|
Printer Friendly - Subscribe to Page
Plaintiffs' Motion for Preliminary Injunction
Not an official copy.
IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON
FOR THURSTON COUNTY
CITY OF BURIEN, a Washington municipal corporation, CITY OF CARNATION, a Washington
municipal corporation, CITY OF PASCO, a Washington municipal corporation, CITY
OF SEATTLE, a Washington municipal corporation, WILLIAM P. MALLOW, and SOUTHWEST
YOUTH AND FAMILY SERVICES, INC., Plaintiffs, vs. FREDERICK G. KIGA, Director,
Washington State Department of Revenue and STATE OF WASHINGTON, Defendants.
No. 00 2 02068 3
PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
[CLERK’S ACTION REQUIRED]
- Relief requested
Plaintiffs respectfully request that this Court issue a preliminary injunction
barring defendants from implementing Initiative Measure 722 ("I-722")
during the pendency of this litigation. The integrity of the 2001 property
tax system state-wide is in jeopardy. The hasty overlay of I-722’s ill-fitting
provisions onto the complex, intricate, and inter-related provisions of Washington’s
property tax statutes, especially at this late stage of the 2001 property
tax cycle, will create chaos and unequal taxation that can never be rectified
if I-722 is later invalidated. Nor can refunds made now ever be satisfactorily
recaptured should they later be ruled illegal.
Undisputed facts demonstrate that the situation is ripe for chaos and unequal
application of the tax laws. The Washington State Department of Revenue ("DOR’),
charged by law with supervising the state’s property tax system and giving
guidance to local taxing officials, is so unsure how I-722 should be implemented
that in late August of 2000 it issued to the 39 county assessors a "brief"
17-page interpretive analysis containing many qualifiers such as "possible,"
"possibility," "possible interpretation," and "apparently"
and phrases such as "difficult to interpret" and "language
of the initiative . . . is unclear" and "seems to indicate."
Declaration of Scott Noble ("Decl. Noble"), ¶5, Ex. A. Nor has DOR
yet been able to say how it will equitably spread among the 39 counties the
burden of the state’s tax levy for the support of the common schools, an equalization
process probably fatally complicated by I-722’s non-market-based assessment
scheme. This uncertainty coming from the "experts" makes it evident
that I-722 simply cannot be sensibly integrated into the tax system this cycle.
For the reasons set forth in detail below, plaintiffs are likely to prevail
on their claim that I-722 is facially unconstitutional in its entirety under
several provisions of the Washington State Constitution, including: Article
VII, section 1 (requirement that taxes be uniform); article XI, section 12
(prohibiting state enactment of local taxes); article II, section 19 (requirement
that an act be limited to a single subject that is expressed in its title);
article VIII, section 7 (prohibition against gifts of public funds), and article
II, section 37 (prohibition against amendments without proper reference).
These constitutional provisions preserve and guarantee, for all of the citizens
of the state, the fundamental fairness and integrity of the initiative process,
the fundamental fairness and equality of our system of taxation, the basic
principle that public tax revenues will be used for public purposes, and the
assurance that there will be full disclosure of the effects of enacted laws.
Under our constitutional form of government, all laws, even those approved
by a large majority of voters, must abide by these core requirements.
Plaintiffs will be irreparably harmed by the implementation of this unconstitutional
initiative and therefore request that the Court exercise its authority under
RCW 7.40.020 and CR 65 to issue an order preliminarily enjoining defendants
from implementing it during the pendency of this lawsuit. A proposed form
of such order is submitted with this motion.
- statement of the case
- Initiative Measure 722 will take effect less than three weeks from now
on December 7, 2000.
On November 7, 2000, a majority of the voters of Washington State approved
I-722, although an estimated 60 percent of Seattle voters rejected the measure.
Declaration of Dan McGrady ("Decl. McGrady"), ¶4. (All declarations
referred to throughout this motion are filed in the companion case, originally
filed as King County Superior Court Cause No. 00-2-29712-2SEA, whose venue
has been transferred to Thurston County Superior Court.) A copy of I-722
is attached hereto as Exhibit A. I-722 will take effect on December 7, 2000.
Wash. Const. art. II, section 1.
- The Initiative contains numerous provisions relating to several different
subjects.
I-722 contains a hodgepodge of provisions that relate to a variety of different
subjects. It purports to declare "null and void and of no effect"
all "tax" increases (defined to include sales and use taxes, property
taxes, impact fees, permit and license fees, water, sewer and other utility
rates, and any "monetary charge") that were adopted between July
2, 1999, and December 31, 1999, without an approving vote of the people,
and to require that all "taxes" collected as a result of such
increases be refunded. I-722, Section 1. It exempts motor vehicles from
property taxation. I-722, Section 2. It purports to exempt "a person"
from paying property taxes on a portion of the value of that person’s property
(i.e., any value that is greater than the 1999 value plus the lesser of
2% or inflation annually), thereby shifting the tax burden from rapidly
appreciating to less rapidly appreciating properties. I-722, Section 3.
It purports to exempt from property taxes "increases in property tax
attributable to maintenance improvements made after January 1, 1999."
I-722, Section 4. It lowers the "limit factor" used to calculate
the allowable annual growth of a taxing district’s total regular property
tax levy from 106% to 102%. I-722, Sections 5 and 6. Finally, it repeals
the law allowing taxing districts to "bank" unused levy capacity
for future use. I-722, Section 7.
- The Initiative establishes a new system of property taxation.
Before passage of I-722, the Assessor established the assessed value of
all property as 100% of its true and fair value. RCW 84.40.030; RCW 84.40.040.
The Assessor calculated the amount of a taxing district’s maximum annual
regular property tax levy in accordance with RCW 84.55.005 and RCW 84.55.010
by applying the applicable levy growth limit factor (either 102% or some
other figure up to 106% depending on the circumstances) to the amount of
the taxing district’s highest lawful levy in the previous three years. The
Assessor then divided the district’s total levy by the aggregate of all
taxable assessed value in the district to determine the rate per thousand
dollars of assessed value to apply to all taxable property in order to collect
a taxing district’s levy. RCW 84.52.080. That rate was then applied to the
assessed value of each tax parcel to determine the tax bill.
Implementing I-722 will fundamentally change the way property is assessed
and tax rates are determined. I-722 requires the Assessor to exclude a portion
of the increases in a property’s value (that exceeding 2% annually) from
the tax rolls. This not only redistributes the tax burden among individual
parcels of property (favoring those that appreciate more rapidly) but also
reduces the total taxable assessed value in each taxing district. Because
of the reduced total assessed value, some taxing districts will suddenly
find their current taxes are at or above the tax rate limit established
by law (e.g., $0.50 per $1000 assessed value for fire districts under RCW
52.16.130). Des Moines, for example, has levied at its maximum $1.60 per
thousand dollars of assessed value. Declaration of Scott R. McCarty ("Decl.
McCarty"), ¶13. Additionally, the limit on the annual growth in dollar
amount of each taxing district’s overall regular tax levy will be reduced
from 106% to 102% of the highest of the previous three years’ levies. I-722,
Sec. 5 and 6. The King County Assessor interprets I-722 to also require
an additional reduction to the levy that is not apparent from I-722’s title
or text. Relying on Section 1 of I-722, the Assessor will further reduce
a taxing district’s levy by reducing the base to which the new levy growth
limit applies. He will disregard the taxing district’s 2000 levy and apply
the limit factor to the (lower) 1999 levy. Decl. Noble, ¶8, Ex.C. The Assessor
will then determine the rate per thousand dollars of reduced assessed value
necessary to collect the district’s limited levy. Decl. Noble, ¶10, Exs.
B, C.
- Once the Assessor implements the new system established by Initiative
722, there is no guarantee the old system can be recreated.
Because implementing I-722 requires changes in the way assessors value
property for the tax rolls, the Assessor must not only decide the procedures
he will follow to comply with the new requirements, but he also must implement
new technology within the next few weeks that will allow him to apply and
retain the additional data that will be generated by the new system of property
taxation without losing existing information. Decl. Noble, ¶¶10, 11. Under
I-722’s new system, the Assessor must each year compare the true and fair
market value for each property against 102% of the property’s assessed value
for the previous year in order to tell whether any portion of value is to
be excluded from assessed value. Decl. Noble, ¶¶8, 10, 11, Ex. C. Therefore,
unlike the present system which only requires valuation each year at true
and fair value, I-722 requires the Assessor to determine two values for
each property each year. The Assessor’s present technology systems are not
designed to perform that function. Decl. Noble, ¶11. Therefore, not later
than December 7, 2000, the 2000 true and fair values must be backed up to
storage devices and then eliminated from the normal subsequent processing
in order to prepare the tax rolls. Decl. Noble, ¶¶16, 17. If those true
and fair values are ever to be used again (if I-722’s value reduction provisions
are invalidated, for example), the data would have to be restored from backup
files to a useful place in the computer system. Decl. Noble, ¶18. While
the Assessor may believe that the 2000 true and fair assessed values could
be retrieved, he has not provided any guarantee that the data can be retrieved
intact if I-722 is later invalidated.
- The Assessor cannot implement Initiative 722 in time to complete the 2001
assessment and billing cycle by the statutory deadline, thereby causing
substantial harm to the municipalities and resulting in inter-county inequities.
Before the 2001 tax rolls can be certified, the Assessor not only must
redetermine the assessed value of each of the more than 580,000 properties
in the county, and calculate the levy limits for each of the approximately
100 taxing districts under his authority (RCW 84.55.100), but he also must
calculate the rates necessary to collect each district’s levy (RCW 84.52.080),
and then, for each property, apply the applicable rates against the assessed
value to determine the amount of tax owed (RCW 84.52.080).
The Assessor is required by law to certify the 2001 tax rolls to the King
County Treasurer by January 15, 2001. RCW 84.52.080(4). Therefore, he has
only a very short time in which to implement I-722. Immediately after I-722
passed, the King County Assessor moved to begin reducing the assessed values
of each of the more than 580,000 parcels of real property in the County
from its true and fair value to its 1999 value plus the lesser of 2% or
inflation. Decl. Noble, ¶¶10, 12, Ex. A. However, because of the staffing
and technological challenges inherent in implementing the new tax system,
and even assuming no difficulties or unforeseen delays with the recalculation
process, the tax roll being prepared under I-722 will not be completed until
approximately February 28, 2001, a date approximately two weeks later than
the normal February 15 bill date. Decl. Noble, ¶12. Although first half
payments are not due until April 30, many taxpayers pay the full amount
of their taxes immediately after receiving notice of what that amount is.
Declaration of Garry Holmes ("Decl. Holmes"), ¶6. A delay in billing
will necessarily result in a delay in payment.
Other counties around the state may have very different technical capabilities
than does King County. The vast majority of assessors do not have enough
personnel on staff, nor are their present computer systems programmed to
perform the calculations and data storage I-722 requires. Declaration of
Keith Willnauer, ¶5.
The King County Treasurer estimates that the delay in the 2001 property
tax cycle caused by implementation of I-722’s new system of property taxation
could cost the taxing districts in King County as much as $1 million or
more in lost interest opportunity. Decl. Holmes, ¶¶8, 9, Ex. B. If by December
7, 2000, however, the King County Assessor is judicially ordered to return
to the pre-I-722 system of property taxation, the 2001 tax statements can
probably be issued very close to the middle of February, Decl. Noble, ¶19,
and while the municipalities would still lose some interest, but that amount
would only be approximately $40,000. Decl. Holmes, ¶¶8, 9, Ex. B.
- The new tax system results in property owners such as Mr. Mallow paying
an unequal share of tax.
Under current law (i.e., before the effective date of I-722), the Assessor
is required to assess and the Treasurer to collect taxes on each property
in King County, including Mr. Mallow’s property, at 100% of its true and
fair value. RCW 84.40.030, 84.40.040. Under the system in place before implementation
of I-722, therefore, the tax is spread equally among all properties in the
county according to the assessed value of the property. Decl. Noble, ¶2.
Under the regime established by I-722, however, the Assessor will recalculate
the 2000 assessed value (for 2001 taxes) of all residential property by
excluding the portion of the value that exceeds 102% of its 1999 value.
Decl. Noble, ¶¶10, 12.
Mr. Mallow’s property is located in Seattle’s South Beacon Hill neighborhood,
an area in which property values have historically grown more slowly than
in some other areas, for example, Seattle’s Queen Anne neighborhood. Declaration
of JoEllen Kuwamoto ("Decl. Kuwamoto"), ¶5, Ex. A.
From 1999 to 2000, the assessed value of Mr. Mallow’s property increased
3.2%. Declaration of William P. Mallow ("Decl. Mallow"), ¶3. That
was far more slowly than the Seattle city-wide average for residential property,
which grew 13%. Decl. Kuwamoto, ¶3. Under I-722, therefore, while the Assessor
will exclude an average of approximately 11% of the value of Seattle properties
when calculating the aggregate taxable value in the city, he will exclude
only 1.2% of the value of Mr. Mallow’s property from tax. That means that
Mr. Mallow’s property will be taxed on a higher percentage of its true and
fair value than will the average residential property in Seattle, and Mr.
Mallow will shoulder an unfair and unequal tax burden escaped by others
who own more favored properties (i.e., properties that have appreciated
more rapidly).
- The implementation of Initiative 722 will prohibit the municipalities
from collecting the correct amount of taxes they are authorized to levy,
with no guarantee that the taxes could be recouped if the initiative is
later struck down.
In November 1999, Seattle levied regular property taxes for collection
in 2000 based on the total assessed valuation of property located in the
City of Seattle as of January 1, 1999, reported to the City by the King
County Assessor. Declaration of Dwight D. Dively, ("Decl. Dively"),
¶7. The 1999 levy was authorized by the voters, who by more than a majority
vote in November 1999 approved "lifting the lid" in RCW 84.55.010
to allow the levy of property taxes at a rate up to $3.52 per thousand dollars
of assessed value. With the lid lifted, Seattle could collect an extra $72
million over eight years (up to $16.5 million in 2000), for Seattle Center
improvements including to the Opera House and the Flag Pavilion, and to
expand nine Parks Department community recreation centers. Decl. Dively,
¶¶7, 8, Exs. B and C.
In November of 2000, before I-722 will take effect, Seattle levied regular
property taxes for collection in 2001 in an amount exceeding 102% of the
amount of both its 1999 and 2000 levies. Decl. Dively, ¶9. As they did in
1999, the voters had authorized the 2000 levy by more than a majority vote
in November 2000 and approved lifting the lid in RCW 84.55.010 to allow
the levy of property taxes at a rate up to $3.55 per thousand dollars of
assessed value. With the lid lifted, Seattle could collect an extra $198.2
million over eight years (up to $23 million in 2001), for the acquisition,
development, and maintenance of parks (including the Zoo), greenspaces,
playfields, and trails. Decl. Dively, ¶¶9, 10.
Burien, Carnation, Des Moines, and the Fire District also before the effective
date of I-722 each set and certified to the County for levy an amount of
regular property tax in excess of 102% of both their 1999 and 2000 levies.
Declaration of Gary P. Long ("Decl. Long"), ¶2, Declaration of
Eugene Lux ("Decl. Lux"), Decl. McCarty, ¶¶11,12, Declaration
of Harwood T. "Woody" Edvalson ("Decl. Edvalson"), ¶2.
Nonetheless, the Assessor, apparently acting pursuant to guidance from DOR,
will reduce Seattle’s levy for collection in 2001 by approximately $11.5
million, Decl. Dively, ¶¶ 13, 14, limit Burien’s levy to an amount $325,000
less than requested, limit Carnation’s levy to an amount $10,000 less than
requested, Decl. Long, ¶3, Decl. Edvalson, ¶¶3 and 4, limit Des Moines’
levy to an amount $192,842 less than requested, Decl. McCarty, ¶11, and
limit the Fire District’s levy to an amount less than requested. Decl. Lux.
The reduction in the levy means that the municipalities will lose substantial
public monies that are budgeted for public services, including public safety,
parks and recreation, bonded debt service, and capital infrastructure. Social
services agencies, such as Plaintiff Southwest Youth and Family Services
("Family Services"), and other similarly situated organizations
reliant on contracts with municipalities could be especially hard hit as
they may be forced to lay off staff and significantly reduce the services
they provide to the community. Family Services, for example, serves 1,500-1,600
families each year, providing crisis counseling, mental health counseling,
case management services, outreach programs, and educational programs to
at-risk families, youth and recent immigrants. Declaration of Steven Daschle,
("Decl. Daschle"), ¶¶ 5, 6, and 12. Loss of city funding for its
contracts would force Family Services to lay off eight staff members, and
consequently, about 350 families that it would otherwise serve will not
receive its help. Decl. Daschle, ¶10. The ripple effect of this loss of
services will be felt throughout the community. The early intervention Family
Services provides helps to prevent problems that harm others in the community,
and reduces the need for more serious intervention later on, through mental
health institutions and the criminal justice system. Decl. Daschle, ¶12.
If the municipalities were allowed to collect the full amounts of taxes
they have levied or certified, however, the burden on the individual
property owner would be comparatively minimal. For example, I-722 reduces
the 2001 taxes on an average $263,995 Seattle home by approximately $39
from what the tax would be if Seattle were allowed to collect the full amount
it levied for collection in 2001 without reduction by the Assessor. Decl.
Kuwamoto, ¶ 4.
- The implementation of Initiative 722 will deprive the municipalities of
millions of dollars in taxes and fees collected pursuant to the authority
vested in the municipalities by the Constitution and the Legislature.
The King County Treasurer administers the collection and refund of property
taxes for the approximately 100 taxing districts located in King County, such
as the plaintiff municipalities. RCW 84.56.020, 84.69.020. In addition, the
King County Treasurer serves as the financial agent for the Fire District
and holds all its funds. RCW 52.16.010.
The Treasurer has already received numerous inquiries from the public requesting
refunds of property taxes in the wake of the passage of Initiative 722. Decl.
Holmes, ¶4. The Washington State Department of Revenue has advised the Treasurer
that I-722 requires refunds of increases over 1999 property taxes. Decl. Noble,
Ex. A, pp. 3-4.
The 2000 property taxes lawfully levied in 1999 for the plaintiff municipalities
raised more revenue than collected in 1999. Decl. Dively, ¶11; Decl. McCarty,
¶12; Decl. Edvalson, ¶2; Decl. Lux, Decl. Long, ¶5. Seattle levied over $8.4
million more in property taxes for 2000 than it did for 1999. Decl. Dively,
¶11. Carnation certified for levy approximately $10,000 more in property taxes
for 2000 than it did for 1999. Decl. Edvalson, ¶4. Des Moines certified for
levy over $192,842 more in property taxes for 2000 than it did for 1999. Decl.
McCarty, ¶¶11. The Fire District certified for levy 106% more property taxes
in 2000 than it did for 1999. Decl. Lux. Burien certified for levy $397,000
more in property taxes for 2000 than it did for 1999. Decl. Long, ¶5. If the
Treasurer implements I-722, the municipalities will lose substantial amounts
of public funds they are lawfully authorized to collect and spend for public
purposes, losses they may never be able to recover if I-722 is later invalidated.
In addition to property taxes, the municipalities adopted other taxes, fees
and charges between July 2, 1999, and December 31, 1999. Decl. Long, ¶ 6,
Decl. Dively, ¶ 3, Ex. A, Decl. McCarty, ¶10, Decl. Edvalson, ¶7. Many, if
not most, of the increases were fees for services provided by the municipality.
For example, Seattle operates several large public utilities which provide
electrical and water services to its citizens. In accordance with the mandate
that charges for services must cover the costs of such services, Seattle Public
Utilities increased charges for water, drainage and wastewater, and solid
waste services and Seattle City Light increased electrical charges. Decl.
Dively, ¶5. In addition, Seattle increased charges for use of parks (including
the Aquarium) and other public facilities. Decl. Dively, ¶3, Ex. A. The estimated
total taxes, fees and charges Seattle adopted during the last six months of
1999 and which I-722 would purport to require be refunded, total over $40
million to date, excluding $8.4 million in property taxes. Decl. Dively, ¶3,
Ex. A.
Des Moines increased surface water management fees, marina moorage charges,
business license fees, construction permit fees, utility occupation taxes,
and park and recreation user fees during the last six months of 1999. Decl.
McCarty, ¶10. Carnation increased water rates that had not been increased
since 1995 in order that its utility regain solvency. Decl. Edvalson, ¶7.
If the municipalities must refund the charges to those who paid them, then
the costs of providing services to a few will be subsidized by all persons
in the community.
Providing refunds of fees and charges imposed by the municipalities for use
of their services is especially unfair because often the persons taking advantage
of those services are not residents of the municipalities that provide them.
For example, Seattle operates an aquarium on Seattle’s waterfront. Persons
from all over the world visit this facility. Aside from the impossibility
of refunding the increased charges to unknown persons, Decl. Dively, ¶4, a
refund results in Seattle taxpayers subsidizing non-residents’ recreational
activities. Another example of this is the Des Moines marina. Des Moines operates
an 800 slip marina on Puget Sound, and charges fees for moorage services.
Decl. McCarty, ¶5. Fewer than 25% of the tenants leasing moorage at the Des
Moines Marina are residents of Des Moines. Decl. McCarty, ¶6. If Des Moines
is required to refund the increased moorage fees, Des Moines residents will
end up subsidizing boat and yacht owners, 75% of whom reside outside Des Moines.
Decl. McCarty, ¶6.
- Issues
Should the Court enter a preliminary injunction to prevent the preparation
of arbitrary, unequal and untimely tax rolls that are likely to contain irremediable
errors, and to prohibit the issuance of unconstitutional and irretrievable
"tax" refunds, given the substantial likelihood that plaintiffs
will prevail on the merits of their claim that all or most of I-722 is unconstitutional?
Alternatively, should the King County Assessor be enjoined from implementing
I-722 in a manner that, contrary to the provisions of state law, fails to
give effect to the voters’ approval of tax levy increases?
- ARGUMENT AND authority
- Introduction.
The implementation of I-722 will result in irreparable harm to the plaintiffs
and others. It will cause the King County Assessor (and all assessors statewide
who attempt to comply) to assess and collect property taxes in a manner
that is fundamentally unfair to the taxpayers and whose inequities can not
realistically be cured later. It also will result in a dramatic decrease
in the revenues available for public services. The unfair (and unconstitutional)
tax-shifting feature of the initiative was not properly disclosed to the
voters who approved it, and it was packaged together with unrelated provisions
in a single measure that the voters had to approve or disapprove in its
entirety. Once the mechanics of the improper tax assessment and collection
methodology specified by the initiative are put into place, it will be difficult
if not impossible to undo its effects. Plaintiffs are likely to prevail
on their claim that I-722 is unconstitutional. The implementation of the
initiative should, therefore, be enjoined.
- The Criteria for Issuing a Preliminary Injunction Are Met.
The granting of an injunction is within the discretionary power of the
court where, as here, the party seeking such relief can show: 1) a clear
legal or equitable right; (2) a well-grounded fear of immediate invasion
of that right; and (3) that the acts complained of are either resulting
in or will result in actual and substantial injury. Tyler Pipe Indus.,
Inc. v. Washington, Dep’t of Revenue, 96 Wn.2d 785, 792, 638 P.2d 1213
(1982) (quoting Port of Seattle v. International Longshoremen's
& Warehousemen's Union, 52 Wn.2d 317, 319, 324 P.2d 1099 (1958));
see also RCW 7.40.020 (grounds for issuance of preliminary injunction).
To answer the question of whether a party has a clear right, the court must
analyze the moving party's likelihood of prevailing on the merits. Washington
Fed’n of State Employees, Council 28, AFL-CIO v. State, 99 Wn.2d 878,
888, 665 P.2d 1337 (1983). Further, "since injunctions are addressed
to the equitable powers of the court, the listed criteria must be examined
in light of equity including balancing the relative interests of the parties
and, if appropriate, the interests of the public." Tyler Pipe,
96 Wn.2d at 792. Finally, in considering a request for a preliminary injunction
that involves purely legal issues the court must reach the merits of the
purely legal issues. Rabon v. City of Seattle, 135 Wn.2d 278, 286,
957 P.2d 621 (1998).
Plaintiffs meet all of the specific criteria for granting a preliminary
injunction in this case, and both the equities and the interests of the
public tilt sharply in favor of granting such relief.
- The Constitution and Existing Law Give Plaintiffs Clear and Important
Legal Rights with Regard to Subjects Addressed by I-722.
Equality of taxation for all persons according to the value of their
property is a fundamental touchstone of our Constitution. Plaintiff Mr.
Mallow has a clear legal and equitable right to have his property assessed
and taxed in accordance with the constitutional requirement that all taxes
be uniform. As discussed below, I-722 will shift a disproportionate share
of property tax burden onto property owners such as Mr. Mallow, whose
property appreciates less rapidly than do others in the same taxing district,
and plaintiffs are likely to prevail on their claim that I-722 is unconstitutional.
Plaintiffs Burien, Carnation, Des Moines, Newcastle, Seattle, and Fire
District No. 20, as corporate municipal entities, have the clear legal
authority to continue to collect, to budget and to spend for public purposes
the revenues from the tax and fee increases that were validly enacted
during the period July 2 through December 31, 1999. (The legal authority
to enact tax and fee increases and to collect revenue therefrom for public
purposes derives from the provisions of state law governing such municipalities,
from their police powers under article XI, section 11 of the Washington
Constitution, and, in the case of Seattle, from its home rule powers under
article XI, section 10.) Again, as discussed below, plaintiffs are likely
to prevail on the merits of their claim that I-722, which purports to
nullify such increases and to require that they be refunded, is invalid.
The municipal plaintiffs also have a clear legal right, on behalf of
themselves and their citizens, to have their property tax levies calculated
by the Assessor in accordance with the Constitution and the valid provisions
of state law, so that such citizens are not subject to unfair and unequal
tax assessments or deprived of necessary government services and amenities.
As discussed below, I-722’s attempt to alter the property tax system makes
a hash of tax law because it effectively amends and renders erroneous
portions of the intricate statutes that heretofore resulted in orderly
and equitable tax levies.
Finally, the municipalities, in providing utility services on behalf
of their citizens under validly adopted utility rates, enter into a contractual
relationship with their utility ratepayers, with reciprocal obligations.
Hearde v. City of Seattle, 26 Wn.App. 219, 611 P.2d 1375, rev.
denied, 94 Wn.2d 1021, 1980 WL 153249 (Div. 1 1980). For example,
Seattle, Des Moines and Carnation increased their utility rates during
the sEcond half of 1999 in accordance with the provisions of state law.
The municipalities, having provided the utility services at those established
rates, became contractually entitled to the payment of such rates. Implementation
of Section 1 of I-722 would deprive them of this contractual "quid
pro quo" as to utility services already provided and for which payment
has been made or has become due. Seattle, Carnation and Des Moines have
a clear legal contractual right to these rate payments, which I-722 threatens
to invade by purporting to require the refund of a portion of such payments.
- Well Grounded Fear of Invasion: It Is Plainly Evident that I-722’s Implementation
Will Burden Mr. Mallow and Cost Local Governments Money They Planned to
Devote to Public Purposes
Plaintiffs have a well grounded fear of invasion of their legal rights
in the event that Initiative 722 is implemented. The King County Assessor
has stated that, unless enjoined, he intends fully to implement the initiative
by decreasing the amount of taxes the municipalities may levy and instituting
a regime of unequal taxation of individual properties. Decl. Noble, ¶
8, Ex. C. Specifically, the Assessor, between now and December 7, will
recalculate the assessed value of all property in the County in an amount
equal to its true and fair value or 102% of its 1999 assessed value, whichever
is less. Decl. Noble, ¶¶10, 16. Therefore, the property of Mr. Mallow
(and other taxpayers who, like him, have enjoyed little or no appreciation
in property values) will bear an unfair share of taxes. In addition, the
Assessor will not allow Seattle to collect the full amount of the taxes
it levied, even though those taxes were levied before the effective date
of I-722 and were approved by Seattle voters. Further, the Assessor will
limit the levies for Burien, Carnation, Des Moines, Newcastle, Seattle
and Fire District No. 20 to less than the amount of tax each requested.
Finally, the King County Treasurer has been advised by DOR that he may
institute a process to refund revenues he determines to have been collected
as a result of "tax increases" (as broadly defined by the initiative)
adopted by the taxing districts during the period July 2 through December
31, 1999. Decl. Holmes, ¶3, Ex. A.
- Irreparable Harm: If I-722 Is Implemented Now But Later Invalidated,
the Tax System Will be Uncorrectable and Revenues Irretrievably Lost.
Plaintiffs will suffer irreparable harm if the implementation of I-722
is not enjoined during the pendency of this case because plaintiffs’ injuries
will not be compensable by money damages. Kucera v. State, 140
Wn.2d 200, 995 P.2d 63 (2000).
First, the Assessor cannot guarantee that he will be able to determine
the true and fair assessed values of property for the year 2000 once he
recalculates the reduced limited assessed values for that year pursuant
to I-722 and overwrites the previous data. If the Assessor were unable
to recreate the 2000 data showing true and fair value of the property
in each taxing district, a necessary task if I-722 is unconstitutional,
he may have to individually reinspect and revalue each property in the
county, a task that will be impossible to complete in time for 2001 taxes.
At a minimum, it is uncertain how long such a process would take. The
process of reestablishing true and fair 2000 values would also delay the
2002 property tax cycle because after I-722 is invalidated, the levy and
calculation in 2001 of taxes to be collected in 2002 will depend on rEconstructing
the 2000 valuations that should have been used for taxes to be collected
in 2001. Untangling the over- and under-payments made by various property
owners in 2001 would be even more difficult than just reestablishing their
proper assessed values; in many counties it could be an insurmountable
challenge. As a practical matter, the Mr. Mallows statewide may never
get credit for what they overpay in 2001. The converse is not true: In
the event that the status quo is maintained now and I-722 is later implemented,
any resulting overpayments could be credited or refunded to the appropriate
taxpayer because such implementation could be carried out in an orderly
fashion.
There is no mechanism to completely redo a property tax cycle once the
rolls have been certified to the treasurer and the bills sent out, so
it is uncertain whether the municipalities could ever collect the
taxes that I-722 would (if implemented) improperly preclude them from
collecting, especially in light of the Washington Constitution’s prohibition
against imposing aggregate property taxes in any year in an amount greater
than 1% of a property’s true and fair value. In the event some property
taxes were to go uncollected in 2001 because the Assessor implemented
I-722, there will be instances in which such taxes could not be levied
in a later year under this constitutional limitation. For example, Des
Moines is presently at or very near its statutory dollar rate limit for
regular property taxes, Decl. McCarty ¶16, levies by other overlapping
taxing districts could make it impossible for Des Moines to recover any
2001 under collection in 2002.
Since there is no provision for taxpayers to pay interest on taxes they
were not assessed or billed, the taxing districts could never be made
financially whole in the event I-722 is later determined to be invalid.
Additionally, there are consequences of funding shortfalls that cannot
be remedied even if interest could somehow be recovered. For Family Services
and other organizations like them, the loss of funding now means a permanent
loss of services to those presently in need. At-risk, hungry or homeless
families cannot be compensated in 2002 for needs that were not met in
2001. Finally, in the event the provision of I-722 purporting to require
the refund of taxes and other charges were to be implemented, it would
be administratively difficult, if not impossible, for the municipalities
to recoup such payments if Section 1 of I-722 is later invalidated. The
costs involved in making refunds of small amounts of money to a large
number of persons, some of whom cannot even be identified, are great.
Then, if the refunds are later ruled to have been unnecessary, the municipalities
would be required to spend large amounts of public resources in order
to recoup the erroneous refunds. It would be wasteful and unfair to require
the municipalities to go through such an exercise, especially when I-722’s
refund provisions are most certainly invalid.
- Balance of Interests: The Balance of Equities Sharply Favors Granting
Injunctive Relief.
In balancing the interests of the parties and of the public, it is clear
that the equities tilt sharply in favor of granting preliminary injunctive
relief. As explained above, if refunds of tax revenues are improperly granted
under Section 1 of this unconstitutional initiative, it would be administratively
difficult, if not impossible, to recoup such payments. If an improper limit
is imposed on the property tax levy, an amount of taxes that is millions
of dollars below what is lawful will be certified to the treasurer for collection.
If individual properties are valued nonuniformly, individual taxpayers will
pay more than their fair share of the property tax burden without any comfort
that they would later receive adequate compensation for having done so should
the law be invalidated.
Conversely, if in this cycle the municipalities are allowed to collect
the property taxes to which they would have been entitled if not for I-722,
plaintiff municipalities could easily be required to refund or credit the
taxes to the property owners with interest. Moreover, the amount of money
a taxpayer might overpay if the implementation of I-722 is delayed pending
a consideration of its constitutionality is minimal. An average homeowner
in the City of Seattle would pay approximately $39 more in taxes than he
or she would have paid under Initiative 722. Decl. Kuwamoto, ¶4.
Any harm to an individual taxpayer if the status quo is maintained for
the 2001 billing cycle, therefore, is far outweighed by the harm plaintiffs
will suffer if I-722 were to be put into effect and is later determined
to be unconstitutional.
There is ample precedent for the issuance of a preliminary injunction barring
the implementation of a state statute that is alleged to be unconstitutional
where such implementation would cause irreparable harm to the party seeking
the injunction. E.g., Allied Daily Newspapers of Washington v.
Eikenberry, 121 Wn.2d 205, 848 P.2d 1258, (1993).
- Plaintiffs are Likely to Prevail on the Merits.
As stated above, a key consideration in weighing injunctive relief is the
likelihood plaintiffs will prevail when the merits are heard. The underlying
facts are not in dispute, and the constitutionality of I-722 is purely a
legal issue. The remainder of this memorandum addresses the reasons why
plaintiffs are likely to prevail on their claims that I-722 is unconstitutional.
- I-722 violates the Constitution’s Uniformity Clause, as to both real
and personal property.
A fundamental tenet of the taxation system in Washington State is that
of uniformity, enshrined in the Uniformity Clause of article VII, section
1 of the Constitution. I-722, while promising tax relief, unconstitutionally
shifts taxes from some property owners to others less fortunate.
- The artificial 2% cap on value increases results in unequal assessment
rates and taxes.
Section 3 of I-722 purports to "exempt" "a person"
from the obligation to pay property taxes attributable to annual increases
in property valuations in excess of the lesser of 2% or inflation. The
practical effect of this provision is to artificially cap at 2% per
year the rate at which the taxable value of all property is increased,
rather than allowing taxes to be assessed and levied according to the
various properties’ true relative values. This distortion shifts taxes
from rapidly appreciating properties to more slowly appreciating properties.
This disproportionality in taxation violates the Uniformity Clause (article
VII, section 1) of the Washington Constitution.
Article VII, section 1 of the Washington Constitution states, in pertinent
part:
All taxes shall be uniform upon the same class of property within the
territorial limits of the authority levying the tax . . . . All real
estate shall constitute one class . . . .
"We have held consistently tax uniformity is ‘the highest and
most important of all requirements applicable to taxation under our
system.’" Belas v. Kiga, 135 Wn.2d 913, 937-38, 959 P.2d
1037 (1998) (citations omitted).
Property taxes are computed essentially as follows:
|
|
True and
|
|
Rate
|
|
Rate
|
|
Tax
|
=
|
Fair
|
X
|
of
|
X
|
of
|
| |
|
Value
|
|
Assessment
|
|
Taxation
|
For a property tax system to comport with the Uniformity Clause, it
must provide both an equal assessment rate and an equal taxation rate
for each class of property. Id. at 923.
The Supreme Court unanimously rejected a recent effort artificially
to cap the rate at which increased market value of property was reflected
in taxable assessed values. In Belas, the Court struck down as
unconstitutional that portion of Referendum 47 that would have limited
the percentage by which the assessed values of rapidly-appreciating
real property could grow, resulting in delayed or only partial recognition
of the increases in those properties’ true and fair values. That feature
of Referendum 47 was referred to as "value averaging." In
legal and practical effect it shares, though perhaps to a lesser extent,
the same fatal flaw from which Section 3 of I-722 suffers. In fact,
the Court’s description of the faults of "value averaging"
succinctly summarizes what is wrong with the feature of Initiative 722
that fails to recognize value increases in excess of 2% per year. Substituting
I-722’s scheme for the phrase "value averaging" in the Court’s
opinion yields the following accurate summary of the problem:
The effect of [not recognizing value increases] is that owners of property
with rapidly increasing value need not pay taxes at the same assessment
ratio as owners with less rapidly appreciating property. Owners of less
rapidly appreciating property would have to pay taxes on 100 percent
of the fair market value of their property, while the owners of rapidly
appreciating property would pay taxes on a lesser percentage of their
property's value. Since in any given tax year the total tax burden stays
the same, taxes are effectively shifted to owners of property with less
rapidly increasing or with depreciating values. This violates the uniformity
requirement of Const. art. VII, § 1 (amend.14). The ratio assessment
must be uniform within any class of property. If the basis of valuation
is the fair market value of the property, then that basis must be applied
to all other property in the same class; if the basis is a certain percent
of the fair market value, the same percentage must be applied to all
other property in the class. [Not recognizing value increases] intentionally
applies different assessment ratios to different parcels of real property.
Since proportionate taxation cannot exist without uniformity of assessment,
[not recognizing value increases] violates the constitutional uniformity
requirement.
Belas, 135 Wn.2d at 942 (with text in brackets substituted for
original text, as discussed).
Both subsections (1) and (2) of Section 3 result in some property
being systematically valued for tax purposes at less than the same share
of true and fair value as other property in its class. In effect, I-722
creates multiple classes of real property: one for parcels that appreciate
2% or less per year, and another (or many) for parcels that appreciate
at a rate faster than 2% per year.
The cumulative effect of this differential taxation over a few years
could be substantial. Assume a taxing district containing only three
parcels of property. Blackacre adjoins a stockyard and has a market
value of $50. Blackacre’s market value does not change at all over the
next 5 years. Greenacre has a market value of $100. Greenacre’s market
value appreciates at a steady rate of 5% annually for the next 5 years.
Goldacre is waterfront property with an initial market value of $200.
As waterfront land in the district becomes more attractive to outsiders,
Goldacre’s fair market value increases at a rate of 15% annually. Assume,
also, that the taxing district levies $10 in property taxes to start,
and that its total tax levy increases only 2% each year, the limit that
would apply under I-722.
After five more years have passed, the fair market values of the three
parcels are as shown, with the reduced values that would be taxed under
I-722 shown in parentheses in the cases of Greenacre and Goldacre. (Blackacre
would be taxed on its full market value in all years with or without
I-722.)
|
YEAR
|
Blackacre
|
Greenacre
|
Goldacre
|
| |
|
|
|
|
1
|
$50
|
$100
|
$100
|
|
2
|
$50
|
$105 ($102)
|
$115 ($102)
|
|
3
|
$50
|
$110 ($104)
|
$132 ($104)
|
|
4
|
$50
|
$116 ($106)
|
$152 ($106)
|
|
5
|
$50
|
$122 ($108)
|
$175 ($108)
|
|
6
|
$50
|
$128 ($110)
|
$201 ($110)
|
In year 1, with a total assessed value of $250, the burden of the
district’s $10 total tax would have been distributed with a tax rate
of $40 per $1000 of assessed value. Blackacre would be taxed $2 and
Greenacre and Goldacre would each be taxed $4. In year 6, and assuming
there were no I-722, the district’s total $11 tax would be distributed
across the full 100% of fair market value (totaling $379), resulting
in a tax rate of $29 per $1000 of assessed value. Blackacre would be
taxed $1.45, Greenacre would be taxed $3.72, and Goldacre would be taxed
$5.83, reflecting its greater market value.
Introducing I-722 into the district would mean that in year 6, the
taxable value in the district would be only $270 and district’s $11
in taxes would require a rate of $40.74 per $1000 of assessed value.
At this tax rate, Blackacre would be taxed $2.04, Greenacre would be
taxed $4.48, and Goldacre would also be taxed only $4.48. The result
is that with I-722, Blackacre is taxed on 100% of its value, Greenacre
is taxed on 86% of its value, and Goldacre is taxed on only 55% of its
value. The taxes on Greenacre are 20% higher with I-722 than they would
have been under present law, and those on Goldacre are 23% lower than
they would be without I-722. Blackacre’s taxes are a whopping 41% higher
with I-722 than without it.
| |
Blackacre
|
Greenacre
|
Goldacre
|
| |
|
|
|
|
Tax in Year 1
|
$2.00
|
$4.00
|
$4.00
|
|
Tax in Year 6 without I-722
|
$1.45
|
$3.72
|
$5.83
|
|
Tax in year 6 with I-722
|
$2.04
|
$4.48
|
$4.48
|
In real life, plaintiff Mr. Mallow’s modestly appreciating property
would suffer the same fate as Greenacre under I-722.
Because it so obviously results in unequal taxation I-722 is blatantly
unconstitutional.
- Labeling I-722’s Value Distortion an "Exemption" Does Not
Make it Constitutional.
The only permitted exceptions to mandatory uniformity of property taxation
within a class are for those properties exempt or differently taxed
by virtue of the Constitution or under statutes that comport with the
Constitution. Section 3(1) of I-722 provides:
As long as the sale of property is subject to the real estate excise
tax in chapter 82.46 RCW and unless otherwise exempt from property taxes,
a person shall be exempt from any legal obligation to pay the portion
of property taxes attributable to any increase in value of property (other
than for new construction or manufacture) over its 1999 valuation level,
plus the lesser of 2% per year or inflation. [Emphasis added.]
Nothing in the Constitution permits the "exemption" in I-722.
Common sense says Section 3’s use of "exemption" language is
merely a word game intended to evade the plain and emphatic holding of
Belas. It is not really an exemption at all, but simply a new and
disproportionate method of valuation. The Court will apply common sense
in judging the validity of laws (see State ex rel. Heavey v.
Murphy, 138 Wn.2d 800, 813, 982 P.2d 611 (1999)) and will look beyond
superficial form to the substance of an enactment (see Bond
v. Burrows, 103 Wn.2d 153, 161, 690 P.2d 1168 (1984)). Particularly
with taxes, the constitutionality of a law is judged by its actual effects,
as determined by the courts, not by labels its drafters attached:
[T]he legislative body cannot change the real nature and purpose of an
act by giving it a different title or by declaring its nature and purpose
to be otherwise, any more than a man can transform his character by changing
his attire or assuming a different name. The Legislature may declare its
intended purpose in an act, but it is for the courts to declare the nature
and effect of the act. The character of a tax is determined by its incidents,
not by its name.
Jensen v. Henneford, 185 Wash. 209, 217, 53 P.2d 607 (1936) (declining
to accept the legislative label of "privilege" tax but instead
invalidating an income tax the Court determined to be a property tax)
(citations omitted).
Even viewed as an attempted exemption, Section 3 of I-722 does not fit
within constitutional parameters. The general authorization for exemptions
in article VII, section 1, permits only property, not persons,
to be exempted from taxation: "Such property as the legislature
may by general laws provide shall be exempt from taxation." (Emphasis
added.) Section 3 of I-722 purports to exempt persons from any
legal obligation to pay a portion of taxes, depending on how much over
2% his or her property has appreciated. This does not even pretend to
be an exemption of property from taxation, as the Constitution
permits. Exemptions from taxation are disfavored and narrowly construed.
United Parcel Service, Inc. v. Washington, Dep’t of Revenue, 102
Wn.2d 355, 360, 687 P.2d 186 (1984). The courts should not stretch the
plain language of I-722, which on its face does not provide for a permissible
exemption.
Even if I-722 were construed to provide a partial exemption from taxation
for rapidly -appreciating property, our Supreme Court has made it clear
that "partial" exemptions from a property tax are not in compliance
with article VII, section 1. In Apartment Operators Ass'n of Seattle,
Inc. v. Schumacher, 56 Wn.2d 46, 351 P.2d 124 (1960), the issue was
whether the Constitution permitted a tax on gross income that exempted
rental income of under three hundred dollars per month. First the Court
held that the "income" tax was really a tax on real property.
Apartment Operators, 56 Wn.2d at 47. Then, because the law excluded
from the tax base a portion of rental income, the court held that it lacked
the uniformity required by article VII, section 1.
Defendants may argue that I-722 does not violate
tax uniformity if I-722 is interpreted so that the assessor and treasurer
would place all property on the assessment and tax rolls at its true and
fair value, but then merely excuse the owner of rapidly-appreciating property
from paying a portion of the resultant taxes. The problem with this approach
is that it cannot simultaneously carry out the intent of the voters and
comply with the Constitution. If there is to be any substance to the act
of imposing the full tax on the property, then all the other state laws
regarding the imposition and collection of the tax must apply. This means
a lien would arise on the property for the full tax, just as on more slowly
appreciating properties. RCW 84.60.010, 84.60.020. A person seeking to
take advantage of I-722’s exemption would pay only a portion of those
taxes on his property, leaving the lien in place for the rest. The lien
would be subject to foreclosure (and the property sold) after three years.
RCW 84.64.050. Plainly the drafters of I-722 did not intend that "exempt"
owners would lose their property through tax foreclosures. So I-722 cannot
fairly be interpreted to direct that the tax rolls be handled for those
parcels just as they are for property that is not appreciating more than
2% per year. It is clear, therefore, that the intent of I-722 is to keep
off the assessment and tax rolls a portion of the value of rapidly appreciating
property. This makes it unconstitutional.
It is readily apparent why the Constitution cannot be read to allow partial
exemptions of market values from property taxation. If it were permissible
to exempt part of the value of property from taxes, there would be no
meaning left to the Uniformity Clause. Wealthy legislators could pass
a law eliminating, for example, property taxes attributable to that portion
of the value of a single family home that exceeds $500,000. Or voters
could initiate a law doing the same for the portion of value under $500,000.
Such "partial value exemptions" would mean there was "uniformity"
only to the extent granted by the politically powerful, undermining the
bedrock principle long enshrined in our Constitution that all real property
in a taxing district be valued according to a uniform percentage of its
market value and be taxed at a uniform tax rate. See Belas,
135 Wn.2d at 923.
Finally, I-722 does not create a valid exemption or classification of
personal property, as permitted by the Constitution. Unlike real property,
personal property may be legislatively divided into different classes,
each valued and taxed differently. But even under the very liberal standards
of Article 1, section 12 of the Constitution there must first be a clearly-defined
separation of the property that is within and without each class (Associated
Grocers, Inc. v. State, 114 Wn.2d 182, 787 P.2d 22 (1990), cert.
denied, 498 U.S. 1023, 111 S.Ct. 670, 112 L.Ed.2d 663 (1991))
and reasonable grounds for distinguishing between those who fall within
the class and those who do not (United Parcel Service, 102 Wn.2d
at 367). When a voter-approved initiative imposed a graduated personal
property tax on net income, the Supreme Court did not hesitate to hold
the law violated the Uniformity Clause, implicitly holding that income
cannot be divided into "classes" according to how much of it
one person receives. Culliton v. Chase, 174 Wash. 363, 378, 25
P.2d 81 (1933). Similarly, I-722 does not even attempt to separate taxable
personal property into reasonable classes, nor could it constitutionally
create differentially-taxed classes of property according only to the
appreciation rates of each "class."
- Initiative 722 Contains Multiple Subjects And Is Therefore Invalid Under
Article II, Section 19 of the Washington State Constitution.
In its recent opinion in Amalgamated Transit Union, et al. v. Washington,
___ P.3d ____, 2000 WL 1591065, No. 69433-8 (Wash. Supreme Court, October
26, 2000), our state Supreme Court held that Initiative 695 was invalid
in its entirety because it violated the "single subject" requirement
of article II, section 19 of the Washington Constitution. Like Initiative
695, Initiative 722 (the so-called "Son of 695") also contains
multiple subjects in direct violation of article II, section 19. It placed
our state’s citizens "in the position of being asked to decide two
unrelated laws with only one vote." Amalgamated Transit, at
*40. Under the Supreme Court’s ruling in the Amalgamated Transit
case, I-722 must therefore be declared invalid in its entirety.
Article II, section 19 of the Washington State Constitution provides:
No bill shall embrace more than one subject, and that shall be expressed
in the title.
This clear and direct constitutional mandate has two fundamental purposes:
1) to prevent "logrolling" and "hodgepodge" legislation
and 2) to assure that both legislators and members of the public are aware
of the contents of legislative proposals. Washington State Legislature
v. State, 139 Wn.2d 129, 146, 985 P.2d 353 (1999).
The requirements of article II, section 19 apply both to measures enacted
by the legislature and to measures enacted through the initiative process.
Washington Fed’n of State Employees v. State, 127 Wn.2d 544, 901
P.2d 1028 (1995). Justice Rossellini’s dissent in Fritz v. Gorton,
83 Wn.2d 275, 517 P.2d 911 (1974) (the reasoning of which was adopted
by the court in Washington Fed’n), pointed out why it is appropriate
that these requirements be applied with special care to initiatives:
Both policies behind article 2, section 19, are present with even stronger
force when considering initiative measures, as in legislative enactment
by the Senate and House.
Logrolling is an even greater danger to the democratic exercise of power
in the initiative process. What is to prevent an individual or a group
from including mildly objectionable legislation--that is, legislation
which might benefit a small group and is mildly disfavored by the electorate
as a whole--in an initiative measure which includes other legislation
which has great popular appeal? In the legislature the committee process
assures that such a provision will be detected; the amendment process
provides the remedy. The legislature can delete parts of a proposal it
disfavors; the electorate is faced with a Hobson's choice: reject what
it likes or adopt what it dislikes. Only article 2, section 19, preserves
the integrity of the initiative process.
Fritz v. Gorton, 83 Wn.2d at 333.
As the Amalgamated Transit decision makes clear, "[w]hen
laws are enacted in violation of this constitutional mandate, the courts
will not hesitate to declare them void." Patrice v. Murphy,
136 Wn.2d, 845, 852, 966 P.2d 1271 (1998) (quoting State ex
rel. Toll Bridge Auth. v. Yelle, 32 Wn.2d 13, 24, 200 P.2d 467 (1948));
see also, Power, Inc. v. Huntley, 39 Wn.2d 191, 235
P.2d 173 (1951) (held: where both the title and the text of an
act contains multiple subjects, the single subject requirement of article
II, section 19 is violated, and the entire act is void).
Initiative 722, like its immediate predecessor I-695, is a blatant and
facially invalid attempt to combine multiple subjects in a single measure.
As was the case with I-695, the ballot title for I-722 reflects the multifarious
nature of the initiative itself. It asks three questions (as indicated
by the bracketed inserts):
Shall certain 1999 tax and fee increases be nullified, [question 1] vehicles
exempted from property taxes [question 2], and property tax increases
(except new construction) limited to 2% annually [question 3]?
Like the ballot title, the text of I-722 includes at least three separate
and unrelated provisions. Section 1 of the initiative purports to declare
"null and void" the "tax" increases (defined broadly
as including various fee increases, utility rate increases and all increases
in other "monetary charges") adopted at the state and local
levels between July 2 and December 31, 1999, and requires that such "taxes"
be refunded. Section 2 of the initiative contains a completely unrelated
provision exempting motor vehicles from property taxes. Section 3 through
6, in turn, have nothing to do with either the "tax" increases
declared null and void in Section 1, or with the specific exemption of
motor vehicles from property taxes. Rather, they establish sweeping and
permanent new rules regarding the assessment and levying of future property
taxes, including an "exemption" from property taxes attributable
to increases in valuation in excess of 2%, and a new 2% growth factor
limit for local taxing districts’ annual property tax levies.
In Amalgamated Transit, the court ruled that Initiative 695 was
invalid in its entirety under article II, section 19 because that initiative
had "two purposes: to specifically set license tab fees at $30 and
to provide a continuing method of approving all future tax increases."
Amalgamated Transit at *15. The court concluded that its earlier
decision in Washington Toll Bridge Auth. v. State, 49 Wn.2d
520, 304 P.2d 676 (1956), was controlling. Amalgamated Transit
at *15.There, the court struck down under the single subject rule a state
statute which also had two separate purposes: "(1) To provide legislation,
permanent in character, empowering a state agency to establish and operate
all toll roads, and (2) to provide for the construction of a specific
toll road linking Tacoma, Seattle, and Everett." Washington Toll
Bridge Auth., 49 Wn.2d at 523. As noted in Amalgamated Transit,
the court in the Washington Toll Bridge Authority case "held
that the two [provisions of the act] were not germane to each other because
one purpose of the act was to provide for a specific road which was subject
to accomplishment and not continuing in nature, while the sEcond purpose
did not pertain to any specific road but was continuing in effect."
Amalgamated Transit, at *15. In Amalgamated Transit
the court held that I-695 had the same fatal defect "because both
its title and the body of the act include two subjects: repeal of the
MVET and a voter approval requirement for taxes" which could not
be combined in a single measure under article II, section 19. Id.
There is no principled way to distinguish I-722 from either I-695 or
the act at issue in Washington Toll Bridge Authority in terms of
the single subject rule. Like the repeal of the MVET in I-695 and the
funding of the specific toll road in the toll road act, the provision
regarding the nullification and refund of taxes and fees specified in
Section 1 of I-722 is "subject to accomplishment and not continuing
in nature." By the same token, like the voter approval provision
of I-695 and like the granting of power over all toll roads to a state
agency in the toll road act, Sections 3 through 6 of I-722 are
"continuing in nature;" they constitute a fundamental restructuring
of the state’s property tax system.
Further, there is clearly no rational unity between these provisions.
As was the case with the separate provisions of I-695 "neither subject
is necessary to implement the other." Amalgamated Transit,
at *15. Nor is there any common sense connection between nullifying, for
example, the City of Seattle’s 1999 electrical rate increases and setting
new permanent limits on future property tax valuations throughout the
state. The voters were entitled under our Constitution to vote on these
provisions separately.
The underlying flaw inherent in the structure of both I-695 and I-722
is that both initiatives used the same "sales gimmick" of combining
the promise of an immediate cash benefit with a fundamental restructuring
of the way in which future taxes are to be levied. The immediate repeal
provision may have caused many voters to support the entire measure, even
though those same voters may well have chosen to reject the separate tax
restructuring provisions if they had had the opportunity to vote on them
separately. Because there is no rational connection between these two
provisions, the attempt to join them in a single measure is precisely
the type of "logrolling" that article II, section 19’s single
subject requirement is designed to guard against. The voters had the right,
guaranteed under our Constitution, to vote upon these separate measures
separately.
- Initiative 722 Also Violates the "Subject in Title" Requirement
of Article II, Section 19, Thereby Compromising the Integrity of the Initiative
Process.
Initiative 722 also violates article II, section 19’s sEcond requirement,
that the subject of an enactment "shall be expressed in the title."
"The purpose of this requirement is, as noted, provision of notice
to legislators and the public of the contents of the measure." Amalgamated
Transit, at *15 (citing Wash. Fed'n, 127 Wn.2d at 553-54).
Our Supreme Court has recognized "the particular importance of this
requirement in the context of an initiative, noting that often voters
will not reach the text of a measure or the explanatory statement, but
may instead cast their votes based upon the ballot title." Id.
In Amalgamated Transit, the court found that Section 2 of Initiative
695 violated the subject in title requirement of article II, section 19
because, while the ballot title asked whether "tax increases"
should be subject to voter approval, it failed to disclose that the text
of the initiative included an expanded definition of the term "tax,"
which extended the voter approval requirement to a broad range of charges
other than just taxes.
The ballot title of I-722 ("Shall certain 1999 tax and fee increases
be nullified, vehicles exempted from property taxes, and property tax
increases (except new construction) limited to 2% annually?") similarly
fails to express the key features of the text of the initiative, and misled
the voters as to its true content in clear violation of article II, section
19’s "subject in title" requirement.
First, the title failed to indicate that, under the initiative, the taxable
value of property upon which an owner will pay taxes is capped so that
the burden of taxes will be distributed unequally among individual property
owners whose properties appreciate or decline in value. (Section 3 of
I-722 has the effect, as discussed above, of limiting the rate at which
increases in true and fair value make their way onto the tax rolls.) This
results in unequal taxation of equal-value properties, an effect not hinted
at in the initiative’s title.
Further, the title expressed to the voters that property tax increases
(except new construction) would be limited to 2% annually. The average
informed voter would assume from this that, under the initiative, his
or her property tax would not increase by more than 2% per year. This
is simply not the case. In fact, the initiative does not place any
limit on tax increases on individual properties at all.
What the initiative does do (in Section 3) is to provide for a radical
departure from the existing law governing our statewide system of ad valorem
property taxation by creating a personal exemption from property
taxes attributable to increases in value above 2% per year (which
as a practical matter, is the same thing as placing a 2% cap on increases
in assessment of taxable value.) The ballot title does not express this
feature of the initiative at all. Because the unequal distribution of
the tax burden is not revealed at all in the ballot title, the title fails
to express the subject of the initiative as required by article II, section
19.
- Initiative 722 Constitutes State Enactment of Local Taxes in Violation
of Article XI, Section 12 of the Washington Constitution.
Initiative 722 violates Art. XI, Sec. 12 of the state constitution, which
prohibits the legislature from enacting local purpose taxes. This section
provides:
The legislature shall have no power to impose taxes upon counties, cities,
towns, or other municipal corporations, or upon the inhabitants or property
thereof, for county, city, town, or other municipal purposes, but may,
by general laws, vest in the corporate authorities thereof, the power
to assess and collect taxes for such purposes.
This section is a limitation on the power of the state to delegate the
right of local taxation to any other than the local authorities of the
county, city, town, or other municipality concerned. State v. Redd,
166 Wash. 132, 139, 6 P.2d 619 (1932). The state itself may only pass
general laws defining the powers of local government; it may not itself
enact taxes for local purposes.
In this case, the state’s legislative power has been used through the
initiative process to repeal validly enacted local taxes. This repeal
is unconstitutional because it is an enactment of a local tax. Black’s
Law Dictionary defines a repeal as "[t]he abrogation or annulling
of a previously existing law by the enactment of a subsequent statute
. . . ." Black’s Law Dictionary 1299 (6th ed. 1990) (emphasis
added). A repeal is therefore creates positive law. Postema v. Snohomish
County, 73 Wn. App. 465, 468, 869 P.2d 1107 (1994).
The fact that the local taxes were repealed by a statewide initiative
rather than by an act of the legislature makes no difference. In approving
initiative measures, the people exercise the same power of sovereignty
as the Legislature does when it enacts a statute. Washington Fed’n,
127 Wn.2d 544, 556, defendants from implementing I-722 during the pendency
of this litigation given that, at this late stage of the taxing cycle,
any attempt to implement I-722 for 2001 property taxes will result in
In re Estate of Thompson, 103 Wn.2d 292, 294, 692 P.2d 807
(1984). Here the people of Washington, by approving Initiative 722, enacted
specific tax provisions applying to Seattle and other municipalities.
This action clearly violates Art. XI, Sec. 12
- The Refund of Taxes, Fees and Other Charges Validly Enacted and Collected
Is a Prohibited Gift of Public Funds in Violation of Article VIII, Section
7 of the Washington Constitution.
Section 1(1) of I-722 states:
Any tax increase adopted by the state from July 2, 1999, through December
31, 1999, is null and void and of no effect. All taxes collected as a
result of such tax increases shall be refunded to the taxpayer.
Initiative 722’s requirement that taxes, fees and charges validly enacted
and collected be given to private individuals violates article VIII, section
7 of the Washington Constitution which prohibits such gifts of public
property. Article VIII, section 7 provides that:
No county, city, town or other municipal corporation shall hereafter
give any money, or property, or loan its money, or credit to or in aid
of any individual, association, company or corporation, except for the
necessary support of the poor and infirm, or become directly or indirectly
the owner of any stock in or bonds of any association, company or corporation.
Article VIII, section 7 prohibits a city or other municipal corporation
such as the fire district from giving money or property to any individual
except for a fundamental governmental purpose or in return for consideration
to the public for use of its property. See CLEAN v. State,
130 Wn.2d 782, 928 P.2d 1054 (1997); State ex rel. O’Connell v. Port
of Seattle, 65 Wn.2d 801, 399 P.2d 623 (1965). The prohibition against
a municipal corporation’s giving money to private individuals is mandatory
and must be strictly observed. Washington Natural Gas Co. v. Public
Utility District No. 1 of Snohomish County, 77 Wn.2d 94, 101, 459
P.2d 633 (1969).
Taxes that have been collected are vested in the taxing authority, and
become subject to the constitutional prohibition. See Seattle-King
County Council of Camp Fire v. Washington, Department of Revenue,
105 Wn.2d 55, 60, 711 P.2d 300 (1985). While the taxing authority has
no "vested right" to uncollected taxes, it cannot be
compelled by retroactive repeal of the tax laws to refund taxes it has
already collected. Id. at 60-61 (citing City
of Yakima v. Huza, 67 Wn.2d. 351, 359, 407 P.2d. 815 (1965); Higher
Educ. Facilities Auth. v. Gardner, 103 Wn.2d 838, 699 P.2d 1240 (1985));
see also Scarsella Bros., Inc. v. State Dep’t of Licensing,
53 Wn. App. 882, 890, 771 P.2d 760 (Div. 1), rev. denied,
113 Wn.2d 1004, 777 P.2d 1051 (1989) ("The gist of the holdings of
Campfire and Huza is that where the authority for the collection
of a tax is not questioned and a tax is imposed, the State cannot give
refunds or credits."). "[R]epeal of a statute does not
destroy vested rights or rights of a common law nature embodied in the
repealed statutes." Cazzanigi v. General Electric Credit Corp.,
132 Wn.2d 433, 441, 938 P.2d 819 (1997) (citing Lau v. Nelson,
89 Wn.2d 772, 575 P.2d 719, overruled in part on other grounds in
Roberts v. Johnson, 91 Wn.2d 182, 588 P.2d 201 (1978)).
Therefore, while it may be true that a taxing authority has no right
against the state to insist upon collection of taxes, and thus, the legislature
may retroactively repeal local taxing power, the law is clear that the
Washington Constitution limits that power to a point before the taxes
are collected. Once collected, however, the taxes become vested in the
public entity and retroactive repeal is prohibited because it would require
an expenditure of public funds for private purposes. Huza, 67 Wn.2d.
at 359) ("where a tax ordinance has been previously validly enacted
it cannot be repealed retroactively and the tax heretofore collected validly
cannot be refunded simply on the basis of retroactive repeal"); Camp
Fire, 105 Wn.2d at 60-61 (laws cannot be retroactively repealed if
the repeal requires an expenditure of public funds).
Defendants do not, and cannot, assert that the tax and fee increases
enacted by the cities and the fire district between July 2, 1999, and
December 31, 1999, were not, at the time they were enacted, lawful in
accordance with the authority vested in the taxing districts by the Constitution
and the Legislature. Nor is this a case where the taxes and fees were
not validly collected. Compare Scarsella Bros., Inc. v. State
Dept of Licensing, 53 Wn. App. 882, 771 P.2d 760 (Div. 1 1989) where
the taxing authority was without power to collect the tax. The Scarsella
court ruled that the taxing authority could have no "vested right"
to taxes collected in contravention of law and paid under protest. Id.
at 53 Wn. App. at 890. In ruling that the taxing authority obtained no
vested rights as against a taxpayer upon whom tax was not imposed by law,
the Scarsella court distinguished Huza, acknowledging that
where the tax is validly enacted and collected (as in this case)
it may not be refunded without violating the Constitution. Id.
DOR has advised the King County Assessor, in regard to property taxes,
that the Assessor has the authority to implement refunds of those taxes
by reducing taxes due in future years by the amount of the refund. Decl.
Noble, Ex. A. A credit against future taxes, however, constitutes an unconstitutional
gift of public funds as much as does the actual payment of money from
the treasury. Huza, 67 Wn.2d at 351. A credit is tantamount to
a prohibited tax refund. In rejecting the argument that a credit against
future taxes owed by taxpayers was not a prohibited refund of taxes because
it was not a payment of money, the Huza court stated that the difference
in form was not material. "The effect is a refund of taxes validly
collected, and the constitutional prohibition applies." Huza,
67 Wn.2d at 359; accord Scarsella, 53 Wn. App. at 890 (where a
tax is validly imposed and collected, the taxing authority "cannot
give refunds or credits") (emphasis added).
As in Huza, I-722 Section 1’s "invalidity is apparent and
obvious in the wording of the act" which retroactively repeals lawful
ordinances and thereby requires an expenditure of public funds for private
purposes. Huza, 67 Wn.2d at 360. Therefore, Section 1 must be stricken
as in violation of article VIII, section 7 of the Washington Constitution.
Initiative 722 Violates Article II Section 37 Because It Is Not a Complete
Act and It Fails to Disclose That it Renders a Normal Reading of Existing
Statutes Erroneous.
Article II, section 37 provides:
No act shall ever be revised or amended by mere reference to its title,
but the act revised or the section amended shall be set forth at full
length.
As the court in Amalgamated Transit recognized, this provision has two related purposes: first, "to disclose the effect of new legislation;" and sEcond to disclose the impact of such legislation on existing laws. Amalgamated Transit, at *32. Initiatives are subject to this disclosure requirement to the same extent as legislative enactments. State v. Thorne, 129 Wn.2d 736, 753, 921 P.2d 514 (1996).
Compliance with article II, section 37 is determined by two tests. First,
"[I]s the new enactment such a complete act that the scope of the
rights or duties created or affected by the legislation [sic] action can
be determined without referring to any other statute or enactment?"
Amalgamated Transit, at *33 (quoting Wash. Educ. Ass'n
v. State, 93 Wn.2d 37, 40, 604 P.2d 950 (1980)). If so, the act is
exempt from the requirements that article II, section 37 would otherwise
impose. If the act is not complete, however, the sEcond test is "would
a straightforward determination of the scope of rights or duties under
the existing statutes be rendered erroneous by the new enactment?"
Id.
Like I-695, I-722 fails both of these tests. It is clearly not a "complete
act" on the subject of taxation – reference to other statutes is
required to give effect to its various provisions. See Statement
of the Case, Section II, D-E.
Further, the initiative would render erroneous a straightforward interpretation
of a number of existing laws. For example, as discussed above, Section
3 of I-722 purports to amend RCW 84.36 by adding a new section exempting
persons from "any legal obligation to pay the portion of property
taxes attributable to any increase in value of the property over its 1999
valuation level plus the lesser of 2% or inflation." This provision
alone affects and renders erroneous numerous existing provisions of state
law governing the levying of property taxes in this state. When read together,
RCW 84.36.005, RCW 84.40.030, RCW 84.40.040, RCW 84.52.030 and RCW 84.52.040
(none of which is referenced in or expressly amended by I-722) set forth
the most basic rules regarding how such taxes are to be levied. RCW 84.36.005
provides:
All property now existing, or that is hereafter created or brought into
this state, shall be subject to assessment and taxation for state, county,
and other taxing district purposes, upon equalized valuations thereof,
fixed with reference thereto on the first day of January at twelve o'clock
meridian in each year, excepting such as is exempted from taxation by
law.
(The word "such" in the last clause of this statute is clearly
a reference to "property" exempted from taxation by law.)
RCW 84.52.030 then provides:
For the purpose of raising revenue for state, county and other taxing
district purposes, the county legislative authority of each county at
its October session, and all other officials or boards authorized by law
to levy taxes for taxing district purposes, shall levy taxes on all
the taxable property in the county or district, as the case may be,
sufficient for such purposes, and within the limitations permitted by
law. [Emphasis added.]
RCW 84.52.040 states:
Whenever any taxing district or the officers thereof shall, pursuant
to any provision of law or of its charter or ordinances, levy any tax,
the assessed value of the property of such taxing district shall
be taken and considered as the taxable value upon which such levy shall
be made. [Emphasis added.]
Section 3 of I-722 is irrEconcilable with the foregoing statutory provisions
and renders the law governing the property tax levying process not only
erroneous but hopelessly confused. These provisions direct taxing officers
to treat assessed value (i.e. true and fair market value pursuant to RCW
84.40.030 and 84.40.040, as properly interpreted under Belas v. Kiga)
as the taxable value upon which every property tax levy "shall be
made." Because I-722 did not amend these provisions it becomes impossible
for tax officials to comply with the law or to even know what the law
is. Are they to continue to comply with RCW Chapters 84.36, 84.40 and
84.52 and assess and tax all property at true and fair value? Or are they
to read I-722 as creating an exemption for "property" even though
it does not by its terms create such an exemption. (If the latter, what
is the particular "property" that is being exempted from
taxation in the case of a house that increases in value by 10% from one
tax year to another, but whose owner is "exempt" from paying
the tax attributable the amount of increase over the lesser of 2% or inflation?)
Because the initiative would render "a straightforward determination
of the scope of rights or duties under the existing statutes" erroneous,
it violates article II, section 37 and must be declared invalid in its
entirety. Amalgamated Transit, Slip Op. at *33.
Another example of an existing law that I-722 renders hopelessly confused
is the inter-county equalization of the state property tax levy. Current
state law directs all county assessors to place property on the assessment
rolls at 100% of its true and fair value. RCW 84.40.030, .040. Even if
all assessors strove to accomplish this task, there would be systematic
variations from county to county in the ability of assessors to hit this
target. If the state property tax levy were spread across the individual
parcels in 39 counties without taking into account the variations in the
percentage of market at which each county lists property, there would
not be a fair distribution of the state tax burden. Therefore, RCW 84.48.080
directs DOR annually to equalize the various counties’ aggregate assessed
values by comparing each to the total "correct" state-wide assessed
value. DOR determines the "correct" value by performing "ratio
studies" premised on actual market sales and independent market appraisals
of a statistical sample of individual parcels in each county. WAC 458-53-135
(real property) and 458-53-160 (personal property). Ratios for each county
were to be certified to the various county assessors by the first Monday
in September. RCW 84.48.075, WAC 458-53-200. The state tax levy is then
apportioned to counties according to values that have all been "equalized"
to 100% of market. DOR has not been able to tell plaintiffs how it will
attempt to harmonize I-722 with RCW 84.48.080. In fact, there is no obvious
way to make the two work together, since RCW 84.48.080 is designed to
increase uniformity of taxation, and I-722 by its very nature works at
cross-purposes to this objective.
A third example of a statute that is rendered erroneous by I-722 is RCW
35.92.010. It specifies with regard to the operation of waterworks and
electrical generating facilities by a city or town that "No rate
shall be charged that is less than the cost of the water and service to
the class of customers served." Seattle, which operates a water and
electric utility, has set its water and electrical rates in accordance
with this statutory requirement, and increased water and electrical rates
during the sEcond half of 1999. However, Section 1 of I-722 purports to
nullify and require the refund of any rate increases set pursuant
to this statutory provision between July 1 and December 31, 1999, that
were not approved by the voters. In doing so, the initiative effectively
repeals this statutory provision, or at least amends it to include
a voter approval requirement. (If refunds are required, the service will
have been provided at less than cost.)
RCW 35.21.706 is yet another of the many statutes amended but not referenced
within the text of I-722. This statute explicitly requires a referendum
procedure be provided with respect to any local ordinance imposing or
increasing a local business and occupation tax, which includes utility
occupation taxes increased by several of the municipalities between July
and December of 1999. In short, RCW 35.21.706 allows individuals seeking
repeal of any ordinance increasing a business and occupation tax to file
a petition for such relief within seven days of the ordinance’s passage.
The timelines and percentages of signatures required for a repeal petition
to be placed on the ballot are fully articulated in RCW 35.21.706. The
statute concludes with the following language, which was not specifically
repealed or amended by I-722:
This referendum procedure shall be exclusive in all instances for any
city ordinance imposing a business and occupation tax or increasing the
rate of the tax and shall supersede the procedures provided under chapters
35.17 and 35A.11 RCW and all other statutory or charter provisions for
initiative or referendum which might otherwise apply.
Because the text of I-722 purports to repeal and nullify any taxes adopted
without voter-approval between July and December of 1999, the provisions
of RCW 35.21.706 would be rendered meaningless, as the statute would no
longer serve as the "exclusive" statutory procedure through
which citizens are allowed to repeal or invalidate any new or increased
business occupation tax.
Several of the municipalities, including the City of Des Moines, increased
local utility-occupation taxes during the timeframe covered by I-722.
Dec. Dively, ¶¶3, 5, Ex. A, Decl. McCarty, ¶10, Decl. Edvalson, ¶7. The
relevant ordinances providing for such increases included specific language
explaining the referendum repeal procedure and applicable timelines as
set forth in RCW 35.21.706. Accordingly, such taxes are valid, unchallenged
revenue measures never subjected to repeal by voters actually affected
by such tax increases as provided in RCW 35.21.706. I-722 purports to
invalidate such taxes without any requirement that the affected voters
comply with the procedures and timelines established in RCW 35.21.706.
I-722 does not even hint at the effect it would have on the statute that
articulates a pre-existing referendum-repeal process for business and
occupation tax measures.
The initiative failed to disclose these effects on these existing statutes
to the voters, and therefore violates the requirements of article II,
section 37.
6. The King County Assessor is Poised to Misapply I-722 so
as to Improperly Limit the Plaintiff Municipalities’ 2001 Tax Collections.
Even if this Court were to conclude that the foregoing concerns regarding
the constitutionality of I-722 did not warrant the issuance of a blanket
preliminary injunction, a preliminary injunction should still be issued
to prevent the King County Assessor from unlawfully limiting the plaintiff
municipalities’ tax levies for 2001, because the Assessor is planning
to apply I-722 in ways that are contrary to law.
- Seattle Voters Have Approved the Levy for 2001, Making the Limitation
in RCW 84.55.010 Inapplicable.
RCW 84.55.010 limits the year-to-year growth of the dollar amount
of regular property taxes levied by Seattle. This limitation is often
referred to as the "levy lid." RCW 84.55.010 begins:
Except as provided in this chapter, the levy for a taxing district
in any year shall be set so that the regular property taxes payable
in the following year shall not exceed the limit factor multiplied by
the amount of regular property taxes lawfully levied for such district
in the highest of the three most recent years . . . .[Emphasis added.]
One of the "exceptions" contained in Chapter 84.55 RCW is
the voter-approval option in RCW 84.55.050. Under that provision, the
taxing district states on a ballot the dollar rate proposed for taxes
to be levied within the next twelve months. If the voters approve, the
limitation in RCW 84.55.010 is lifted to allow that levy. RCW 84.55.050(1).
This voter approval is often referred to as a "levy lid lift."
After the year in which that higher levy is collected, the dollar amount
of that levy is used as the base upon which the limitation in RCW 84.55.010
operates in future years. RCW 84.55.050(2).
In November 1999 and again in November 2000, Seattle’s voters authorized
the city to exceed the limit in RCW 84.55.010. Decl. Dively, ¶¶ 7, 9.
Each time, the voters lifted the levy lid to authorize a levy for the
following year at a dollar rate ($3.52/$1000 for 2000 and $3.55/$1000
for 2001) higher than needed to accommodate the total dollar amount
of the levy Seattle thereafter made. (The statutory maximum regular
levy rate for Seattle is $3.60/$1000, with an exception for certain
voter-approved taxes to fund very-low-income housing.)
Nonetheless, the King County Assessor has told Seattle that, in light
of I-722, he will apply RCW 84.55.010 to limit Seattle’s 2001 taxes
to 102% of the levy it collected in 1999 (not 2000), plus only a limited
dollar amount for the specific public purposes called out in the two
ballot measures. Decl. Noble, ¶8, Ex. C. This is wrong. The levy lid
in RCW 84.55.010 does not even apply because voters have authorized
the city to levy beyond it for this coming year. Even if a limitation
under Chapter 84.55 RCW were to be applied to Seattle, that lid should
be a percentage above Seattle’s levy for 2000 taxes, which levy was
voter approved in November 1999 and therefore was a "lawful"
levy not invalidated by Section 1 of I-722. Moreover, if any limitation
under Chapter 84.55 RCW is to be applied to Seattle, that lid should
be the 106% in effect in November 2000 when Seattle’s voters approved
the lid lift. Voters are entitled to the benefit of the laws in effect
at the time they voted. Louthan v. King County, 94 Wn.2d 422,
617 P.2d 977 (1980). If the Assessor limits Seattle to 102% of its 1999
levy plus $23 million for parks, as threatened, the voters will not
be receiving the benefit of the total city tax levy they approved in
November 1999 and November 2000.
- The Plaintiff Municipalities’ Levies Have all Been "Set"
in Compliance with RCW 84.55.010 Before the Effective Date of I-722,
and Should Not Be Reduced Thereafter.
Initiative 722 will not be effective until December 7, 2000. At that time
it will amend Chapter 84.55 RCW to reduce the levy lid to the lesser of 102%
or 100% plus inflation. But Initiative 722 will not amend RCW 84.55.010, which
places a limitation only on the "setting" of a levy, not on its
collection. The act of establishing, or setting, the amount of each district’s
levy will have already been completed by the time I-722 takes effect. Not
until the levies for 2002 taxes are being "set" in November 2001
will I-722 operate to reduce the lid under which they must be established.
- conclusion
For all of the foregoing reasons, plaintiffs’ request for a preliminary injunction
barring implementation of I-722 should be granted.
DATED this ______ day of November, 2000.
|
MARK H. SIDRAN
Seattle City Attorney
By: ______________________________
Cynthia Unwin Seu, WSBA #26831
Sandra L. Cohen, WSBA #11304
Quentin R. Yerxa, WSBA #18219
Assistant City Attorney
Attorneys for Plaintiff The City of Seattle
|
MICHAEL WEIGHT
Burien City Attorney
By:__________________________
Michael Weight, WSBA #11643
415 SW 150th Street
Burien, Washington 98166-1973
(206) 248-5535
Attorney for Plaintiff The City of Burien
|
|
OGDEN MURPHY WALLACE, PLLC
By: _____________________________
Greg Rubstello, WSBA #6271
1601 Fifth Avenue, Suite 2100
Seattle, Washington 98101-1686
(206) 447-7000
Attorneys for Plaintiff The City of Carnation
|
EVANS KERR HANEY & HILTON, P.S.
By: _____________________________
Leland Barrett Kerr, WSBA #6059
7025 W Grandridge Blvd., Suite A
Kennewick, WA 99336-7724
(509) 735-1542
Attorneys for Plaintiff The City of Pasco
|
|
DAVIS WRIGHT TREMAINE, LLP
By: ________________________________
Michele Radosevich, WSBA #24282
2600 Century Square
1501 Fourth Avenue
Seattle, Washington 98101-1688
(206) 622-3150
Attorneys for Plaintiffs Southwest Youth and Family Services, Inc. and
William P. Mallow
|
|
|
