Judge blocks tax-cutting Initiative 722

Herald staff and news reports

A Thurston County judge signed an order Thursday that temporarily blocks tax-cutting Initiative 722 – but only in the nine cities and four counties that sued to stop it.

Neither Snohomish nor Island counties, or any of their cities, are part of the suit yet, but at least one local leader says that may not matter.

And Tim Eyman, the Mukilteo man who authored 1-722, is disappointed with the order but still optimistic it will hold up in court eventually.

The cities and counties in the suit sought and got a temporary injunction on I-722, which rolls back some 1999 taxes and fees and limits property tax growth.

In Thurston County Superior Court on Thursday, plaintiffs’ lawyers argued that implementing I-722 now, before the court determines whether it is constitutional, would cause permanent damage.

Attorney James Johnson, representing the I-722 campaign, said while the initiative might inconvenience tax collectors, it wouldn’t cause irreparable harm.

Thurston County Superior Court Judge Christine Pomeroy said at the end of the three-hour hearing that she believes the plaintiffs have a case, and that I-722 could cause permanent harm if it goes into effect and then is later struck down.

Her ruling applies to the cities of Bainbridge Island, Burien, Carnation, Des Moines, Newcastle, Olympia, Pasco, Richland and Seattle; as well as King, Kitsap, Pierce and Whitman counties. Pomeroy said that, according to state law, she could not make the injunction apply to counties that did not ask for it.

Other cities and counties, unless they join the lawsuit, will have to go ahead and change their tax-collecting systems to comply with I-722 when it takes effect Dec. 7. Snohomish County and cities inside the county have stayed out of the legal fray up to this point.

Despite the judge’s comments, Snohomish County Finance Director Dan Clements said he is being told other counties may be sheltered by the ruling. The state Department of Revenue is expected to issue an administrative ruling saying all counties should follow the same rules governing property tax assessments, he said.

Clements said he also received a memo from the Washington State Association of Counties suggesting the ruling might extend to governments not joining in the suit.

Regardless, he said, Snohomish County wouldn’t see an immediate impact from I-722 because the budget recently approved by the county council holds increases in property tax revenues to the required 2 percent.

“I haven’t seen anything seriously about joining the lawsuit,” Clements said.

Plaintiff’s attorney Sandra Cohen, however, predicted the decision could set off a new round of legal moves.

“I’m not sure what they’re going to do,” she said. “I think we’re going to see a bunch of legal action.”

Johnson argued unsuccessfully that the court should put the rights of taxpayers and voters ahead of complaints from the cities and counties.

“Hundreds of thousands of people are going into Christmas thinking they have tax relief,” he said. “These people have rights.”

I-722 passed last month with 56 percent of the vote. Sponsored by Mukilteo populist Eyman, the initiative requires a refund of taxes and fees imposed since July 2, 1999. It also limits property tax growth to 2 percent a year or the rate of inflation, whichever is lower.

The plaintiffs’ lawyers argued that forcing local governments to return taxes they’ve already collected – and in some cases spent – would be disastrous. Also, since county assessors start calculating taxes for next year this month, they would have to make huge, costly changes to their systems at the last minute.

“Behind these cities are real people,” said Michelle Radosevich, representing the city of Seattle. She said if cities are forced to refund money now, it would require drastic cuts in services such as police, libraries and paramedics.

Radosevich made an example of the city of Newcastle’s golf course. The city last year imposed an admission fee on users of the golf course. Now, the owners of the golf course are demanding the city pay back $120,000 in fees collected.

“That’s a huge blow to a very small city,” Radosevich said. “We need this injunction because very bad things will happen to people in the meantime.”

Plaintiffs’ lawyers compared this initiative to Eyman’s I-695, which passed in 1999. It also sought to limit taxes, but the state Supreme Court recently struck it down as unconstitutional. Both initiatives, the attorneys said, promised a one-shot tax break while at the same time requiring a complicated restructuring of the tax system – thus violating the state constitution’s single-subject rule for laws.

State budget analysts say the I-722 revenue loss to state and local programs – and the savings to property owners – will be $376 million during the two-year budget cycle that begins next summer.

The state Department of Revenue is a defendant in the lawsuit, which adds another wrinkle to the injunction. The injunction means the Revenue Department cannot give local governments any advice on implementing I-722. Usually, the state assesses the value of property that crosses county lines – things like public utilities and railroads. Because of the injunction, the Revenue Department won’t be able to assess those properties according to the rules of I-722. Counties that don’t join the lawsuit and are trying to implement I-722 on their own will thus have a tough time doing it without help from the Revenue Department.

Gary McLean, the Des Moines city attorney, called the judge’s ruling a “victory for the constitution of the state.”

Eyman was disappointed but still optimistic that the courts will uphold I-722 in February, when both sides are scheduled to argue the merits of the case before Judge Pomeroy.

“Elected officials that choose to use taxpayer money to sue the taxpayers are going to be able to stick it to the taxpayers,” Eyman said after the judge’s decision. “Voters have this kooky idea that when they vote for something it becomes law.”