I-722’s passage wallops local governments with a familiar conundrum

By WARREN CORNWALL and KATHY KORENGEL

Herald Writers

As ballots continue to be counted from Tuesday’s election, the debate over the apparently victorious Initiative 722 is already poised to unfold in the courtroom, tax offices, and city and county council chambers.

A number of governments, including the city of Seattle, are considering going to court to block the statewide measure, which caps property tax increases and forces refunds of any tax hikes in the second half of 1999.

County assessors and treasurers meanwhile are trying to figure out how to refund money to taxpayers and overhaul the way they calculate property tax bills. And local budget writers are paring back budget plans for the coming year.

Tim Eyman, the initiative’s sponsor, took voters’ response — a 57 percent "yes" vote as of Wednesday night — as strong support for the tax-cut message he first promoted in Initiative 695. That 1999 measure canceled the state car tax and required voter approval of future tax increases. It was recently struck down by the state Supreme Court.

"We have clearly become the taxpayers’ lobbyist," he said.

The initiative could spur refunds of $128 million worth of taxes statewide, according to state budget office estimates. In addition, it could limit overall property tax increases by more than $380 million in the next two years.

But first, I-722 may have to run the same legal gantlet that killed its predecessor. The city of Seattle is talking to other cities about a possible lawsuit challenging the initiative, said Dick Lilly, Seattle Mayor Paul Schell’s press secretary.

"We are looking for a coalition," Lilly said, adding that action could be taken this week.

Initiative critics have contended I-722 probably violates the state constitution by combining too many topics into one measure and by changing the way property taxes are divided up.

But Eyman blasted city officials for contemplating a challenge to the popular initiative.

"We think it’s obscene for government officials to use taxpayer dollars to sue taxpayers because they don’t like what taxpayers told them," he said.

Meanwhile, away from the courts, local officials are trying to figure out how to implement the measure. That means giving back money they’ve already collected — and possibly spent — shaving budget plans for next year and overhauling the way property taxes are assessed.

The Snohomish County Treasurer’s Office is prepared to overhaul the way it calculates tax bills and to sort out refunds, said Debi Putnam, the county’s chief deputy treasurer. But the changes haven’t been made yet.

"We have the means to implement it," Putnam said, "but we fully expect it will be challenged."

Unless it’s blocked by a court injunction, the initiative could become law Dec. 7. There is no specific deadline for refunds.

Vicki Heilman, assistant finance director for the city of Lynnwood, said the city has estimated how much it might have to dole out in refunds. This would amount to about $196,000 in emissions taxes and about $225,500 collected through an increase in business license fees.

Those revenue sources were included in the proposed city budget for next year as well, Heilman said, so the proposed budget would need to be adjusted. Some of that lost revenue might be covered by budget surpluses this year, she said.

The initiative also caps future property tax increases to 2 percent per year.

That will likely short-circuit Snohomish County plans to raise the portion of the property tax that goes to roadwork by 6 percent, county councilman Gary Nelson said.

The change could cost the county $1.8 million in road funding, Nelson said, in addition to refunds of money collected from property tax increases approved in 1999. Though only a small part of the county’s proposed $95 million road budget in the coming year, it could stall work at a time when county roads are strained, he said.

"If it’s down in my district, I’m going to scream and moan and really get upset about it. And if it’s in someone else’s district they’re really going to be the one that gets upset about it," he said.

In Lake Stevens, which has proposed a 6 percent increase in its property tax levy for next year, finance director Jan Berg said she was sure the initiative’s passage would be discussed at a city council workshop Monday.

"We’re still reeling from Initiative 695," Berg said. "We really took a big hit."

She said the city will wait to hear from the county assessor’s office about how to proceed, but in the worst-case scenario would have to reduce its tax levy increase to 2 percent. As a result, the city might put off some planned purchases.

She said the city already has reduced staff as a result of I-695.

"We’re a lean, mean machine," Berg said.

Sultan also has proposed a 6 percent increase in its property tax levy for next year. City clerk Laura Koenig said city council members are meeting in work sessions this week to determine how to adjust the 2001 budget.

Koenig said with I-722 becoming law in 30 days, it has to be followed whether or not it may be challenged in court.

"The council will have to discuss their options again," Koenig said. "It will mean the chance of less revenue to operate on. That equates to less money to operate the city on."

But the council has to follow the voters’ response, she said.

"Once it passes, we have to follow it until the courts say different," Koenig said.