News, Events & Updates

August 2011

Legislature's Attempt to Increase Taxes Without a Public Vote Held Illegal

On March 17, 2005, attorneys at Groen Stephens & Klinge (GSK) saved Washington State voters the right to vote on increased taxes, totaling more than $130 million in excess taxes for this fiscal year alone.

More than a decade ago, the voters adopted Initiative 601 (I-601), which required the Legislature to exercise fiscal discipline by requiring (1) legislative approval of tax increases by a supermajority vote and (2) voter approval for those bills that raised taxes above the state expenditure limit. That all changed, however, when the Legislature convened for the 2005 session. First, the Legislature defied the will of the voters, as reflected in I-601, by suspending the supermajority voting requirement. Next, the Legislature enacted ESHB 2314, which raised taxes on cigarettes, liquor, and extended warranties, among others. Then, in an apparent move to avoid scrutiny of their overspending, the Legislature attempted to artificially increase the state expenditure limit by manipulating the transfer of funds between state accounts.

Specifically, on June 14, 2005 the Legislature appropriated $250 million from the General Fund to the Violence Reduction and Drug Enforcement Account. The next day, the same $250 million was transferred to the Health Services Account and then back to the General Fund from where it first originated. Remarkably, the State took the position that this transfer of funds, which had no fiscal effect whatsoever, acted to increase the state expenditure limit by $250 million.

On July 19, 2005, attorneys at GSK filed suit against Governor Christine Gregoire, the State Expenditure Limit Committee, and the State of Washington on behalf of the Washington State Farm Bureau Federation, Washington State Grange, National Federation of Independent Business, Building Industry Association of Washington, Evergreen Freedom Foundation, Washington Association of Realtors, and citizen Steve Neighbors. They alleged that ESHB 2314 is not legally in effect because voters should have been given the opportunity to vote on the increase in taxes. The manipulation of the $250 million did not operate to increase the state expenditure limit. On March 17, 2005, Judge James Allendoerfer of Snohomish County Superior Court agreed.

In his much anticipated ruling, Judge Allendoerfer ruled that the actions of the Legislature in manipulating state funds merely gave an "illusion" of new money being available, but this "illusion" did not legally increase the limit. He reasoned that, because the state expenditure limit was $250 million less than claimed by the State, ESHB 2314 raised revenue above the state expenditure limit, which is permissible only with voter approval. Specifically, Judge Allendoerfer stated that the Legislature "exploited a loophole in I-601 to avoid a vote," and had stinging criticism for the state agency that was intended to be the watchdog to look out for the taxpayers' rights in I-601, yet conspired with the Legislature to conceal their overspending.

Attorneys at GSK are understandably pleased with Judge Allendoerfer's ruling and for their clients' dedication to vindicate the rights of the Washington voters. The ruling reaffirms that I-601 continues to meaningfully impose fiscal restraint on the Legislature and that the will of the voters cannot be subverted.

Click to the following news articles to see other accounts of this case.

David Postman, Some of State's Taxes Invalid, Judge Rules, Seattle Times, Mar. 18, 2006.

Curt Woodward, Associated Press, Judge Strikes Down Taxes in Spending-Limit Lawsuit, Seattle Times, Mar. 17, 2006.

Curt Woodward, Associated Press, Tax Increase Package on Liquor, Cigarettes Fails in Court, Tacoma News Tribune, Mar. 18, 2006.

Curt Woodward, Associated Press, Judge Strikes Down New Taxes on Liquor, Cigarettes, Seattle P.I., Mar. 18,2006.

Curt Woodward, Associated Press, Judge Strikes Down Taxes Increases, King County Journal, Mar. 18, 2006.

Jim Haley & Jerry Cornfield, County Judge Strikes State Raise in Taxes, Everett Herald, Mar. 18, 2006.

Brad Shannon, Court Ties Up State Tax Increases, The Olympian, Mar. 18, 2006.

David Postman, Spending Limit's Legality Placed in Spotlight, Seattle Times, Mar. 8, 2006.

August 2011

Washington State Supreme Court Allows Sound Transit to Arbirtrarily Take Private Property for the South Tacoma Sounder Rail Station

The Washington Supreme Court yesterday upheld Sound Transit's arbitrary condemnation of private property for the South Tacoma Sounder Rail Station in Central Puget Sound Transit Authority v. Kenneth R. Miller. A bare majority of the Court eviscerated constitutionally protected property rights in a different, but equally devastating manner as the United States Supreme Court in the recent and much maligned Kelo case. The dissent thought otherwise (Chief Justice Alexander and Justices James Johnson, Sanders, and Chambers).

This case challenges Sound Transit's, and every other government agencies', power to ignore the facts, ignore public input, and take property based on nonsensical reasons. Prior to this case, citizens could look to the Courts to fairly review an agency determination of condemnation, and require a showing of public use and necessity, but no longer. The State Constitution specifically promises that the issue of public use and necessity in a condemnation case "shall be a judicial question" "without regard to any legislative assertion" in Article I, Section 16.

The key point is that by making it a "judicial question," the State Constitution ensures judicial review to prevent arbitrary and capricious agency condemnation decisions. Yet, the majority opinion by Justice Fairhurst never even recognizes that this Constitutional language exists and instead rules that the courts are bound by, "the high level of deference we accord legislative bodies in making necessity determinations." The majority by only five of the nine justices refuses to follow the State Constitution and in doing so completely eliminates decades of judicial precedent requiring the courts to ensure that the taking of people's property is necessary for the constitutionally required public use. The Supreme Court majority abdicates the constitutionally required responsibility of the courts in favor of a "high level of deference" to government agencies. As concisely put by Justice James Johnson in dissent:

Only by adopting a rubber-stamp standard of review at odds with article I, section 16 and relevant case law can the majority look the other way. To rely upon clearly erroneous factual information of such magnitude amounts to arbitrary or capricious conduct.

Justice James Johnson also quoted an earlier case in pointing out that without proper judicial review and adequate agency evidence, the condemnation decision, "would amount to oppression and abuse of the power."

The unrebutted evidence in this case was so overwhelming that it is clear no property owner can expect the courts to stop any condemnation decision in the future. The facts at trial were unrebutted by Sound Transit and largely accepted by the trial court. As a result, the trial court ruled that Sound Transit, "negligently omitted and missed some facts and evidence which ideally should have been considered, and if considered could have reasonably led to a different result." Yet, the trial court in following complete deference to Sound Transit refused to throw out the condemnation decision, and the majority of the Supreme Court agreed.

Yet, Sound Transit's process was so full of erroneous facts and improprieties that the decision would have been thrown out under prior case law: (1) Sound Transit made false statements to the public that other alternative sites had prohibitive contamination problems; (2) Sound Transit did not even know that a change in the project would require the demolition of a historic house on the Miller property listed by the City of Tacoma as a historic structure; (3) Sound Transit threatened a community activist into ending complaints about the process and the failure of Sound Transit to choose a better alternative, and this threat came directly from the Chair of the Sound Transit Board and Pierce County Executive John Ladenburg and Sound Transit Board Member and Tacoma City Council Member Kevin Phelps; and, (4) Sound Transit never even considered a better site immediately adjacent to the proposed station that would not require dangerous pedestrian crossings over the tracks. The majority ignores the facts, or worse misstates the facts, and otherwise brushes the facts off as no big deal. As a result, the constitutionally protected right of citizens to stop massive government power grabbers like Sound Transit or any government agency is destroyed.

The first issue in the case is also resolved by the majority in a manner destroying previously held rights. Sound Transit was required to give public notice before making the condemnation decision and the majority rules that merely placing a meeting agenda on its website is the same as furnishing notice to newspapers as required by its own rules, and is otherwise the same as publishing notice in newspapers, posting notice on the property and in public places. The decision is the first in the United States to say that Internet notice is sufficient alone without requiring any of the traditional forms of notice practiced for decades. The majority said that Internet notice is the same as publication in the newspapers even though newspapers reach hundreds of thousands of people every day, while there was no showing of any traffic to the exact page on the Sound Transit website. The majority also said the notice was sufficient to apprise the property owners and interested persons even though the notice only mentioned a condemnation in the South Tacoma area generally.

Charlie Klinge, attorney for Ken and Barbara Miller, said: "Today, the State Supreme Court majority destroyed a previously held Constitutional right. Government can take your private property even when the condemnation process is corrupted by falsehoods, threats to community leaders, and other arbitrary and capricious actions. For over a century, the Washington courts protected the citizens from arbitrary government condemnation actions, but no more."

Click here to watch the oral argument in the Supreme Court

Additional articles on this case:

Mike Baker, Squabbling Derails Bills on Land Grabs, Tacoma News Tribune (Feb. 27, 2006).

Peter Callaghan, Court's Ruling on Public Notice Falls Short of Fair, Tacoma News Tribune (Feb. 19, 2006).

Editorial, More arbitrary taking of land by the court, Seattle Times (Feb. 19, 2006).

August 2011

GSK Obtains $10,710,000 Jury Verdict for Developer

John Groen partnered with Jon Ferguson Law Group PLLC in a seven-week jury trial on behalf of Westmark Development Corp. against the City of Burien. The City illegally delayed Westmark's proposal to build a 176-unit apartment project within Burien city limits for nearly 13 years! The jury ultimately awarded $10,710,000 in damages as a result of Burien's improper actions. This was a case of first impression in Washington, and it was the first successful case involving improper delay by a municipality under SEPA.

Our client, Westmark Development Corporation ("Westmark"), sought to build and own a multi-family development project in newly-incorporated Burien around 1993. However, the new, Burien city government didn't want apartment developments within its city limits or the "types of people" who live in apartments. So Burien enacted an illegally broad moratorium to specifically prevent the Westmark project from being built. Furthermore, Burien refused to process Westmark's building permit application for almost four years.

Ultimately, Burien tried to "settle" the case in 1998, and, in fact, both parties agreed to settlement terms. However, the Burien City Council did not approve the settlement agreement in an open public meeting as required by law. Moreover, Burien officials failed to tell Westmark that the settlement was not yet approved by public vote.

After posturing for several months, Burien refused to abide by the terms of the settlement agreement. Westmark was forced to sue Burien to enforce the terms contained within the mutually agreed upon settlement. Litigation lasted until 2003 when Burien conveniently disclosed that the settlement was invalid because it had failed to approve it in an open public meeting. This game of smoke-and-mirrors bought Burien five more years of delay on Westmark's project.

Finally, after a seven-week jury trial, justice was served. A Snohomish County jury found Burien liable under the theory of negligence, negligent misrepresentation, and tortious interference with business expectancy. Westmark was awarded $10,710,000 in lost profits for the project, which was never built due to the improper delay.

July 2011

City of Bainbridge Island's Attempt to Impose Excessive Building Permit Fees Rejected by Court of Appeals

On February 24, 2007, a panel of Division II of the Washington State Court of Appeals ("Court") unanimously determined that the City of Bainbridge Island's ("City") excessive fees on building permit applicants violated state law, specifically RCW 82.20.020. See Home Builders Assoc. of Kitsap County v. City of Bainbridge Island, No. 34743-1-II (Feb. 21, 2007).

This class action lawsuit was initiated by the Home Builders Association of Kitsap County ("Home Builders") in 2001, subsequent to the City's increase in its building permit fees from 100% of the fee schedule in the Uniform Building Code to 110% of that fee schedule. After additional inquiry, the Home Builders discovered that the City's per permit cost quadrupled those of similar jurisdictions and that overhead costs exceeded direct costs by over 400%.

RCW 82.020.020 expressly prohibits, with limited exceptions, local governments from imposing any tax, fee, or charge, either direct or indirect, on development activities. One exception includes "reasonable fees….to cover the cost to the city…of processing applications, inspecting and reviewing plans, or preparing detailed [environmental impact] statements required by chapter 43.21C RCW."

In this case, the Court was asked to determine if the Home Builders or the City had the burden of demonstrating compliance or noncompliance with RCW 82.020.020. The Court also determined what standard was applicable to determining compliance with RCW 82.20.020.

With respect to the burden of proof, the Court determined that the City, and not the Home Builders, "must show that its fees fall within the specific exemption and that they are reasonable." In doing so, the Court also rejected the City's assertion that compliance with RCW 82.020.020 merely required demonstrating that the City's fees were not "grossly disproportionate" to the City's costs of regulation:

"RCW 82.020.020 does not mention the phrase ‘grossly disproportionate.'… The legislature established that the proper measure of fees imposed as an exception to the general prohibition of fees on construction is that they be ‘reasonable.' Reasonable is defined as ‘being or remaining within the bounds of reason: not extreme: not excessive.'"

Finally, the Court ruled that the City's practice of including a pro-rata share of all municipal overhead costs, including costs only remotely related to the building department, into its fee schedule calculations violated RCW 82.02.020. Rather, the Court held that RCW 82.020.020 expressly limits the City to including only those costs for processing applications, inspecting and reviewing plans, or preparing detailed SEPA environmental impact statements in their fee schedule calculations.

This important decision is a necessary step to ensure that local governments do not use permit application fees as simply another method of raising general revenue to pay for general governmental services. Similarly, this decision is also necessary to ensure that local governments do not impose excessive fees for the purpose of discouraging development. The Home Builders were represented by Richard M. Stephens.

Click here to read the Court's decision: HBA Opinion (PDF)

Additional articles on this case:
Rachel Pritchett, BI Lawsuit Over Use of Permit Fees is Back in Court
(Feb. 24, 2007).