PUBLIC FINANCE - June 2006
Initiative 747 Ruled Unconstitutional;
State to Appeal
On Tuesday June 13, 2006, King County Superior Court
Judge Mary E. Roberts ruled Washington State Initiative 747
unconstitutional. Initiative 747 limits annual increases in the
amount of regular property taxes levied by a city, county, port
or other taxing district. Initiative 747 generally limits annual
increases to one percent (except for, among other things,
increases resulting from new construction). Regular property
taxes subject to the Initiative’s one percent limit include
nonvoted property taxes as well as certain voted taxes such as
emergency medical services levies.
Judge Roberts’ order voided Initiative 747 and enjoined the
State of Washington from enforcing the Initiative. Attorney
General Rob McKenna has announced that the State (as
defendant in the suit) will appeal the decision to the State
Supreme Court. Although the State’s appeal has not yet been
filed, it is likely that the State will seek to stay the effect of
Judge Roberts’ order pending a final decision by the State
Supreme Court.
As described above, Initiative 747 is a one percent limit on
annual increases in the amount of a taxing district’s regular
property tax levy. Initiative 747 purported to amend Washington
State Initiative 722, which had been enacted by public vote
earlier and generally limited annual increases to two percent.
Prior to both Initiatives 747 and 722, taxing districts could, as
a general matter, increase regular property taxes by the lesser of
inflation or six percent. In other words, the original six percent
limit was reduced to a two percent limit by Initiative 722.
Initiative 747 reduced Initiative 722’s limit from two percent to
one percent.
Initiative 722’s two percent limit was ruled unconstitutional
by the State Supreme Court, however, prior to the vote on
Initiative 747. The timing of this sequence of events is the
basis for Judge Roberts’ ruling invalidating Initiative 747.
Judge Roberts held that Initiative 747 is unconstitutional
because it amended Initiative 722, which had been invalidated,
rather than amending then existing law. The Washington State
Constitution requires that any amendatory initiative clearly
set out the initiative’s impact on existing law. The order holds
that, by referencing Initiative 722’s two percent limit rather
than the then existing six percent limit, Initiative 747 failed to
meet this standard. As a result, voters were presented with a
question whether to reduce a two percent limit to a one percent
limit, rather than the relevant question: whether to reduce a six
percent limit to a one percent limit.
Assuming an appeal is filed, the State Supreme Court likely will
hear the case in either its fall 2006 or winter 2007 term.
If Initiative 747 is held unconstitutional on appeal, the prior six
percent limit will once again be the law. This result may create
a number of uncertainties. Taxing districts have taken steps in
reaction to Initiative 747 since its adoption - setting annual levy
amounts, passing levy lid “lifts” with voter approval to exceed
the one percent limit, and forgoing “banking” unused property
tax capacity up to the prior six percent limit.
It is possible that the State Legislature may act in response to
the decision in the upcoming 2007 legislative session.
Several jurisdictions currently are considering seeking voter
approval for levy lid lifts to increase their levies above Initiative
747’s one percent limit. Until a final decision by the State
Supreme Court these jurisdictions may need to proceed with
their levy lid lifts, in case the one percent limit remains in effect
or is re-enacted by the State Legislature.
For more information, please consult any of the attorneys in
our public finance practice:
Portland Office (503) 228-3200
Carol J. McCoog
Edward A. (Mac) McCullough
Harvey W. Rogers
Ann L. Sherman
Gulgun Ugur
Seattle Office (206) 623-7580
Stacey Crawshaw-Lewis
Deanna L. Gregory
Tina Kyle Livingston
Nancy M. Neraas
Faith Li Pettis
Jay A. Reich
David O. Thompson
Cynthia M. Weed
Spokane Office (509) 624-2100
Laura D. McAloon
Michael C. Ormsby
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