Spokane Mayor Lisa Brown pivots to smaller sales tax proposal for November ballot

Two months after Spokane Mayor Lisa Brown backed away from a proposed property tax increase to fill the city’s major budget hole and invest in public safety, she unveiled a much smaller sales tax increase proposal for the November ballot.

Implicit in the proposal are much deeper spending cuts throughout city government than originally envisioned to eliminate an approximately $50 million deficit going into next year. Some of those cuts have already been announced, including retirement incentives for up to 25 senior staff in the police department. But deeper cuts and possibly widespread layoffs will be proposed in the coming months.

If approved by voters this November, the proposed sales tax increase of 0.1% is projected to generate about $7.7 million annually over its initial years – with 15% going to Spokane County, in accordance with state law. For every $1,000 spent on retail goods and services in the city, the tax would cost consumers an additional $1. The tax does not have a sunset date.

Brown proposes spending the roughly $6.5 million expected to be apportioned each year to the city itself on public safety investments, such as vehicle, equipment and fire stations, relaunching a neighborhood resource and traffic enforcement officer positions in the police department, and investing in community hubs that residents can turn to during extreme weather.

However, it is unclear how much of the revenue would be spent on improving public safety services in the first few years as opposed to helping to fill the existing budget hole. Brown said Monday that she’s “hopeful most of it will go to new investments,” but she and her administration’s chief financial officer, Matt Boston, noted that this will depend on budget discussions in the coming weeks.

“It’s too early to say how much would go to funding current commitments,” Boston said.

Joint budget discussions between the City Council and mayoral administration to consider spending cuts and the sales tax proposal are scheduled for July 18.

The proposal differs greatly from the property tax that Brown suggested in April, which would have raised more than $38 million a year, costing property owners around an extra $1 per $1,000 of assessed value. For a $400,000 home, for instance, property owners could roughly expect an additional $400 in taxes annually.

In an interview Monday, Brown said that the housing market was too tight and costs too high to place an additional burden on homeowners and renters. Revenue from a sales tax would not just come from Spokane residents, but also visitors and consumers from around the region.

“I think that’s fair, because public safety investments also benefit people outside the city,” she said.

Spokane City Councilman Michael Cathcart, who had vocally opposed the property tax proposal, remained cautious but was more amenable to a smaller sales tax.

“I’m very grateful that the proposal is a sales tax, rather than property,” Cathcart said Monday. “Whether you’re an owner or a renter, you just cannot afford increases in the property tax right now.”

He remains concerned, however, at what he believes are a lack of guardrails mandating how the tax revenue would be spent. State law would require 30% of the revenue generated to be spent on public safety, but future councils and mayoral administrations would not be constrained by law on how the remaining funds are spent, he noted.

Brown acknowledged the lack of spending constraints but said her administration would work with the current council to spend according to its priorities.

“I can’t guarantee against the actions of future administrations and councils, but I have a pretty good handle on the next two years,” she said. “We will work with all the council members to meet their priorities for their districts, and … this gives us a better path than if we did nothing.”

The proposed investments in public safety are significantly smaller now than they were in the property tax proposal, Brown acknowledged. But amid increased concerns over rising costs, Councilwoman Kitty Klitzke argued the newer proposal appeared the best option to invest in the priorities of constituents while being conscious of tax-wary voters.

“It wasn’t the path forward that would deliver everything I would want to deliver, but there are competing forces,” Klitzke said. “High interest rates, inflation – none of that is working in our favor.”

With far fewer dollars being generated, the city would still be committed to tough decisions about spending cuts. More than half of the $38.5 million in estimated revenue from the property tax proposal was expected to be spent just trying to partially cover the city’s deficit.

Since May, the Brown administration has asked most city departments to identify cuts of up to 10% per department that may need to be enacted if the city doesn’t significantly raise property taxes. The administration also worked with the police union to come to an agreement on early retirement incentives, and Brown said future conversations with other city unions will be needed to find other cost savings.

She added that her administration is reviewing the potential cuts identified by city departments but has not decided when to implement those recommendations, including when to send out layoff notices. Some cuts likely will be implemented sooner than others, but many more will have to be decided as part of talks for the upcoming budget, which for the first time will be a biennial one rather than for a single year.

“(The biennial budget) is a new exercise for the budgeting team, and with the 10% cut exercise … I want to give them time to feel confident in their analysis before making recommendations,” Brown said.

Not everyone is mollified by the smaller tax proposal. Spokane County Treasurer Michael Baumgartner, a congressional candidate who opposed Brown’s property tax proposal, argued that tax increases shouldn’t even be on the table.

“Mayor Brown still doesn’t get it,” he said. “People are really suffering from high inflation and want government to reform and tighten its belts, not dip into taxpayers’ pockets.”

He proposed the city work with the county to come up with a “joint approach” to address crime and public safety, but added that he was not voicing support for a regional tax like the failed 2023 proposal by the county to raise sales taxes by 0.2% in order to pay for, among other things, a new jail.

Brown said Baumgartner was once again evading the difficult decisions that needed to be made to pay for improved public safety services

“When it comes to Treasurer Baumgartner, I don’t think he’s proposing a solution,” Brown said. “Just saying ‘cuts’ isn’t doing the job, and I think he’s well aware of the community’s expressed wish to have more investments in public safety.”

The proposal also has reluctant liberal backers. Councilman Paul Dillon said he would support this tax measure due to the depth of the city’s financial difficulties, but broadly has concerns with sales taxes, which hit lower income consumers harder.

Dillon is in the early days of drafting a pay ratio tax proposal, which would implement higher taxes for companies that pay their CEOs a certain amount more than their lowest paid employee. Portland passed a surtax in this vein in 2017. He hopes to move this proposal forward in coming months.

Klitzke and Councilman Zack Zappone also voiced more general concern with taxation policy in the state .

“Unfortunately we live in a state with an upside -down tax code,” Zappone said. “We would love to look at revenue on those who have the most means, but this is a systemic problem that those with the most means aren’t being taxed fairly.”