Assessor puts I-722 tax limits on hold

By WARREN CORNWALL

Herald Writer

A decision by a state tax agency and Snohomish County’s assessor could save dozens of local governments from running afoul of a new property tax initiative.

It could also mean no lowered tax bills in the coming year.

Assessor Gail Rauch on Monday said she will delay implementing Initiative 722’s property tax limits in the wake of a Thurston County court injunction.

Her statements came in response to a letter from the Department of Revenue advising that the ruling applied to property taxes even for governments that didn’t join the legal challenge.

"Since we have been directed not to implement 722, then I will not be doing that," she said.

The department’s letter, and Rauch’s decision, angered initiative sponsor Tim Eyman. The Mukilteo businessman charged the state agency was changing the judge’s ruling by saying it applies statewide rather than just to the governments that filed suit.

"It’s really, really astounding that they think they’re above the law," he said of the department.

The initiative, which caps increases in property tax collections at 2 percent and requires refunds of tax increases from the second half of 1999, is scheduled to become law Thursday.

James Pharris, the lead attorney defending the initiative for the state attorney general, didn’t challenge the department’s position. The state’s property tax system is so intertwined, it could prove difficult to separate different taxing districts, he said. The Office of the Attorney General is required to defend any initiative approved by voters.

The injunction is meant to delay the initiative at least until a Thurston County Superior Court hearing in February. Then, the court is scheduled to hear challenges to the ballot measure’s constitutionality by a number of cities and individuals. No governments in Snohomish County have joined the suit yet.

Rauch defended the decision as an attempt to ensure property taxpayers were all billed according to the same rules.

With the initiative delayed, some county residents will wind up paying more property taxes than they would have under I-722.

That’s because a large number of local governments, including cities, fire districts and public hospital districts, have essentially ignored the initiative’s property tax limits. In all, 25 taxing districts in Snohomish County have approved 2001 budgets with a property tax increase above the initiative-allowed levels, Rauch said. That includes the cities of Marysville, Gold Bar, Index and Woodway, according to the assessor’s office.

Rauch said if she implemented the initiative, she would not allow the districts to collect more than the 2 percent increase.

Some of these governments may have been counting on the court challenge to rescue them from a collision with the initiative, she said.

"I think they were all probably banking (that) it was unconstitutional," she said.

Marysville Mayor David Weiser voiced no concerns that the planned 6 percent increase in city property tax collections runs counter to the initiative.

The city is struggling to keep pace with a growing population, and it already lost tax dollars to Initiative 695, the Eyman-created tax cut passed in 1999, Weiser said. He estimated the city would collect an additional $140,000 by going above the initiative’s cap.

Eyman predicted the move would create a backlash and boost support for his new initiative. It would require voter approval of all tax and fee increases.

"If they want to pour gasoline on the bonfire of support we have for the ‘right to vote on taxes’ initiative, then join the fray," he said.

City and county officials are still weighing whether to join the lawsuit. The Department of Revenue letter didn’t refer to refunds of other tax and fee increases. That means governments that don’t join the suit could be subject to the refund requirements, Rauch said.