High court to hear tax case

OLYMPIA – In a case that could affect your property tax bill, the state Supreme Court will hear arguments today that voters were misled into approving a tax-capping initiative six years ago.

“Voters were hoodwinked into passing I-747, in violation of our state constitution,” attorneys challenging the measure wrote in a brief filed to the high court.

The initiative said that taxing districts – the state, cities, counties, fire districts, library districts and so forth – cannot increase their tax levy more than 1 percent a year unless voters approve more. As attorney Knoll Lowney and other critics of the measure note, however, that’s well below the average rate of inflation.

Last June, King County Superior Court Judge Mary Roberts agreed and declared I-747 unconstitutional. If the high court upholds her ruling, taxing districts will be free to increase their tax levies as much as 6 percent a year.

State attorneys, obliged to defend the tax limit once voters made it law, call the case a “hypertechnical” challenge that threatens to hamstring ballot measures.

“The state constitution exists to protect important rights, not to trap citizens on fine technical points,” wrote Attorney General Rob McKenna and his staff.

This winter, Republican lawmakers wanted to reinstate the 1 percent limit immediately, but the Legislature’s Democratic majority decided to let the case play out in court. Gov. Chris Gregoire has said that 1 percent is probably too restrictive but that 6 percent is probably too high.

The initiative was challenged by diverse groups, including Whitman County, the anti-sprawl group Futurewise, the Welfare Rights Organizing Coalition and Washington Community Action Network.

“We’ve taken a lot of heat about it, but I think we did the right thing,” said Whitman County Commissioner Jerry Finch. “Other counties were afraid to step up and sign on because they were a little fearful of political fallout.”

Finch said the county – which gets some sales tax and other sources of revenue – can live with the 1 percent annual increase limit. But he said the commissioners agreed to join the case because they fear that the cap will make it impossible for local fire and cemetery districts to keep running. Unlike the county, they rely almost entirely on property tax.

“One percent? Look at just the price of fuel alone, or electricity,” said Finch. “They’re using up all their cash reserves. We’re slowly but surely starving our junior taxing districts into financial crises.”

And if fire departments and cemeteries can no longer pay the bills, he said, he’s worried that they’ll ask the county to do it.

“And I don’t think we as county commissioners are real anxious to do that,” he said. Whitman County’s legal bill in the case is limited to $1,000, he said.

The central issue in the case is whether voters knew what they were doing.

Prior to 2000, local property tax increases were generally capped at a 6 percent a year. That November, voters approved I-722, which cut that to just 2 percent. Days after it passed, critics filed a lawsuit against the measure.

While that case was working its way through the court, anti-tax activist Tim Eyman filed I-747, to reduce the cap even further to 1 percent. By the July 6 deadline, he’d filed the thousands of signed petitions required to get the new measure on the ballot. The petitions cited I-722 and the new 2 percent cap, suggesting that voters were being asked for a modest 1 percentage-point lowering of the cap.

But in late September, the high court decided that I-722 had, in fact, been unconstitutional. It was thrown out, and the 6 percent cap remained in place. So critics of the measure argue that the reduction – a drop of 5 percentage points, not a mere 1 point – was much steeper than many voters thought.

“They were misled,” said Joshua Welter, organizing director for the Washington Community Action Network.

The legacy of I-747, he predicts, will be roads full of potholes, shorter library hours, longer waits for ambulances and fewer fire stations.

Nobody was misled, according to McKenna. Eyman and the drafters of the initiative had no obligation to try to “guess correctly” which way the court would rule on I-722, he said. And at the time Eyman filed I-747, McKenna argues, the 2 percent cap was the law.

Besides, he said, the state voters’ pamphlet included a statement explaining that the 2 percent cap had been declared unconstitutional but was being appealed.