STAR Nw. INC. v. CITY of KENMORE, 63971-4-I
| Decision Date | 04 April 2011 |
| Docket Number | No. 63971-4-I,63971-4-I |
| Court | Washington Court of Appeals |
| Parties | STAR NORTHWEST, INC., d/b/a KENMORE LANES and 11th FRAME RESTAURANT & LOUNGE, a Washington corporation, Appellant, v. CITY OF KENMORE, a Washington municipal corporation, and KENMORE CITY COUNCIL, the legislative body of the City of Kenmore, Respondents |
Grosse, J. — An ordinance that requires a specified percentage of gambling tax revenue be dedicated to a purpose other than enforcement of the gambling act does not violate RCW 9.46.113 where the ordinance contains a proviso that insures that the revenue collected from the tax is put in the first instance to the purpose of enforcing the gambling act. Further, an ordinance banning all card rooms within a city does not constitute an unconstitutional taking as applied to the operator of a card room where the ordinance does not deprive the operator of all economically viable use of its property and there is no showing that the ordinance goes beyond regulating a public harm. Accordingly, the city of Kenmore's ordinance imposing a card room tax of 15 percent of gross revenue is not invalid under RCW 9.46.113, nor does the application of its ordinance banning all card rooms to Star Northwest, Inc. constitute a taking in violation of the Fifth Amendment. We affirm.
Star Northwest, Inc. operated a card room, restaurant, bowling alley, bar, and arcade in leased premises located in the city of Kenmore (Kenmore). This appeal involves Star Northwest's challenge to two of Kenmore's ordinances. One ordinance, enacted in 2004, raised Kenmore's tax on card rooms from 11 percent to 15 percent and provided for the dedication of a portion of the tax revenue to the funding of capital facility projects. The other ordinance at issue is a 2005 ordinance banning all card rooms in Kenmore.
In 1998, Kenmore enacted Ordinance No. 98-0013, which established a gambling tax on card rooms. The ordinance provided:
C. Social card playing: Operators shall pay a tax equal to eleven percent (11%) of the gross receipts from such games.
Star Northwest operated a card room as part of its business and, accordingly, was subject to this tax.
In December 2004, Kenmore enacted Ordinance No. 04-0223, which raised the card room tax from 11 percent to 15 percent of gross revenue and imposed requirements as to the expenditure of the card room tax revenue. The amended ordinance provides:
C. Social Card Games Playing. Operators shall pay a tax equal to eleven fifteen percent of the gross receipts from such games. An amount equal to four fifteenths of the social card game tax paid by operators of social card games shall be dedicated to funding City Capital Facilities Plan projects; provided, however, that revenue collected from this tax shall be expended primarily for the purpose of enforcement of gambling laws pursuant to RCW 9.46.113.
In December 2005, Kenmore enacted Ordinance No. 05-0237 banning all card rooms within the city. Star Northwest closed its card room in 2009 after expiration of an injunction allowing the card room to remain open.
After the ordinance banning card rooms was enacted, but before it became effective, Star Northwest filed an action in federal district court against Kenmore and the city council (collectively the City), challenging both the ordinance banning card rooms and the ordinance increasing the gambling tax. Star Northwest sought injunctive relief, declaratory relief, and damages. The court issued a temporary restraining order (TRO) barring enforcement of the card room prohibition. The parties later stipulated to continuation of the TRO as a preliminary injunction until the district court determined the merits.
The district court granted the City's motion for summary judgment and dismissed Star Northwest's challenge to the card room prohibition. The court declined to exercise supplemental jurisdiction over Star Northwest's claim for a refund of the gambling tax it paid and remanded that claim to state court. The court also dissolved the injunction. Star Northwest appealed to the Ninth Circuit, and that court affirmed the district court. According to Star Northwest's complaint filed in state court, the Ninth Circuit issued an order in September 2006 staying the district court's order dissolving the injunction.
In 2006, Star Northwest filed this action in state court, seeking injunctive relief and damages. Star Northwest alleged a taking under the Fifth Amendment, a violation of 42 U.S.C. §§ 1983 and 1988, a claim for injunctive relief, and a claim for a refund of the gambling tax it paid under the ordinance. The state court denied Star Northwest's motion for partial summary judgment on the gambling tax claim and its motion to reconsider the denial. The court granted the City's motion for summary judgment on the gambling tax claim and dismissed the claim. The court later granted the City's motion for summary judgment on Star Northwest's takings claim and dismissed that claim as well. Star Northwest appeals.1
We review the denial of a motion for summary judgment de novo.2Summary judgment is appropriate if the pleadings, deposition, answers to interrogatories, and admissions on file, together with any affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.3 We take all facts in the light most favorable to the nonmoving party.4 "[T]he proper construction of a city taxation ordinance is a legal question that is reviewed de novo on appeal."5 The taxpayer has the burden of proving that a tax it paid is incorrect.6 We also review de novo the question whether a municipal ordinance conflicts with state law.7
Under state law, the City is permitted to provide, by ordinance, for the taxing of any gambling activity authorized by the gambling act within its jurisdiction.8 The statute directs that the taxation of social card games may not exceed 20 percent of the gross revenues from such games.9 Under the law as it existed at the relevant time, the City was required to use any revenue collected from such a tax "primarily for the purpose of enforcement of the provisions of [the gambling act] by the county, city or town law enforcement agency."10
Star Northwest argues that the City's gambling tax ordinance violates RCW 9.46.113 on its face because the ordinance does not require that the tax revenue be used primarily for the purpose of enforcement of the gambling act, but rather requires that four-fifteenths of the tax revenue be dedicated to funding capital facilities plan projects. It argues that the proviso in the ordinance does not cure the problem. We disagree.
A proviso is a limitation upon or an exception to the general terms of the statute to which it is appended.11 "The appropriate office of a proviso or exception is to restrain or modify the declaring or enacting part of the statute or to except something which would otherwise be in the enacting clause."12 The proviso in the City's gambling tax ordinance limits the directive in the declaring part of the statute as to the dedication of four-fifteenths of the tax revenue to funding capital facilities plan projects. The proviso ensures that the City expends the revenue collected from the tax "primarily for the purpose of enforcement of gambling laws pursuant to RCW 9.46.113" before dedicating revenue to funding capital facilities plan projects.13 The City's card room tax ordinance fulfills the requirement of RCW 9.46.113 that the tax revenue be "primarily" used for the purpose of enforcing gambling statutes.
Star Northwest also argues that the City has failed to comply with RCW 9.46.113 with regard to the use of the tax revenue collected under the ordinance because the City is not primarily using the tax revenue for the purpose of enforcing the gambling statutes. Each year, the City deposits all gambling tax revenue into the general fund, into which it also deposits property tax revenue, sales and use tax revenue, criminal justice sales tax revenue, utility tax revenue, franchise fees, state-shared revenues, liquor excise tax revenue, community development fees, investment interest, and other sources of revenue. The City contracts with King County for its police services and pays the county for these services out of the general fund. The City likewise pays for costs incurred in enforcing the gambling tax from the general fund. Payments are not tracked to a particular source of revenue, but rather are simply tracked to the general fund as a whole.
This scenario is similar to that in American Legion Post No. 32 v. City of Walla Walla.14 That case was a taxpayer challenge to Walla Walla's gambling tax, imposed pursuant to chapter 9.46 RCW. As is the case in Kenmore, all gambling revenue was placed in Walla Walla's general fund, and no line item in the budget was specifically dedicated to the enforcement of the gambling laws. Walla Walla conceded that there was no way to trace the actual expenditure of the gambling tax revenue. The same appears to be true in Kenmore.
The American Legion made the same argument Star Northwest is making here, namely that the city was not utilizing the gambling tax revenue primarily for the enforcement of the gambling statutes as required by RCW 9.46.113. The court in American Legion first rejected the argument that an improper use of tax revenue renders an otherwise constitutional tax unconstitutional:
There is no authority, nor does Legion provide any, that renders an otherwise constitutionally levied tax unconstitutional merely because it is purportedly utilized for a purpose other than what is required.15
Rather, the court concluded, American Legion's argument was "nothing more than a challenge to Walla Walla's allocation of the gambling...
To continue reading
Request your trial