Spokane Valley officials warn Spokane letter seeking retroactive 20% wastewater utility tax could cost residents millions

City staff briefed the Spokane Valley City Council on May 27 about a renewed demand from the City of Spokane seeking retroactive collection of a 20% utility tax on wastewater service provided by the Spokane County Wastewater Reclamation Facility. Deputy City Manager Eric Lamb summarized the history and the potential fiscal impact on Spokane Valley residents.

Background and staff summary: Lamb said the City of Spokane imposed a 20% utility tax in February 2009. Spokane County'owned wastewater treatment facilities opened in February 2011 and serve customers across the county, including roughly 30,000 customers in Spokane Valley. Lamb said Spokane historically did not collect the tax from the county facility but has recently revived the collection effort.

Lamb said Spokane's most recent letter seeks the full amount of taxes dating back to June 30, 2020, and adds penalties and interest; the letter totals approximately $34,000,000 in tax plus $23,000,000 in penalties and interest, or about $57,000,000 in total. Lamb noted prior staff and council efforts to block collection, including a 2021 legislative attempt to prohibit the tax without approval by affected counties and cities, which did not move out of committee.

Council reaction: several council members described the demand as "taxation without representation" and expressed frustration. Council Member Yeager said she had "no trust" in the City of Spokane on the issue and urged Spokane to withdraw the claim. Council Member Padden and others recalled prior incidents and the county auditor's earlier review; council members urged continuing legislative and legal options and to coordinate with regional partners including Liberty Lake and Millwood.

Next steps: Lamb said staff is assessing legal and legislative options and continuing discussions with county commissioners and partner cities. He said the city will provide further updates after evaluating options, which include legislative fixes and potential legal responses. No formal council action was taken during the meeting.

Clarifying details: Lamb cited a 2021 estimate that collecting a prior-year tax from the county would amount to roughly $8,000,000 for the tax component (which at that time equated to about $150 per household); the new letter seeks a larger retroactive sum that, when penalties and interest are added, could raise the per-household impact substantially depending on calculation method and current customer counts.