Lawyers And Locke Work Out Plan To Set Aside New Hotel-Motel Tax Law

State and city lawyers have agreed to ask a Thurston County judge to set aside a new state law that inadvertently keeps some cities from collecting hotel-motel taxes they need to pay off civic projects, participants confirmed Friday.

Gov. Gary Locke said the negotiations should avert a need for a special legislative session this year.

Yakima, Bellevue and other cities have sued the state, saying it’s unconstitutional to block collection of the taxes, since the revenue is needed to pay off construction bonds. They say the new law, with partial vetoes by the governor, illegally requires them to break their contracts.

The Locke administration, cities, and the hotel-motel industry have agreed to propose a settlement in which the court would set the statute aside and the Legislature would decide on a permanent fix in January.

“We think we have a solution that will not require a special session,” Locke told reporters in Eastern Washington this week. He spoke of a combination of a court order and some administrative rules by the state Department of Revenue.

Participants in the talks said Friday that the bottom line is that all parties to the lawsuit have agreed to ask Judge Richard Strophy to put the new law on hold, with assurances that the governor and Legislature will quickly address the problem in the 1998 session.

Locke spokeswoman Marylou Flynn said the principals are being careful not to present the proposed settlement as a done deal. The judge has full discretion and won’t appreciate any impression that his authority is being circumvented, she said.

Unless Strophy stops the law from taking effect July 27, Bellevue and Yakima will be barred from collecting the taxes they were counting on to pay off Bellevue’s Meydenbauer Center and the Yakima Center.

The problem began with a technical bill that was supposed to simplify the complex web of hotel and motel taxes collected by the state’s cities and counties.

Locke, in an effort to make sure the measure did not conflict with other legislation affecting the taxes, vetoed two of its 25 sections. The two sections had been aimed at protecting Bellevue and Yakima from any adverse effect, but Locke says he was told there would be no problem with the vetoes.

That turns out to be wrong: Bellevue says it would lose $2 million per year and Yakima says it would lose several hundred thousand dollars.