State fears city of Spokane exemptions usurp taxing authority
In a case that could have far-reaching implications for local governments, the Washington Department of Revenue has entered the legal fray over a city of Spokane tax exemption for veterans and the elderly.
Allowing the city’s request to keep in place a property tax exemption affecting roughly 5,000 residents would make “Swiss cheese of the tax code,” a state attorney told appellate judges in Spokane last week.
The exemption at the center of the case was enacted by the Spokane City Council to keep a campaign promise made in 2014, when voters overwhelmingly approved a measure to fund street repairs under the assumption taxes would not increase.
City officials believed an existing tax exemption benefiting low-income senior citizens and military veterans would apply to the street levy. But after the vote, they learned the county believed that the exemption would not apply to the tax, and many seniors and veterans had unexpected tax increases as a result.
In response, the Spokane City Council created their own tax exemption so those seniors and veterans wouldn’t have to pay the extra money, but the county and state argued the city didn’t have the authority to craft the exemption.
“One of the unintended consequences of this is the effect to other taxing districts,” said Andrew Krawczyk, a Washington assistant attorney general, at a hearing in which Spokane County and the Department of Revenue argued against the exemption.
Krawczyk said the exemption would negatively affect tax collections for libraries, fire and school districts, while Laura McAloon, an attorney representing the city of Spokane, said the state should have no authority over the collection of a local tax.
“It is a local exemption to a local tax,” McAloon told the three-member panel. “There is no attempt on the part of the city to change the state’s senior tax exemption.”
Attorneys and judges said Friday they believed this is the first case of its kind in the state, and its outcome could affect the authority of local governments to change the tax rolls.
The attorney general’s office initially avoided becoming involved in the dispute, which went before Spokane Superior Court Judge Harold Clarke. But after Clarke ruled in favor of the city and upheld the exemption, the state is now intervening, saying the city of Spokane is seizing taxing authority from the state Legislature.
“The city’s ordinance violates constitutional uniformity requirements on tax, and no authority exists for the city to look past it,” Krawczyk said, referring to a section of the Washington Constitution requiring taxing rates to be equal on properties used for a similar purpose.
Krawczyk argued granting this exemption could open the door to cities dictating their own tax codes and flouting the tax uniformity requirement. Judge Robert E. Lawrence-Berry pressed McAloon on that point.
“How much power do you think you’ve got?” he said.
McAloon said cities already issue tax credits for properties considered historically significant, among other actions. She argued Spokane had the authority to issue tax reprieves consistent with the state constitution.
The appellate judges will rule on the dispute in the coming months. The second round of property tax payments in Spokane County are due at the end of October.