Belas v. Kiga
| Decision Date | 30 July 1998 |
| Docket Number | No. 66417-0,66417-0 |
| Citation | 135 Wn.2d 913,959 P.2d 1037 |
| Court | Washington Supreme Court |
| Parties | Carol BELAS, Kitsap County Assessor; Scott Noble, King County Assessor; Paul G. Dossett, San Juan County Assessor; John M. Sweetman, Ferry County Assessor; Jack Westerman, III, Jefferson County Assessor; Ray Ryan, Cowlitz County Assessor; Bill Brooks, Lewis County Assessor; Blanche G. Estep, Stevens County Assessor; Mark Leander, Skagit County Assessor; and Darryl Cleveland, Mason County Assessor, Petitioners, v. Frederick C. KIGA, Director, Washington Department of Revenue, Respondent. |
Frederick C. Kiga, Christine Gregoire, Attorney General, Edward B. Mackie, Olympia, for Respondent.
Garvey, Schubert & Barer, William Severson, Seattle, Amicus Curiae on behalf of Washington Association of County Officials.
This is an original action brought by 10 elected county assessors challenging the constitutionality of a portion of a 1997 referendum which changed the method of assessing real property for the purpose of levying property taxes. The county assessors argue the new scheme violates the uniformity requirement of the Washington Constitution and unfairly shifts the tax burden from owners of rapidly appreciating property to owners of property which is staying more stable in value or which is depreciating in value. We agree with the assessors that the challenged provisions violate article VII of our state constitution. The apparent intent of value averaging was to accommodate
taxpayers experiencing large increases in real property market values. To accomplish this, however, value averaging shifts the tax obligation to other taxpayers not experiencing large value increases. While the goal of alleviating rapid increases in taxes is laudable, the method used is unfair and unconstitutional.
In 1997, the Legislature referred Referendum 47 to the people, and the voters approved the referendum. The elected county assessors of Kitsap, King, San Juan, Ferry, Jefferson, Cowlitz, Lewis, Stevens, Skagit, and Mason Counties (Assessors) challenge the constitutionality of that part of Referendum 47 which mandates a new "value averaging" formula for assessing the value of rapidly appreciating parcels of real property. The named respondent is the Director of the State Department of Revenue. The Department of Revenue has general supervision and control over the administration of the assessment of property and the tax laws of the state.
Referendum 47 addresses taxation of real property in three ways. First, it reduces the state property tax levy for collection in 1998 by 4.7187 percent of the levy amount. Second, the 106 percent limit, RCW 84.55, was revised to generally lower the maximum levies of the various taxing districts. Third, individual increases in real property assessments are limited to 15 percent or 25 percent of the increase of market value in any given year. This third effect is the only part of Referendum 47 which is challenged, and is the one we address. The referendum refers to this limitation as "value averaging." The Assessors contend that Referendum 47's "value averaging" provisions produce a property tax scheme that violates the uniform taxation requirement of Const. art. VII, § 1 (amend.14).
"Value averaging" is a value limitation mechanism which is designed to limit large increases in real property assessments for individual parcels of property. Real property assessed The effect of this limit is that: (1) for property with a market increase of less than 15 percent, the assessed value of a parcel will be its full market value; (2) for property with a market increase of between 15 percent and 60 percent, the assessed value will increase only by 15 percent from the previous year's assessed value; and (3) for properties with a market increase of greater than 60 percent, the assessed value will increase only by 25 percent of the actual market increase. Agreed Fact 827 (Table 1). For example, in an annual appraisal county, if a $100,000 property The Assessors sought original jurisdiction in this Court, which we granted. The parties agree that the case involves only a question of law and have submitted an 80-page Agreed Statement of Facts to which reference is made in this opinion. We have allowed the Washington Association of County Officials to file an amicus brief. The Assessors and the Association of County Officials ask us to conclude that discriminating among property owners within the same class violates the state constitutional requirement that taxes be uniform. They ask us to issue a writ mandating the Director of the Department of Revenue to disregard Referendum 47's value averaging provisions and implement the property tax laws uniformly. 3
values will be recalculated each year 1 and annual increases will be limited to [959 P.2d 1040] the lesser of market value or a calculated limited value. The calculated limited value imposes an increase limit of either 15 percent over the prior year's assessed value or 25 percent of the market change of value if the change exceeds 60 percent, whichever is greater. Laws of 1997, ch. 3, § 105. 2 increased in value by 10 percent, the new appraised value would be $110,000 and the new assessed value (upon which the tax rate would be applied to determine tax liability) would also be $110,000. If a $100,000 property increased in value by 50 percent, the new appraised value would be $150,000 but the new assessed value (upon which the tax rate would be applied) would only be $115,000. If a $100,000 property increased by 80 percent, the new appraised value would be $180,000, but the new assessed value (upon which the tax rate would be applied) would be $120,000. Agreed Fact 327.
Does the "value averaging" provision of Referendum 47 violate the constitutional requirement that taxes be uniform in one class as required by article VII, § 1 of the Washington State Constitution?
The Legislature possesses a plenary power in matters of taxation except as limited by the Constitution;
amendment 14 to the state Constitution is a limitation on the taxing power of the Legislature. State ex rel. Mason County Logging Co. v. Wiley, 177 Wash. 65, 73, 31 P.2d 539 (1934). A referendum or an initiative measure is an exercise of the reserved power of the people to legislate, and the people in their legislative capacity remain subject to the mandates of [959 P.2d 1041] the Constitution. Gerberding v. Munro, 134 Wash.2d 188, 196, 949 P.2d 1366 (1998); Philip A. Trautman, Initiative and Referendum in Washington: A Survey, 49 W ASH. L. R EV. 55, 63, 66, 70 (1973). Constitutional provisions cannot be restricted by legislative enactments. City of Kennewick v. Benton County, 131 Wash.2d 768, 774, 935 P.2d 606 (1997). A statute is presumed constitutional and the parties challenging its constitutionality must demonstrate its unconstitutionality beyond a reasonable doubt. Granite Falls Library Capital Facility Area v. Taxpayers of Granite Falls Library Capital Facility Area, 134 Wash.2d 825, 832-33, 953 P.2d 1150 (1998); Sator v. Department of Revenue, 89 Wash.2d 338, 346, 572 P.2d 1094 (1977). This standard is met if argument and research establish that there is no reasonable doubt the statute violates the Constitution. Island County v. State, 135 Wash.2d 141, 147, 955 P.2d 377 (1998).
Article VII of the state Constitution deals with revenue and taxation. The limitations on the assessment of property are contained in Const. art VII, §§ 1 and 2. Article VII, § 1 provides in relevant part:
All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax.... The word "property" as used herein shall mean and include everything, whether tangible or intangible, subject to ownership. All real estate shall constitute one class: Provided, That the legislature may tax mines and mineral resources and lands devoted to reforestation by either a yield tax or an ad valorem tax.... Such property as the legislature may by general laws provide shall be exempt from taxation.
Const. art. VII, § 2 provides in relevant part:
Except as hereinafter provided and notwithstanding any other provision of this Constitution, the aggregate of all tax levies upon real and personal property by the state and all taxing districts now existing or hereafter created, shall not in any year exceed one per centum of the true and fair value of such property in money[.]
A brief history of article VII is helpful to understand the parties' arguments and the case law interpreting the taxing provision. The original state Constitution required uniformity in taxation of all property, real and personal, tangible and intangible. In 1930, the voters approved amendment 14 which authorized separate classifications of personal property. Laws of 1929, ch. 191, § 1. The purpose of the 1930 amendment was to allow the Legislature to classify different kinds of property and levy different rates on different classes. The intent was mainly to allow classes of property known as...
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