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I-695 fallout may mean months in court, experts say
I-695 fallout may mean months in court, experts say
Tuesday, October 5, 1999
By NEIL MODIE SEATTLE POST-INTELLIGENCER REPORTER
If Washington voters pass Initiative 695 on Nov. 2, it will mean a financial
windfall not only for owners of high-end automobiles, but also for a lot of
tax-and-bond lawyers.
King County's attorneys, bond counsel and financial advisers yesterday briefed
the County Council on the ballot measure, saying it could have myriad unintended
consequences and raise endless legal and constitutional questions.
Those questions, they said, could leave tax, budget and other decisions up
in the air for months until the state Supreme Court sorts out the issues.
For one thing, the experts said, the initiative could freeze the county's
property tax levy at its existing level, rather than allowing revenues to increase
as property values appreciate.
If approved by voters, I-695 would replace the state's motor vehicle excise
tax with a $30 flat fee. It also would require voter approval of all future
tax and fee increases, from sewer rate increases to higher library fines.
The county's legal and fiscal advisers said the initiative could cause many
conflicts with existing tax and bond statutes.
And like other municipal governments, the County Council would have to pass
a 2000 budget without knowing the effect of I-695 because they won't know how
the courts will interpret it.
Jay Reich, a bond counsel for the county, said lawsuits by taxpayers, bond
holders and other parties challenging I-695's provisions or state and local
government acts could take months to resolve.
"Literally dozens" of questions would need to be sorted out by the Legislature,
noted Sally Tenney, chief of the county prosecutor's civil division.
However, Tim Eyman, sponsor of I-695, scoffed afterward at what he called
scare tactics.
"These were the same legal arguments that were made against (state spending-limit)
Initiative 601 -- that (governments) couldn't adjust -- and they did," he said.
The County Council commissioned Arthur Andersen & Co., the international accounting
firm, to analyze the initiative's fiscal effect.
The consultants said the loss in car-tax revenue to the county would be about
$114.5 million from a general fund of $2.77 billion.
Of that, Metro Transit would lose an estimated $97.8 million, the Health Department
$9.8 million and the criminal justice system $6.9 million.
But one of the unintended consequences, the consultants and others said, would
be property tax collections.
The property tax is levied annually as a dollar amount rather than a fixed
percentage of assessed value. I-695 prohibits raising an existing tax, so "it
would appear that the (overall) dollar amount of the property tax levy could
not be increased without voter approval," the consultants wrote.
Reich and others said the initiative also might not exempt new construction
from the tax-levy limitation, which would limit tax-revenue growth even more
severely.
"Planned property tax increases for 2000 and 2001 are $11 million and $21
million, respectively, excluding new construction," the report noted.
These are a few of the other problems cited:
Councilmanic general-obligation bonds -- a common way to finance capital construction
projects -- might become more expensive. Without the county being able to guarantee
sufficient tax revenue to pay them off without voter approval, interest charges
likely would be higher.
As a wholesaler of sewer-collection and disposal services to local governments,
King County probably could pass inflationary cost increases on to cities and
sewer districts without voter approval. But that might be politically impractical
since those entities couldn't raise their rates to cover the costs without voter
approval.
The King County Board of Health has the sole authority for raising health
program-related fees, such as those for flu shots or restaurant inspections.
But it isn't a legislative body, and so it has no authority to submit a fee
increase to the voters.
P-I reporter Neil Modie can be reached at 206-448-8321 or neilmodie@seattle-pi.com
