Court tosses Eyman limit on property taxes

Published 11:52 am Friday, November 9, 2007

OLYMPIA — The state Supreme Court threw out a voter-approved limit on property tax increases Thursday, but the governor and lawmakers pledged to craft a permanent and legal cap next year.

In a 5-4 ruling, justices concluded Initiative 747 pushed by Tim Eyman of Mukilteo was unconstitutional because its wording was ambiguous and misled voters as to the measure’s full effect.

The court’s decision wiped out the 1 percent cap on annual property tax collections by state and local governments in effect since voters passed the measure in 2001.

As it now stands, the law will allow increases up to 6 percent a year.

Eyman in an e-mail to supporters warned of “absolute chaos,” predicting cities, counties and special districts would rush to enact larger tax hikes.

Leaders in two cash-strapped Snohomish County cities said as enticing as that sounds, they aren’t jumping to take action.

Sultan Mayor Ben Tolson said the high court’s decision will be “a hot topic” in Sultan.

Council members in the city of 4,500 have scrambled to plug a $450,000 shortfall in this year’s budget. They cut back the size of its police force and city services to fill the gap.

Tolson said I-747 has contributed to the city’s financial woes. Sultan has few businesses and counts on property taxes to pay for city services.

“We can’t keep up with inflation,” he said. “Therefore, we continue to reduce the level of service.”

Yet Sultan Councilman Jim Flower said he will not propose raising property taxes.

“I don’t care what the ­Supreme Court says,” Flower said. “I believe the voters.”

Up the highway in Gold Bar, population about 2,200, officials also count heavily on property taxes to pay for services. The elimination of I-747 gives the city more leeway to create revenue to keep up with growth, Mayor Crystal Hill said.

Still, she expects the city to adopt its 2008 budget based on 1 percent increase.

“To some level, voters spoke when they voted on the one percent cap,” Hill said. “We all want to be cautious.”

Everett built a 1 percent increase into its budget. Snohomish County did not raise its tax rate last year and County Executive Aaron Reardon is proposing to cut taxes slightly in next year’s budget.

Gov. Chris Gregoire on Thursday issued a statement calling on those with taxing powers “to assure me that they will not increase property tax levies for their upcoming budgets as a result of the court decision.”

She said she planned to work with the Legislature in 2008 “to thoughtfully reinstate a property tax cap.”

What it will look like is unclear as she did not mention 1 percent — or any figure — in her statement.

Republican lawmakers said they want to write provisions of the initiative into law. They tried last session without success.

“Voters spoke very clearly when they passed I-747 six years ago. Unfortunately their will has just been overturned,” said Senate Minority Leader Mike Hewitt, R-Walla Walla, in a prepared statement.

“The Legislature must act quickly to put this measure back into law,” he said.

Thursday’s court ruling stemmed from a lawsuit filed in 2005.

It claimed that ballot language misled voters by implying I-747 would reduce the limit on property tax increases from 2 percent a year to 1 percent a year by amending Initiative 722, which voters passed in 2000.

At the time of the vote, I-722 had already been declared invalid and the effect of Eyman’s measure was to reduce the limit from 6 percent to 1 percent.

“A voter reading the text of the initiative would have perceived a much smaller impact on government coffers than would actually occur under I-747,” Justice Bobbe Bridge wrote for the majority.

“The text of the initiative misled voters about the substantive impact of the initiative on existing law,” she wrote.

That violates a section in the state constitution aimed at ensuring legislators and voters understand the full ramifications of what they are acting on, the majority ruled.

Dissenting justices said the majority applied the correct legal test and came up with the wrong conclusion.

“The majority seems to suggest that the voters are unable to think or read for themselves, when in fact our democratic process is based on the assumption that voters do in fact read and understand the impact of their votes,” Justice Charles Johnson wrote in the dissent.

Majority opinion:

http://www.courts.wa.gov/opinions/?fa=opinions.disp&filename=788448MAJ

Minority opinion:

http://www.courts.wa.gov/opinions/?fa=opinions.disp&filename=788448Di1

Reporter Yoshiaki Nohara contributed to this story.