Special session meets goals of Gregoire, most attendees

Brad Shannon and Adam Wilson
The Olympian

Nov. 30, 2007

Olympia, WA - Gov. Chris Gregoire signed two property-tax-relief bills into law Thursday evening, ending a dizzying three-week debate over restoring property-tax limits that the courts had thrown out.

Photos: 2007 Special Legislative Session

The votes in the state House and Senate were overwhelming — and bipartisan — to restore the 1 percent cap on yearly increases in local governments' property-tax collections. The cap, which requires voter approval for higher increases, had been on the books since 2002, when legally flawed Initiative 747 took effect.

Democrats had little Republican support in favoring a second measure that lets lower-income families defer half their property taxes until selling their homes.

The deferral program would target an estimated 5,500 families with incomes of $57,000 or less, letting them delay payment on half of taxes each year, but with interest charges paid when they sell their homes. It could cost the state up to $13.8 million in the next two-year budget cycle to help replace counties' lost revenues.

Republicans and Democrats both hailed the tax-cap measure's passage — while fighting to the end over the deferral.

"This is good. Where can you go back in history and find a Legislature that was called into special session for the purpose of cutting taxes? Has that ever happened?" asked Sen. Joseph Zarelli, R-Ridgefield, his caucus' top voice on tax and budget issues.

"The end result is no one is harmed as a consequence of I-747 being struck down, and meaningful tax relief is on its way to citizens," added Rep. Brendan Williams, D-Olympia. Williams expressed surprise that Republicans would object to the deferral measure, given that it provides direct relief to struggling homeowners.

A recent state Supreme Court decision threw out the 1 percent limit under I-747, tempting ports, cities and other governments to consider larger tax increases to pay for services.

A satisfied Gregoire said Thursday's action meant the "American dream is alive and well" for people who fear losing their homes over increasing property-tax bills.

"We need to revisit property taxes and funding for local governments. There's no doubt about that, in my view," she added, but she declined to say what specific changes are needed.

The vote

The final votes on the 1 percent cap bill were 39-9 in the Senate, with all four of South Sound's lawmakers approving — Republican Dan Swecker of Rochester and Democrats Karen Fraser of Thurston County, Tim Sheldon of Mason County and Marilyn Rasmussen of Eatonville.

"This 1 percent policy has been in place for several years. … I think it's really important for people to understand we only made the technical fix that the state Supreme Court said we needed to make." Fraser said. "There were some people who wanted to do more and some people to do less."

In the House, it was 86-8. Democratic Rep. Sam Hunt of Olympia was the lone South Sound lawmaker opposing it — on grounds that it was too tight a limit for local governments.

"I think I'm reflecting the wishes of the 22nd District, which voted strongly against I-747 when it was on the ballot," Hunt said.

Lawmakers also can expect to confront some of the leftover disputes on property taxes that raged all day.

House Republican Leader Richard DeBolt of Chehalis said his caucus in January wants to pass a $400-per-homeowner tax rebate that Democrats refused to allow a vote on Thursday evening. He also wants to take another look at the tax-deferral program, saying it is flawed and could lure people too deeply into debt.

'Banked' taxes

Also, the question of whether to let local governments save up unused tax capacity for use in future years remains alive. I-747 sponsor Tim Eyman tried to galvanize support for blocking use of that extra taxing authority.

That tax capacity — known as "banked" tax authority — is what governments had a right to collect under former laws but had not allocated. It's worth $108 million statewide but just $867,000 in Thurston County. The effects locally are not large, amounting to less than $10 extra tax for the owner of a $200,000 home if all local jurisdictions used up their capacity in the same year.

The banked-tax issue could become an issue in the 2008 governor's race if GOP challenger, Dino Rossi, makes it one. Rossi accused Gregoire and Democrats of only doing half the job of fixing the tax-cap problem, saying in a statement that leaving the "banked" taxing authority "is against the will of the people."

Gregoire said the GOP had been moving the goal posts by insisting on ending the "banked" tax authority, which has been available for six years. She also said Tim Eyman, who never addressed the issue in I-747, "needs to get some help in writing initiatives."

Name calling

The day included a few tense moments. Eyman got into a shouting match outside the Senate chambers with Sen. Adam Kline, D-Seattle, in the morning. Eyman had refused to answer Kline's questions about what government spending he wanted to cut.

"You won't answer the question," Kline said, his voice rising during a hallway confrontation outside the Senate chamber doors. "The reason is you're chicken. You're a coward!"

"You are ignoring the voters. You're ignoring me!" Eyman shouted back. Later that day, however, Eyman said voters should be pleased with the session, which at least restored his initiative.

Brad Shannon is political editor for The Olympian. He can be reached at 360-753-1688 or bshannon@theolympian.com.

Adam Wilson covers state workers and politics for The Olympian. He can be reached at 360-753-1688 or awilson@theolympian.com.

RELATED STORY:

Shouting, name-calling as lawmakers cap property taxes

By Ralph Thomas and Andrew Garber
Seattle Times staff reporters

OLYMPIA — Gov. Christine Gregoire and the Democrat-led Legislature on Thursday saved another Tim Eyman tax-cut initiative from a court-ordered death.

Eyman showed his gratitude by calling the Democrats panderers and accusing them of cheating the voters.

Meeting in a rare one-day special session marked by bickering and occasional name-calling, lawmakers overwhelmingly passed a bill to reinstate a 1 percent cap on annual property-tax increases that was tossed out by the state Supreme Court earlier this month.

Only a handful of Democrats opposed the measure. It passed the House 86-8 and the Senate 39-9. Gregoire signed the legislation Thursday night.

The cap doesn't apply to individual homes but rather limits increases in total property-tax collections by a taxing district to 1 percent a year.

"This bill makes things exactly the way they were prior to the Supreme Court's decision," said Rep. Christopher Hurst, D-Enumclaw, the bill's lead sponsor. "It does nothing more and it does nothing less."

However, Democratic leaders said they expected to revisit property taxes.

"This is not the end of the property-tax issue. This is really the kickoff," said Senate Majority Leader Lisa Brown, D-Spokane.

The Legislature also approved a measure that allows homeowners earning less than the median state income — currently $57,000 a year — to defer up to half of their property taxes.

They'll have to pay the taxes — with interest — when the house is sold.

Supporters said the bill could help financially strapped homeowners keep their homes. But critics called it a form of predatory lending that would trap homeowners with a large debt owed to the government.

The 1 percent cap, however, dominated the day's debate. The cap was imposed by Eyman's Initiative 747, which voters approved in 2001. The state Supreme Court overturned the initiative, saying voters were not fully informed about what they were voting on.

The ruling sparked an outcry from Eyman and Republicans, who demanded immediate action to reinstate the cap. After some initial reluctance, Gregoire and Democratic leaders agreed to convene a special session.

"The fact of the matter is, this has nothing to do with Tim Eyman as far as I'm concerned," Gregoire said Thursday night. "My motivation is what the voters had to say, and the voters said they're fearful about whether they're going to be able to keep their homes."

Thursday's votes marked the second time lawmakers have revived an Eyman initiative. In 2000, after the courts tossed Initiative 695, which abolished the state's car-tabs tax, the Legislature moved quickly to reinstate it.

But even before lawmakers had a chance to vote Thursday on reviving I-747, Eyman was seizing the spotlight and bad-mouthing the Democrats.

"Democrats don't care about taxpayers. The only reason we're facing this is because of voter pressure, and now you're pretending to care about taxpayers," Eyman told members of the House Finance Committee.

In addition to reinstating his initiative, Eyman argued, the Legislature should eliminate the ability of taxing districts to use the tens of millions of dollars' worth of "banked" taxing authority they've accumulated over the years.

"You're already partially pandering to the voters. Why don't you fully pander?" he said.

He clearly irritated committee chairs, who told him to stick to the bill at hand.

"I would like to point out that it's your words that we are reinstating," Senate Ways and Means Chairwoman Margarita Prentice, D-Renton, told Eyman.

At one point early in the day, Eyman and Sen. Adam Kline, D-Seattle, got into a shouting match outside the Senate chamber in front of a horde of reporters and photographers.

Holding up a 3-inch-thick copy of the state's operating budget, Kline asked Eyman to point out one service he would eliminate.

"And you call me a media whore," Eyman said.

"You're quite the expert, Tim," Kline retorted. "There are services that you must've thought that we spent too much money on, because you want to cut the taxes that pay for them."

Eyman tried to duck out of the confrontation, but Kline got in his face. "Answer the question, Tim: Where is the fat in the budget?" Kline continued. "You won't answer the question, and the reason you won't is you're chicken. You're chicken. You are a coward."

Eyman wasn't the only one under the gun. Gregoire and Democratic leaders in the House and Senate were beaten up from both sides.

Republicans said they weren't going far enough, and liberals bashed them for caving in to Eyman at the expense of more meaningful property-tax reform.

"This legislation is being railroaded out of fear, with an election year coming up," Steve Zemke, a Democratic blogger, told legislators.

Rep. Sharon Tomiko Santos, D-Seattle, said the Legislature was moving too fast.

Santos, who opposed the bill, said she was dismayed at the process. "What is so critical that we could not wait for six and a half weeks for the beginning of the regular session, when we could engage in a more thoughtful process?" she asked.

Several interest groups also opposed putting the cap back in place. "This definitely hurts local government — there's no way around it," said Bud Sizemore, with the Washington State Council of Firefighters. "One percent has no logical basis for paying for essential services."

Republicans insisted reinstating the cap was the right thing to do.

"I believe voters knew what they were doing. As someone who voted for 747, I knew what I was doing," said Rep. Ed Orcutt, R-Kalama. "It will set a 1 percent limit but it doesn't mean they can't get more than 1 percent. If they want more, they have to go to the voters. That's not unreasonable."

Both Eyman and the Republicans pounded Democrats for not eliminating so-called "banked capacity." Under state law, cities, counties and other local taxing districts are allowed to stockpile — or bank — unused taxing authority.

The state estimates that, with the 1 percent cap back on the books, local taxing districts statewide have about $108 million worth of banked taxing authority. Unless the Legislature bans the use of banked taxes, taxpayers will not see a true 1 percent cap, Eyman and the Republicans said.

But the bill's sponsor, Rep. Hurst, called those arguments "political subterfuge."

Hurst pointed out I-747 did not ban banked capacity and that, in the years since it passed, neither Eyman nor the Republicans had pushed any measures to do that.

Yet the protests were on the fringes Thursday. The move to reinstate I-747 was on a greased track.

While it takes most bills weeks or months to pass the Legislature, this one made it through two committees, both chambers and to the governor's desk in roughly 12 hours.

One lobbyist opposed to the measure said efforts to stop it were like "throwing rocks at a train whizzing by."

Ralph Thomas: 360-943-9882 or rthomas@seattletimes.com. Andrew Garber: 360-943-9882 or agarber@seattletimes.com.

Seattle Times reporter David Postman contributed to this story.

Copyright © 2007 The Seattle Times Company