Sator v. State Dept. of Revenue

• Decision Date: 08 December 1977
• Docket Number: No. 44072,44072
• Citation: 572 P.2d 1094,89 Wn.2d 338
• Parties: Fred R. SATOR and Evangeline Sator, his wife, John G. Fischer and Betty Rae Fischer, his wife, and Boeing Computer Services, Inc., a Delaware Corporation, Appellants, v. STATE of Washington DEPARTMENT OF REVENUE, and King County, a Municipal Corporation, Respondents.
• Court: Washington Supreme Court

Page 338

89 Wn.2d 338

572 P.2d 1094

Fred R. SATOR and Evangeline Sator, his wife, John G Fischer and Betty Rae Fischer, his wife, and Boeing Computer Services, Inc., a Delaware Corporation, Appellants, v. STATE of Washington DEPARTMENT OF REVENUE, and King County a Municipal Corporation, Respondents.

No. 44072.

Supreme Court of Washington, En Banc.

Dec. 8, 1977.

Perkins, Coie, Stone, Olsen & Williams, Graham Fernald, Seattle, for appellant.

Slade Gorton, Atty. Gen., Richard Holmquist, Matthew J. Coyle, Asst. Attys. Gen., Olympia, for respondent.

Don Herron, Pros. Atty., Terrence McCarthy, Deputy Pros. Atty., Tacoma, amici.

DOLLIVER, Associate Justice.

This is an appeal by five taxpayers and property owners in King County from (1) the denial of plaintiffs' motion for a summary judgment, and (2) the granting of the defendants' motion for a summary judgment dismissing with prejudice the plaintiffs' lawsuit. The appellants filed a complaint in King County Superior Court praying for a declaratory judgment and injunctive relief against the use of the intercounty equalization method as a basis for determining value of property for purposes of the state school ad valorem property tax levy. They sought to have RCW 84.52.065 declared unconstitutional. The statute reads:

In each year the state shall levy for collection in the following year for the support of common schools of the state a tax of three dollars and sixty cents per thousand dollars of assessed value upon the assessed valuation of all taxable property within the state adjusted to the state equalized value in accordance with the indicated ratio fixed by the state department of revenue.

Appellants Sators and Fischers own taxable real estate. Appellant Boeing Computer Services is a corporation which owns taxable personal property. All appealed the 1974 assessments of their property to the King County Board of Equalization. The board reduced each of the assessments from the original assessment.

In that this case calls into question the validity of the property tax system, it is useful to review the procedure by which the tax is ultimately determined.

The county assessor in each county determines the value of property. RCW 84.40.040. The value is adjusted by the county board of equalization to 100 percent of true value. RCW 84.48.010. Personal property is revalued and inspected every year (RCW 84.40.040), and real property every 4 years. RCW 84.41.030, .041.

The Department of Revenue, sitting as the State Board of Equalization, then ascertains the "indicated ratio." This is the ratio of the true and fair value of locally assessed property both real and personal within a county, as determined by the assessor and the county board of equalization, to the true and fair value of such property as determined by the Department of Revenue. RCW 84.48.080. The "indicated ratio" is used to adjust or equalize the local tax base among the counties of the state in order to assure that each county bears its fair share of taxes for state purposes: the support of the common schools.

The state tax for schools is levied at the rate of $3.60 per thousand dollars of assessed valuation after it is adjusted by the indicated ratio. In 1974, the indicated ratio for King County was 89.08 percent.

The county, instead of expressing the state tax as $3.60 on the state determined assessed valuation, expresses it as an increased dollar rate on the locally determined assessed valuation. Stated otherwise, when taxpayers in King County received their 1974 tax statements in 1975, the state school levy was not expressed on those statements in terms of $3.60 on an increased local assessed valuation. Rather, it was expressed in terms of an increased millage rate that is, $4.04 on the locally determined assessed valuation. The result on taxpayers in King County is the same, however, whether the adjustment is expressed in terms of an increased assessed valuation or in terms of an increased millage rate. Similarly, tax statements in the other 38 counties reflected the equalization accomplished by the State Board of Equalization for each county, to the end that all property in the state shared the tax burden for the support of the common schools at 100 percent of true and fair valuation as determined by the Department of Revenue as of January 1, 1974.

Based on these facts, the issues raised by appellants are: (1) Does RCW 84.52.065 impose taxation arbitrarily and capriciously in violation of the equal protection clause and constitutional guaranties of uniform taxation? (2) Does RCW 84.52.065 authorize the taking of property without notice and hearing in violation of Const. art. 1, § 3 and U.S.Const. amend. 14, § 1? and (3) Does RCW 84.52.065 violate the "home-rule" provisions of Const. art. 11, § 12?

This case is the latest in a line of cases beginning with State ex rel. Barlow v. Kinnear, 70 Wash.2d 482, 423 P.2d 937 (1967), concerned with the constitutionality of state statutes and practices relative to the valuation and assessment of property. Carkonen v. Williams, 76 Wash.2d 617, 458 P.2d 280 (1969); Dore v. Kinnear, 79 Wash.2d 755, 489 P.2d 898 (1971); Snohomish County Bd. of Equalization v. Department of Revenue, 80 Wash.2d 262, 493 P.2d 1012 (1972); Morrison v. Rutherford, 83 Wash.2d 153, 516 P.2d 1036 (1973); and Valentine v. Johnston, 83 Wash.2d 390, 518 P.2d 700 (1974). The instant case, however, represents a decisive break with the past. It is the first to involve an interpretation of amendment 55 to the Washington State Constitution and the statutes enacted attendant to its passage. In each of the other cases cited above, the following constitutional provision was in effect:

(T)he 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 forty mills on the dollar of assessed valuation, which assessed valuation shall be fifty per centum of the true and fair value of such property in money . . .

Const. art. 7, § 2 (amendment 17).

In 1972, prior to the actions complained of and in effect at the time of this case, Const. art. 7, § 2 (amendment 55, superseding amendment 17), was adopted by the people. Amendment 55 provides:

(T)he 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 percentum of the true and fair value of such property in money . . .

Under the former constitutional directive, amendment 17, the aggregate tax could not exceed 40 mills on each dollar of assessed valuation, which assessed valuation "shall be" 50 percent of the true and fair value. (Italics ours.) Forty mills at 50 percent of true and fair value is, of course, equivalent to 2 percent of true and fair value.

Contrast this with the present constitutional requirement, amendment 55, which directs that the aggregate tax levies "shall not in any year exceed one percentum of the true and fair value". (Italics ours.) Thus, those cases cited by appellant, Snohomish County Bd. of Equalization v. Department of Revenue, supra, and Morrison v. Rutherford, supra, which deal with the problems of cyclic valuation with reference to amendment 17, are not in point.

Contrary to the assertions of appellants, there is now no constitutional requirement that property be assessed at 100 percent of true and fair value. The constitutional requirement is only that aggregate levies not exceed 1 percent of true and fair value. The questions now are not the percentage of appellants' assessed valuation but whether their total tax exceeds 1 percent of true and fair value (cf. Department of Revenue v. Hoppe, 82 Wash.2d 549, 512 P.2d 1094 (1973)), and whether, under Const. art. 7, § 1 (amendment 14), the appellants are treated uniformly with other taxpayers in their class. While appellants complain their assessed valuation exceeds 100 percent, they do not allege their tax exceeds 1 percent of the true and fair value of their property. Thus, regardless of what their annual valuation may be, we need only inquire as to whether they are being treated consistent with the "uniform" requirements of amendment 14.

As to real property, this court held in Snohomish County Bd. of Equalization v. Department of Revenue, supra, that, when the 4-year cycle had been completed it was mandatory that all assessments be at 50 percent of true and fair value. Accord, Morrison v. Rutherford, supra. But this was to meet the valuation provisions of amendment 17 (now superseded by amendment 55), not the uniformity provisions of amendment 14. As to the validity of the 4-year cycle against the requirements of uniformity, we stated in Morrison, 83 Wash.2d at page 156, 516 P.2d at page 1038:

It is apparent that in a 4-year cycle there will be substantial disparities between properties which have been revalued and those not yet reappraised. That is the unhappy position in which plaintiffs find themselves. The holding of Carkonen v. Williams, supra (76 Wash.2d 617, 458 P.2d 280) is that such disparity, per se, violates neither article 7, section 1 of the state constitution nor the Equal Protection Clause of the federal constitution.

What plaintiffs really seem to be urging is that the 4-year valuation cycle program for real property (RCW 84.41) be held unconstitutional as violating amendment 14. This we decline to do. We have repeatedly said that, if the 4-year revaluation program is conducted in an orderly manner and pursuant to a regular plan, and if it is not done in an arbitrary, capricious or intentionally discriminatory manner, then it does not violate the constitution nor does any incidental inequality which flows from it. A program is not invalid just because it is imperfect; minor discrepancies will be tolerated in an otherwise acceptable statewide system. Carkonen v. Williams,supra; Morrison v. Rutherford, supra. Compare Dore...