Real estate sales provide boon for cities

Thanks to a vibrant housing market, cities in Spokane County are raking in record amounts of taxes on real estate sales.

Although the money pales compared with other sources of local government revenue, the extra income is helping cities and the county pave roads, pay off debt and attract grant funding for special projects.

“For the last three years it’s just gone sky-high,” said Spokane County Treasurer Linda Wolverton. “We’ve never seen anything like this before.”

The reason for the real estate excise tax windfall is simple: Homes have sold at a record pace the last three years and property values have soared.

Most of the Spokane County cities that collect the tax have seen annual excise tax collections more than double in the past five years. State law requires that the money be spent on one-time expenses like road construction.

Cities and counties can collect 0.25 or 0.5 percent in addition to the 1.28 percent excise tax the state collects on real estate sales statewide. In Spokane County, only Millwood, Fairfield, Latah and Waverly have opted not to collect the extra tax. Medical Lake, Rockford and Spangle charge 0.25 percent. The rest tax at 0.5 percent.

Spokane County, which collects from areas outside city limits, has received impressive excise increases even though it lost the ability to collect from Spokane Valley and Liberty Lake when they became cities.

The county has spent some of the tax on roads and paying off debt, but most of the money has been earmarked to construct two swimming pools. One, on the North Side, opened last year. The other, near 61st Avenue and Freya Street, is due to open in 2007.

While some places have used the money as frosting, other areas need it more as a bandage.

“It helps kind of replace the money we lost in previous years,” said Roger Flint, Spokane’s public works and utilities director.

When the city hit the financial doldrums a couple years ago, officials shifted more of its excise tax revenue from road improvement construction like widening to maintenance projects like repaving, Flint said.

But not all of it is used on road maintenance. This year, for instance, some of it will be spent to widen Crestline Street north of Francis Avenue.

Rob Higgins, executive vice president of the Spokane Association of Realtors, cautions cities not to get too dependent. While the housing market likely will stay strong, it can’t keep its current pace, he said.

That hasn’t been reflected yet in 2006. January’s excise tax collections were up 51 percent from January 2005, according to the county treasurer’s office.