?

Looks like the new one will make up for it.

Spokane City Council has given the green light to Mayor David Condon’s plan to increase property taxes 2 percent next year, twice the rate normally allowed by state law. The city was able to add the amount it didn’t take last time to the tax hike for next year.

The increase was approved Monday night on a 5-1 vote by the City Council and will be calculated into the proposed 2014 budget, which is expected to be approved next week. The council also increased utility rates 2.9 percent.

Backers of the plan say that while taxes are going up, much of the increased spending is dedicated to police and fire equipment purchases rather than ongoing operations. The tax increase is expected to generate about $750,000 per year.

Budget Director Tim Dunivant said the city plans to borrow $4.2 million from its own investment pool to buy police cars and other public safety equipment. The investment pool is composed partly by the city’s utility department reserves. By state law, that money can’t be spent for nonutility purposes. That’s why the loans have to be repaid with interest. Over six years, the city will pay $750,000 to the investment pool annually. Interest will total about $300,000.

The city has usually used the annual 1 percent property tax increase to help balance rising cost of city operations as the result of inflation or increases in worker pay and benefits. The new strategy, instead, will lock the city into spending it for capital needs. City officials for years have argued that they didn’t have a steady source of revenue to replace police cars. The city used to replace fire equipment with a fire tax, but voters rejected its last proposed fire bond in 2009.

City Council President Ben Stuckart, who was absent from Monday’s meeting, said he initially was skeptical of the plan but believes it is prudent to lock up at least the additional yearly $750,000 for public safety needs outside operating costs.

“We do have desperate capital needs,” Stuckart said. “We have too many firetrucks that are too old to look at anybody with a straight face and say that we are doing the job for the public.”

Councilman Mike Allen said the strategy allows the city to replace its aging fleet of police vehicles and firetrucks without having to ask taxpayers to take on more long-term bond debt.

“We have to live within our means,” he said.

The strategy is to set aside the next five annual tax increases and match them with additional city money, so that the city could borrow more than $4 million a year for vehicle replacement.

“At the end of six years, you’ve created a financing model for replacement of your vehicles,” said Utilities Director Rick Romero, who crafted the plan.

That could mean that the city would not have to ask voters for additional taxes to pay for firetrucks or police cars. That strategy, however, could put strains on the city’s usual operations funding, as money is diverted to pay off the loans for police and fire equipment.

Romero said borrowing the money gives the city enough to compete for grants that require matching funds.

“It lets you start to make a dent in your needs more quickly,” he said.

City Councilman Mike Fagan cast the lone vote against the 2 percent property tax increase. He said he is impressed by the proposal to earmark it for public safety vehicles but that his constituents still are suffering from the economic downturn.

“I believe that we could have waited one more year,” Fagan said. “Where my colleagues may see light at the end of the tunnel, I just see a glimmer.”