Washington Citizens Action v. State, 78844-8.

Citation162 Wn.2d 142,171 P.3d 486
Decision Date08 November 2007
Docket NumberNo. 78844-8.,78844-8.
PartiesWASHINGTON CITIZENS ACTION OF WASHINGTON, a Washington non-profit corporation; Welfare Rights Organization Coalition, a Washington nonprofit corporation; 1000 Friends of Washington, a Washington non-profit organization; and Whitman County, Respondents, v. The STATE of Washington, and William Rice, Director of the State Department of Revenue, Appellants.
CourtUnited States State Supreme Court of Washington

James Kendrick Pharris, Timothy Dunning Ford, Office of Attorney General, Cameron Gordon Comfort, Atty Generals Ofc/Revenue Division, Olympia, WA, for Appellants.

Eric D. `knoll' Lowney, Attorney at Law, Gwynne L. Skinner, Ronald A. Peterson Law Clinic, Seattle U, Nancy S. Chupp, Public Interest Law Group PLLC, Seattle, WA, for Respondents.

Daniel Brian Heid, Auburn, WA, Kathleen J. Haggard, Dionne & Rorick, Seattle, WA, for Amicus Curiae on behalf of Washington State Assoc of Municipal Attorneys, Amicus Curiae on behalf of Association of Wash Cities and Wash Assoc of Counties, and Amicus Curiae on behalf of Washington Association of Counties.

BRIDGE, J.

¶ 1 Property taxes are levied each year by the state and by local governments based on the assessed value of a piece of property. Chapter 84.55 RCW limits the rate at which each taxing district, including the State, may increase the regular property tax levy amount. Initiative 747 (I-747), passed in 2001, attempts to amend chapter 84.55 RCW to generally limit state and local property tax levy increases to one percent per year.

¶ 2 Washington Citizens Action Welfare Rights Organization Coalition, 1000 Friends of Washington,1 and Whitman County challenge the constitutionality of I-747. Article II, section 37 of the Washington Constitution requires that amendatory laws set forth at full length the law to be amended. I-747's challengers argue that the initiative failed to accurately set forth the law that it sought to amend in violation of article II, section 37 because the text of the initiative claimed to reduce the general property tax levy limit from two percent to one percent, but in reality it reduced the limit from six percent to one percent. We agree. While the challengers also assert that I-747 violated article II, section 19's subject in title requirement, we need not address that argument in this case.

I Facts and Procedural History

¶ 3 Central to this case is the recent history of chapter 84.55 RCW (Limitations Upon Regular Property Taxes). Prior to 1997, chapter 84.55 RCW provided:

Except as provided in this chapter, the levy for a taxing district in any year shall be set so that the regular property taxes payable in the following year shall not exceed one hundred six percent of the amount of regular property taxes lawfully levied for such district in the highest of the three most recent years. . . .

Former RCW 84.55.010 (effective in 1996). The statute allowed for additional calculations based on new construction, property improvements, and any increase in assessed value of state-assessed property, but generally, the statute limited property tax increases to a levy of six percent above the total amount levied in the highest of the three previous years. Unless otherwise noted in a particular chapter or section, the term "[t]axing district" as used in Title 84 RCW, referred to both the state and municipal corporations with the power to impose property taxes. Former RCW 84.04.120 (effective in 1996). Finally, former RCW 84.55.050 (effective in 1996) allowed regular property taxes to be levied in an amount exceeding the limits set forth in chapter 84.55 RCW if authorized by voters of the taxing district at an election. Former RCW 84.55.050 (effective in 1996).

¶ 4 In 1997, the voters approved Referendum 47, amending chapter 84.55 RCW. Instead of a simple six percent limit, the referendum imposed a "limit factor" on property tax increases, defined as:

(a) For taxing districts with a population of less than ten thousand in the calendar year prior to the assessment year, one hundred six percent;

(b) For taxing districts for which a limit factor is authorized under section 204 of this act [set forth below], the lesser of the limit factor authorized under that section or one hundred six percent;

(c) For all other districts, the lesser of one hundred six percent or one hundred percent plus inflation.

LAWS OF 1997, ch. 3, § 201(2). Section 204 of Referendum 47 added a new section to chapter 84.55 RCW, creating an avenue for taxing districts other than the State to increase property taxes by a rate higher than the rate of inflation, but still equal to or less than six percent:

Upon a finding of substantial need, the legislative authority of a taxing district other than the state may provide for the use of a limit factor under this chapter of one hundred six percent or less. In districts with legislative authorities of four members or less, two-thirds of the members must approve an ordinance or resolution under this section. In districts with more than four members, a majority plus one vote must approve an ordinance or resolution under this section. The new limit factor shall be effective for taxes collected in the following year only.

Id. § 204. Referendum 47 limited the levy for a taxing district such that "regular property taxes payable in the following year shall not exceed ((one hundred six percent of)) the limit factor multiplied by the amount of regular property taxes lawfully levied for such district in the highest of the three most recent years." Id. § 202. Like its predecessor, Referendum 47 allowed for additional calculations based on new construction, property improvements, and any increase in assessed value of state-assessed property. Id. Referendum 47 did not alter the definition of "taxing district" and it emphasized that former RCW 84.55.050's voter approval mechanism could be used to increase property taxes above the limit factor. Id. § 208; former RCW 84.04.120 (effective in 1998); former RCW 84.55.050 (effective in 1998).

¶ 5 Thus, after Referendum 47, property tax increases were generally limited to a rate amounting to the lesser of inflation or six percent in most districts. Small taxing districts were limited by only six percent. Larger taxing districts (other than the State) could increase their property tax levy by a rate above the level of inflation up to six percent with a finding of substantial need, and all taxing districts, including the State, could increase property taxes above the six percent limit with voter approval.

¶ 6 Then, on November 7, 2000, the voters adopted Initiative 722 (I-722). City of Burien v. Kiga, 144 Wash.2d 819, 822-23, 31 P.3d 659 (2001). The portion of I-722 relevant to this case purported to amend chapter 84.55 RCW's definition of "[l]imit factor" by replacing all six percent increase limits with two percent increase limits. LAWS OF 2001, ch. 2, §§ 5-6. I-722 generally limited property tax increases to a rate amounting to the lesser of inflation or two percent. Small taxing districts would be limited by only the two percent cap. And if the rate of inflation were to fall below two percent, then larger taxing districts (other than the State) could increase their rate of property tax increase above the level of inflation up to two percent with a finding of substantial need.

¶ 7 Several municipal corporations, cities, counties, and nonprofit organizations challenged the constitutionality of I-722, and on November 30, 2000, the Thurston County Superior Court entered a preliminary injunction against the implementation or enforcement of I-722. Kiga, 144 Wash.2d at 823, 31 P.3d 659. In response, sponsors of I-722 contemplated a new property tax initiative for the 2001 ballot, apparently intending to provide a safety net if I-722 were declared unconstitutional. January 6, 2001, was the first day that 2001 initiatives could be filed with the secretary of state. See RCW 29A.72.030. On January 11, 2001, several weeks after the preliminary injunction against I-722 took effect, Permanent Offense filed I-747.

¶ 8 I-747's official ballot title read as follows:

Initiative Measure No. 747 concerns limiting property tax increases. This measure would require state and local governments to limit property tax levy increases to 1% per year, unless an increase greater than this limit is approved by the voters at an election.

Should this measure be enacted into law? Yes [] No []

State of Washington Voters Pamphlet, General Election 4 (Nov. 6, 2001) (Voters' Pamphlet).2 Section 2 of I-747 explains that:

RCW 84.55.005 and 2001 c 2 s 5 (Initiative Measure No. 722) are each amended to read as follows:

. . . .

(2) "Limit factor" means:

(a) For taxing districts with a population of less than ten thousand in the calendar year prior to the assessment year, one hundred ((two)) one percent;

(b) For taxing districts for which a limit factor is authorized under RCW 84.55.0101, the lesser of the limit factor under that section or one hundred ((two)) one percent;

(c) For all other districts, the lesser of one hundred ((two)) one percent or one hundred percent plus inflation. . . .

Id. at 14-15. Section 3 of the initiative amended "RCW 84.55.0101 and 2001 c 2 s 6 (Initiative Measure No. 722)" to read:

Upon a finding of substantial need, the legislative authority of a taxing district other than the state may provide for the use of a limit factor under this chapter of one hundred ((two)) one percent or less unless an increase greater than this limit is approved by the voters at an election as provided in RCW 84.55.050. In districts with legislative authorities of four members or less, two-thirds of the members must approve an ordinance or resolution under this section. In districts with more than four members, a majority plus one vote must approve an ordinance or resolution under this section. The new limit factor shall be effective for taxes collected in the...

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