Clark will ask to join counties that get state sales tax rebate

By Erik Hidle, Columbian staff writer

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Clark County isn't rural, but it believes it belongs in a state program intended to assist distressed rural counties.

Under the program, which has been in place since 1999, each county defined as "rural" essentially receives 0.09 percentage point's worth of the 6.5 percent state sales tax collected in that county. It's not an additional tax levied by the counties, but a bonus distribution for counties to disburse to local jurisdictions. The intent is to add funds for local economic development.

In 2011, 32 of the state's 39 counties cashed in on the program. Clark County wants a piece of the action.

"The 0.09 percent is effectively a rebate," said Clark County Senior Policy Analyst Axel Swanson. "It comes from the sales tax we send up to the state. This program is the state sending back a percentage of the tax we send to them."

State law defines a rural county as a county smaller than 225 square miles, or with a population density of less than 100 people per square mile.

Clark County is requesting a change to the law, adding the line: "… or any county that borders a state without a sales tax."

It's a simple change for a scrivener, but a major change for Clark County coffers. Swanson said estimates show that between $4.2 million and $7 million could be directed to the county if it joins in the program.

The county reasons that it should be included because the cards are stacked against it in the sales tax game. Just a quick drive to the south is Oregon, beckoning Clark County residents with the allure of no sales tax on their purchases.

How big of a problem is that? Adriana Prata, a senior management analyst for the county budget office, estimates the county is losing more than 40 percent in sales taxes because of purchases across state lines.

"I am estimating that the annual amount of leakage for 2012 is $21.9 million," Prata wrote in an email. "Total expected sales tax revenue for 2012 is $28.4 million, so without leakage, we would receive $50.3 million, between all the different sales tax revenues. This does not include sales tax revenue for the cities or C-Tran, or the state's share."

Prata said the estimate is based on comparing per capita sales tax revenues with other urban counties in the state where the "leakage" doesn't take place.

So, while the county may not be rural in the traditional sense, county commissioners and staff believe it is distressed because of the tax loss.

"It has less to do with 'rural' and more to do with intent of the statute," Swanson said. "It has more to do with counties that need it, and we stack up with every other county in terms of need."

To change the law will require a bill sponsored in the Washington Legislature. At a Friday morning meeting between Clark County commissioners and local lawmakers, the county petitioned for the change.

Eight representatives and senators listened to the proposal, but didn't indicate if they would take up the cause or not.

Perhaps most telling was a question posed by state Rep. Jim Moeller, D-Vancouver, when he asked, "what's the cost?"

The additional funds for the county would come directly from the state budget. That is the same state budget that may be facing an estimated billion-dollar shortfall in the upcoming budget cycle.

The bill would also need support from other legislative members, and the new wording affects only Clark County. Every other county bordering Oregon collected from the program in 2011, and Idaho has a state sales tax, which means Spokane County won't benefit from the wordsmithing.

"I can already hear the request coming from Spokane," Moeller said.

Commissioner Tom Mielke countered that notion, saying, "We're hit more by this than Spokane."

Now the county will play the waiting game as the legislature prepares to convene next year.

"Once session starts, the hope is the bill gets sponsored and dropped right away and they start working on it," Swanson said. "But no, we haven't determined who is going to sponsor it yet."

Erik Hidle: 360-735-4547; http://twitter.com/col_clarkgov; erik.hidle@columbian.com.