With reservation, Spokane City Council tentatively approves sales tax to fund affordable housing

After last-minute changes that blindsided some of its own members, the Spokane City Council narrowly – and tentatively – approved a new sales tax on Monday.

The new one-tenth-of-1% sales tax would fund the development and operation of affordable housing projects.

But under an amendment drafted in the hours leading to Monday’s vote, it will only be imposed if the city can’t find an alternative and equal source of funding for affordable housing by April 1, 2021.

The change was necessary to secure the support of a majority of the council’s members, Council President Breean Beggs acknowledged. The amendment itself passed by a slim 4-3 majority, with council members Kate Burke, Karen Stratton and Michael Cathcart opposed. The amended proposal ultimately passed by a 6-1 margin; only Cathcart voted no.

The sales tax, authorized by the Legislature, will cost the average Spokane family about $25 a year, according to city estimates.

That’s expected to add up to $5.8 million in annual revenue for the city, allowing it to develop 100 new units of affordable housing every year.

“This will not cure all the ills of housing, but it will provide an opportunity for those who want and need a place to live,” said Councilwoman Betsy Wilkerson.

While council members agreed that more funding is much needed to address the city’s housing crisis, some struggled ahead of Monday’s vote with the idea of imposing a new tax in the midst of an economic downturn. Some specifically took issue with the notion of increasing the sales tax, calling it regressive and disproportionately burdensome for low-income people.

“I do believe it is possible that we can find the funding without having to impose a sales tax,” said Councilwoman Candace Mumm, who chairs the council’s finance committee and supported the amendment.

Mumm said she would work with the administration to explore alternative sources of revenue in the coming months, though she did not specify any. If they’re unsuccessful, the sales tax will automatically be collected beginning in July, and Mumm said council members could assure taxpayers “we looked under every couch cushion for the money for this.”

Cathcart, who opposed the new tax, called the amendment a “gimmick.”

“I don’t think we have $6 million a year laying under a rock, otherwise I’m pretty certain it would have been uncovered,” Cathcart said.

Stratton excoriated the council for allowing the last-minute substitution, saying “we have had days, weeks to discuss this, to come up with ideas.”

“If people lose their faith and trust in us, I don’t blame them, because this is something that should have come up earlier,” Stratton said.

The new sales tax was authorized by the Legislature under House Bill 1590 earlier this year, and it’s the choice of local governments whether or not to implement it. Spokane County declined to do so earlier this year.

The City Council’s hesitation was a surprise given that it explicitly lobbied state lawmakers to pass House Bill 1590 for two years.

At least 60% of the sales tax revenue must be spent by the city on the development of new affordable housing, while the remainder can be used to support existing housing with “mental and behavioral health treatment programs and services or housing-related services.”

The ordinance calls for the creation of a housing action subcommittee that will recommend how to spend the money. Its members will include those disproportionately impacted by the housing crisis, including people who have experienced homelessness, people of color, immigrants, seniors and domestic violence survivors.

New housing units must be targeted for specific groups, including low-income residents, veterans, and people with disabilities.

The list of local organizations that supported the measure includes Spokane Alliance, the Spokane Association of Realtors, and Community Frameworks.

Supporters testified that while the tax revenue won’t solve the city’s housing crisis, it would help. They specifically praised the support for maintenance and upkeep of affordable housing under the law, and lamented restrictions tied to obtaining state and federal funding for housing projects.

Others shared their personal struggles with housing in Spokane and experiences with homelessness.

Amber Johnson, director of mission support for Spokane Neighborhood Action Partners, noted the long waiting list of people for housing provided by the nonprofit.

“There are simply not enough homes to house our neighbors, regardless of their income,” Johnson said.

The council entertained the new sales tax as one component of the city’s ongoing effort to address increasing housing prices and a dwindling supply.

There was an 11% increase in the average rent of a two-bedroom apartment in Spokane between 2010 and 2020, according to a survey of the city’s housing needs published this year. At the current projected population growth, the survey found that the city would need to add 357 new units of housing each year until 2037 to meet demand.