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To tax or not to tax

SNOQUALMIE VALLEY — Even though state voters approved

an initiative that would lower their property taxes, several Valley cities

have increased tax rates higher than the measure allows so they can

operate without cutting services.

Initiative 722 was approved Nov. 7 and limits property tax increases

levied by any government entity to either 2 percent or the rate of inflation. It

also would give residents back the difference from any tax or fee

increase adopted from July through December of 1999 without taxpayer consent.

Currently, an injunction has been granted against I-722 which

prevents it from becoming law. The Washington Supreme Court is expected to

ultimately rule on its constitutionality sometime next year.

Lawyers throughout the state have said that I-722 is unconstitutional

because it contains two components instead of the maximum of one

allowed in every initiative. Its fate could be the same as its predecessor, I-695,

which passed in 1999 but was ruled unconstitutional earlier this year.

I-695 required taxpayer approval for all tax and fee increases, and

set state license tab fees at $30. The State Legislature ended up keeping the

$30 fee, but rejected the rest. Mukilteo resident Tim Eyman crafted both

initiatives.

Many Valley city officials said they understand the motivation for

limiting tax increases, but they also don't want to cut services that residents count

on to meet those limits, such as police, fire, park and human services.

Out of four Valley cities, three of them — Snoqualmie, Carnation

and Duvall — chose to go with the maximum 6 percent property tax

increase allowed before I-722 was passed, because, they said, their budgets are

already lean.

The fourth city, North Bend, chose to stick with 2 percent, even

though its budget is higher than last year's.

"The main reason was that at the time [of the City Council's vote,

I-722] was law, as well as the fact that the majority of the [residents] voted for

it and it is our job to reflect the wishes of the people," said Fred

Rappin, North Bend city councilman.

"Next year I think I'll go back to the 6 percent because costs rise,

and we hate to see any services cut," he added.

This is the seventh budget Rappin has been involved with, and this

year was the first time that he personally voted for less than 6 percent.

Most city budgets have included 6 percent property tax increases

for years. Snoqualmie City Council members voted for 6 percent for next

year because the city is growing rapidly, and it would not be able to keep

up with providing services to new residents if the budget was cut.

"As this will be the first year of the city standing on its own two

feet with no shortfall from WRECO, we wanted to be very careful to do

the budget correctly and to maintain the level of service that we are

currently giving the citizens," said

Snoqualmie Mayor Randy "Fuzzy" Fletcher.

The city had been receiving money from the Weyerhaeuser Real

Estate Co. until Snoqualmie Ridge could be fully developed. The money,

which was spent on planning and extra staff,was distributed to the city

because it could not collect property tax revenues from the subdivision's

taxpayers on houses that had not yet been built. Snoqualmie Treasurer

Shirley Leonard said the city adds 30 to 50 new residents each month.

"It was a real challenge trying to estimate figures for next year's

budget because of our growth and no history to fall back on to estimate

new resident totals," she said. "Our

elected officials worked hard on the budget."

Duvall City Council members originally included a 2 percent

increase in the 2001 budget, but later changed their minds.

"I think we have a real conservative budget this year. I think our

feeling was we could go with the max, and if I-722 impacted us, we would

[deal with it] at that time," said Dianne Nelson, Duvall's finance director.

She said that allowing only a 2 percent increase instead of 6

percent would result in a domino effect of revenue loss for the city.

"If you don't go to the full 6 percent each year, you lose more than

the [eliminated] percent — it's compounded and you can't go back

and collect it," she said.

Carnation also approved a 6 percent increase because its officials

determined the city needed the money to continue to provide public services.

"Our budget is very tight. Our economic base is very low, and this is

our problem," said Carnation Mayor Bob Patterson, explaining that with

fewer residents and businesses, there are fewer taxes that can be collected.

"We have been using the 6 percent every year, and we saw no reason to

change that."

After I-722 passed in November, Carnation joined the city of

Seattle, as well as other Washington cities and counties, in the lawsuit to stop

the initiative's implementation.

"We're maintaining our budget as we have in the past, our taxes as

we have in the past, and we need it to provide the services we're providing,"

he added.

Carnation City Manager Woody Edvalson agreed.

"I think the council's determination or feeling was to give the

residents what they want, and to do that, this level of revenue was

needed," Edvalson said.

But I-722 creator Eyman said the cities could be bluffing about

their supposedly lean budgets and need to raise taxes 6 percent annually.

"The cities in Snoqualmie Valley have obviously taken this

`father knows best' approach and ignored the voters' wishes," he said. "I-722

became law Nov. 7, and it's arrogant for them to take an approach of

ignoring it."

Eyman said city officials often pass tax increases because they

feel their residents aren't smart enough to understand ballot issues and

would always vote down a tax increase.

"First of all, the taxpayers have shown time and again that they

will approve tax increases as long as the project is explained to them and

their permission is asked," he said. "[It]

flies in the face of common sense that people would vote every tax

increase down." He noted that voters across

the state have approved his tax-cutting initiatives two years in a row.

The majority of Valley residents who voted Nov. 7 approved I-722.

The Valley is divided into two legislative districts, District 5 and District 45.

The 5th District includes Issaquah, Renton and most of the Valley. Carnation

and Duvall lie in the 45th District, along with the

Woodinville-Kirkland-Redmond area.

Out of 61,293 votes cast for I-722 in the 5th District, 37,943 were for

the proposal — almost 62 percent — and 23,350 were against. In the 45th

District, 58 percent of voters approved I-722. For the entire state, about 56

percent of the voters approved the initiative, while in King County close to

50 percent voted for it.

While I-722 limits how much property taxes can go up from year

to year, it also forces cities to refund residents the difference in tax

increases and fees voted in between July and December of 1999. Officials

from across the state have said that part of I-722 is unconstitutional for two

reasons: Initiatives can't contain more than one component, and cities

can't be forced to refund tax revenues already collected.

Snoqualmie City Attorney Pat Anderson said the state

Supreme Court has ruled in the past that taxing agencies cannot give back money

already collected from taxpayers because it would be a "gift of

public funds."

Eyman is currently planning a third initiative for 2001 called

"The Spirit of I-695." This measure

would include only one component: to require taxpayers' permission

before governmental bodies can pass any tax or fee increases.

"Now [with I-722] it's going to be up to elected officials to start to

treat taxpayers as customers [and] ask permission to take t

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