Larson v. Seattle Popular Monorail Authority

¶38 (dissenting) — The Seattle Popular Monorail Authority (Monorail) was formed in 2002 by voters of Seattle pursuant to chapter 35.95A RCW. The Monorail Governing Board (Board) consists of seven appointed members and only two members elected by Seattle voters at large. The Board has authorized taxing of Seattle residents who own vehicles, through a Monorail motor vehicle excise tax (MVET), at an annual rate of 1.4 percent of the “value” of each car.

J.M. Johnson, J.

*768¶39 The Monorail MVET is actually collected by the Department of Licensing (DOL) when a vehicle’s registration is renewed. The tax is collected on every vehicle owned by Seattle residents, regardless of whether the vehicle is located or used in Seattle. For purposes of the Monorail tax only, DOL determines the vehicle’s taxable value from the manufacturer’s suggested retail price (MSRP), which is then depreciated using a schedule that DOL used before voters repealed the state MVET. The schedule and the “value” substantially overstate the actual market value of vehicles. As a result, the amount of tax charged to each motor vehicle owner is far more than 1.4 percent of market value, and the tax revenue to Monorail substantially increased (by millions of dollars).

140 In upholding this Monorail MVET as set by the Board, a majority of this court disregards the fundamental principle of “no taxation without representation.” The majority upholds the taxation of local residents by an unelected board. The majority also sustains as an “excise” tax a measure that cannot be distinguished from an improper ad valorem tax. Finally, the majority upholds the use of a tax valuation schedule that clearly produces excessive valuations (and tax) and which voters in this state have twice repealed. The voice of the people in their own self-government is diminished. I dissent.

Analysis

A. Tax Set by Unelected Board; “Taxation Without Representation”

¶41 The Monorail MVET tax is invalid because it was set by an unelected board in violation of a fundamental constitutional principle of no taxation without representation. By this principle, only elected or legislative bodies may exercise the power of taxation.8 Unelected bodies cannot be delegated the legislative power to tax citizens. Here, the *769power of establishing taxation levels was improperly delegated to an appointed, nonlegislative body — the Board. The majority of the Board is not accountable to the people through elections (only two were elected). The power to tax cannot be delegated to such a board under our constitution because neither the legislature nor the people can alienate this essential legislative function.

¶42 No taxation without representation is a fundamental principle vindicated in the American Revolution, by the adoption of the United States Constitution, and adhered to throughout this nation prior to Washington’s admission to statehood.9

¶43 Adherence to the principles of the United States Constitution and of the Declaration of Independence was an express condition of our admission to the Union as a state on equal footing. The State’s Enabling Act provides:

That the delegates to the conventions elected as provided for in this act shall meet at the seat of government of each of said Territories . . . and, after organization, shall declare, on behalf of the people of said proposed States, that they adopt the Constitution of the United States; whereupon the said conventions shall be, and are hereby, authorized to form constitutions and States governments for said proposed states, respectively. The constitutions shall be republican in form, and make no distinction in civil or political rights on account of race or color, except as to Indians not taxed, and not be repugnant to the Constitution of the United States and the principles of the Declaration of Independence.

Enabling Act, ch. 180, § 4, 25 Stat. 676 (1889).10

*770¶44 The Washington State Constitution begins with the recognition that “[a]ll political power is inherent in the people,” Wash. Const, art. I, § 1. The power to tax must derive from delegation of the peoples’ power under our state constitution. See also Wash. Const, art. I, § 19. Article I, section 32 states: “A frequent recurrence to fundamental principles is essential to the security of individual right and the perpetuity of free government.”

¶45 Washington Constitution article XI, section 12 and article VII, section 9 do empower the legislature to delegate taxing authority to local governments, but the legislature may make such delegation only to elected bodies that are directly accountable to citizens.

¶46 This court’s case law recognizes taxing power as inherently legislative. “Taxes are defined to be ‘burdens or charges imposed by legislative authority on persons or property, to raise money for public purposes ....’” State ex rel. Nettleton v. Case, 39 Wash. 177, 182, 81 P. 554 (1905) (quoting 27 Am. & Eng. Ency. Law 578 (2d ed. 1905)). “It is elementary that the power of taxation, subject to, constitutional limitations, rests solely in the legislature.” State ex rel. Tacoma Sch. Dist. No. 10 v. Kelly, 176 Wash. 689, 690, 30 P.2d 638 (1934); Love v. King County, 181 Wash. 462, 467, 44 P.2d 175 (1935).11

*771¶47 Prior cases also affirm constitutional limits on the legislature’s grant of taxing authority. “It is a legal tenet, universally accepted, that the power of a county or other municipal corporation to tax is not an inherent, but a delegated, power.” Love, 181 Wash. at 468 (citing 1 Thomas M. Cooley, The Law of Taxation §§ 119, 122, at 264, 276 (4th ed. 1924)); Great N. Ry. v. Stevens County, 108 Wash. 238, 243, 183 P. 65 (1919); State ex rel. Sch. Dist. No. 37 of Clark County v. Clark County, 177 Wash. 314, 322, 31 P.2d 897 (1934). “Municipal corporations have no inherent power to levy taxes. Their powers are derived through legislative grant, and are strictly construed. No implications are indulged to expand the powers granted.” Kelly, 176 Wash. at 690 (citing 1 Cooley, supra, §§ 123, 124, 125).

¶48 In Malim v. Benthien, 114 Wash. 533, 196 P. 7 (1921), this court held that fairness and equality required that residents outside a district and without a voice in selecting its officers should not be subject to its taxing power. Malim, 114 Wash. at 539. “To uphold such a course would be a denial of the principle [of no taxation without representation] upon which our government is founded, and which as a nation we have always maintained is the only true principle upon which a free government can be founded and maintained.” Id.

¶49 Similarly, in State ex rel. State Tax Commission v. Redd, 166 Wash. 132, 6 P.2d 619 (1932), this court voided a statute requiring a county to tax local lands in accordance with the (unelected) state tax commission’s valuation. This court recognized its obligation to “ ‘give force and effect to the principle of local self-government which has always been regarded as fundamental in our political institutions, and to be the very essence of every republican form of government.’ ” Id. at 144 (quoting People ex rel. Town of Pelham v. Vill. of Pelham, 215 N.Y. 374, 382, 109 N.E. 513 (1915)). It observed:

*772“The power of taxation is, of all the powers of government, the one most liable to abuse, even when exercised by the direct representatives of the people, and if committed to persons who may exercise it over others without reference to their consent, the certainty of its abuse would be simply a question of time.”

Id. at 141 (quoting Harward v. St. Clair & Monroe Levee & Drainage Co., 51 Ill. 130, 135 (1869)).

|50 The later case oí Municipality of Metropolitan Seattle v. City of Seattle, 57 Wn.2d 446, 357 P.2d 863 (1960), suggests taxing authority can be delegated to appointed boards, but only if those boards are composed of members who hold an elective office. The board in Metropolitan Seattle consisted entirely of elected officials automatically appointed to the board. This court held the appointed officials to be sufficiently accountable to the people subject to taxation because they were appointed from amongst “the ranks of elected officers residing within the region.” Id. at 454.

¶51 More recently, the dissenting opinion in Granite Falls Library Capital Facility Area v. Taxpayers of Granite Falls Library Capital Facility Area reiterated our state constitution’s respect for the principle of no taxation without representation. 134 Wn.2d 825, 848, 953 P.2d 1150 (1998) (Sanders, J., dissenting) (“[Tjaxation without representation was not popular with the colonists then and is unconstitutional today.”).

¶52 Granite Falls involved a constitutional challenge to the establishment of a library taxing district governed by three appointed members from the Snohomish County Council. The dissent concluded that “[tjhe Legislature may not constitutionally grant the power of taxation to persons over whom the taxpayers can exercise no control.” Id. at 845 (citing Redd, 166 Wash. at 141). The dissent found that “[bjecause the governing body is vested with the power to tax, it must either be directly accountable to taxpayers or limited by sufficient procedural safeguards.” Id. at 847. The governing board was not subject to direct election and taxpayers living in the library district could not recall or *773vote out of office board members who were not from the district. See id. at 847-48.

¶53 The Monorail MVET does not satisfy these constitutional requirements. The Monorail Board is not directly elected by the citizens of Seattle, nor do sufficient procedural safeguards control its use of taxing power. The majority of appointed members do not hold elected positions.

¶54 The majority points to possible safeguards against abuse in holding that this MVET is constitutional. See majority at 762. Such safeguards cannot overcome the constitutional defect in placing tax setting power in the hands of board members who are neither directly elected by the people nor comprised of elected officials. “No viable alternative means for holding SMP [Monorail] Board members accountable for their tax related actions actually exists,” resulting in a scenario where “board members are left primarily to police themselves.” Matthew Senechal, Revisiting Granite Palls: Why the Seattle Monorail Project Requires Re-examination of Washington’s Prohibition on Taxation without Representation, 29 Seattle U. L. Rev. 63, 91 (2005). With only two of the Monorail Board’s nine members elected by voters,12 it cannot reasonably be held to represent or to be directly accountable to the people it taxes.

B. Whether MVET Is an Excise Tax

f55 The majority in Sheehan v. Central Puget Sound Regional Transit Authority, 155 Wn.2d 790, 123 P.3d 88 *774(2005) held that the Monorail’s MVET was an excise tax and not a property tax. Today’s majority opinion provides scant analysis or reasoning for the same conclusion beyond citation to Sheehan. As pointed out by the dissent in Sheehan, there was good reason to remand for further proceedings to determine whether the Monorail MVET is actually a property tax because it is imposed on ownership of a vehicle. Sheehan, 155 Wn.2d at 814-17 (J.M. Johnson, J., dissenting).13 Recent events indicate there is little practical purpose for remanding this case for further proceedings. There is surely not a sufficient record for definitively concluding that the Monorail MVET is a valid excise tax. The record is to the contrary.

¶[56 This court’s jurisprudence has always narrowly construed the legislature’s taxing power14 and has likewise denied even a legislative grant of taxing authority to a municipality wherever there is any doubt of the breadth or existence of such a grant.15 The dissent in Sheehan makes the plain observation that the statutory grant of legislative *775taxing authority to the Monorail is devoid of any language indicating that it can be levied annually. See Sheehan, 155 Wn.2d at 810 (J.M. Johnson, J., dissenting). Our jurisprudence requires narrow construction of the grant of taxing authority.

¶57 As indicated in the Sheehan dissent, if the Monorail MVET is actually “ad valorem or property taxes mislabeled as ‘excise,’ ” we should not hesitate to say so and invalidate the taxes. Id. at 816.

¶58 I separately disagree with the majority’s erroneous assertion that a sufficient nexus exists between the taxing event and Monorail because Seattle residents are the prime beneficiaries. Majority at 765. Seattle voters ultimately concluded to the contrary. This observation still adds nothing to the analysis of whether MVET is an excise or ad valorem tax.

C. Improper Valuation Schedule

¶59 Also improper is Monorail’s continued use of the twice-repealed MSRP.16 The MSRP valuation schedule was most recently repealed by Washington State voters in November 2002. This was the same election in which Seattle voters approved Seattle Citizen Petition No. 1. The, concurrent repeal of the MSRP valuation schedule should therefore have informed our reading of the meaning of the term “value” in Seattle Popular Monorail Authority Proposition No. 1.

¶60 Here, the trial court clearly was in error in concluding that the voters approving Seattle Citizen Petition No. 1 would have thought “value” meant the MSRP valuation schedule that was repealed in the same election. In its *776natural and ordinary sense, “value” connotes fair market value.17 A voter or motor vehicle owner would in all likelihood consider the value of his motor vehicle to be its sale price in the marketplace.

¶61 Further, the Monorail’s publications cited the market value of various automobiles in describing how the MVET tax would be implemented. See Clerk’s Papers (CP) at 444-45. In the agreed stipulation of facts at the trial court, Monorail and the State conceded that “The Elevated Transportation Company led voters to believe that SPMA [Monorail] MVET would be assessed on the market value of the taxed vehicle” CP at 1044 (emphasis added). All of this evidence supports only the conclusion that the MVET tax was understood by voters to be based upon the fair market value of motor vehicles.

¶62 The majority’s arguments defending continued usage of the MSRP schedule are unpersuasive. It was conceded only that some mass appraisal methodology may be appropriate, rather than individual appraisals. Appellants’ Replacement Br. at 54. The majority overlooks the fact that the record includes several accepted mass appraisal methodologies that more closely reflect the actual market value of motor vehicles. In the agreed stipulation of facts, Monorail and the State conceded that “Several publicly accepted commercial data bases provide the market value of used cars including Kelley Blue Book, Edmunds.com, and the National Automobile Dealers Association (NADA).” CP at 1043.18

|63 Accordingly, I disagree with the majority’s upholding the use of the MSRP and would hold that Monorail must *777use a valuation methodology, such as those in the agreed stipulation of facts, which approximates the fair market value of motor vehicles.

Happy Ending; The Voters Exercise Their Power Over Monorail

¶64 By today’s decision, the majority would allow an unelected agency board to bind future generations of people to pay improper taxes. The court missed an opportunity to uphold the fundamental constitutional principle of no taxation without representation. The court also validated a tax valuation schedule that the people had twice rejected. The court has again failed to assure constitutional constraints apply to this abusive agency.19

¶65 This is a political story with a happy — and constitutional — ending, however. In November 2005, Seattle voters exercised their rights and voted against Seattle Popular Monorail Authority Proposition No. 1, which terminated the Monorail. I defer to them and dissent from the majority’s decision today.

Sanders, J., concurs with J.M. Johnson, J.

After modification, further reconsideration denied May 25, 2006.

In Washington, the people retain legislative powers. See Wash. Const, art. II, § 1.

See McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 428, 4 L. Ed. 579 (1819) (“The only security against the abuse of this power [of taxing the people and their property], is found in the structure of government itself. In imposing a tax, the legislature acts upon its constituents. This is in general a sufficient security against erroneous and oppressive taxation.”); Slaughter-House Cases, 83 U.S. (16 Wall.) 36, 115, 21 L. Ed. 394 (1872) (Bradley, J., dissenting) (referring to the fundamentals of the constitution in the Colonies and its regarding “taxation without representation as subversive of free government, was the origin of our own revolution”).

See The Declaration of Independence (U.S. 1776); U.S. Const, art IV, § 4 (“The United States shall guarantee to every state of this union a republican form of *770government.. ..”); Enabling Act, ch. 180, § 8, 25 Stat. 679 (1889) (declaring that with the final act of compliance, the State “shall be deemed admitted by Congress into the Union ... on an equal footing with the original States”); Romine v. State, 7 Wash. 215, 218, 34 P. 924 (1893) (describing a state’s enabling act as a proposition to the people, the conditions for which, upon adoption of a state constitution and admission to the union, become binding upon the state). See also John C. Eastman, “The Declaration of Independence as Viewed from, the States,” in The Declaration op Independence: Origins and Impact (Scott Douglas Gerber ed., 2002).

See also New Orleans Waterworks Co. v. La. Sugar Ref. Co., 125 U.S. 18, 31, 8 S. Ct. 741, 31 L. Ed. 607 (1888) (“[T]he power of determining what persons and property shall be taxed belongs exclusively to the legislative branch of the government, and, whether exercised by the legislature itself, or delegated by it to a municipal corporation, is strictly a legislative power.”); Meriwether v. Garrett, 102 U.S. (12 Otto) 472, 515, 102 U.S. 472, 26 L. Ed. 197 (1880) ("[Taxation] is a high act of sovereignty, to be performed only by the legislature upon considerations of policy, necessity, and the public welfare. In the distribution of the powers *771of government in this country into three departments, the power of taxation falls to the legislative.”).

Pursuant to Seattle Citizen Petition No. 1, § 4(g), the Monorail Board was charged with submitting a proposal to Seattle voters that would make a mere majority of the board seats be elected by Seattle voters. Monorail submitted to the voters of Seattle a proposition (Proposition No. 2) for the November 2005 election that would make five of the Monorail Board positions elected, beginning with the 2007 general municipal elections in Seattle. The remaining four positions would be appointive. Proposition No. 2 passed, but will not be carried into effect because, in the same election, the voters of Seattle voted against Proposition No. 1, which dissolves the Monorail authority. See infra, note 19. The passage of Proposition No. 2 does not cure the constitutional defects outlined infra. The majority’s decision should not have the prospective effect of encouraging subsequent creation of unconstitutional taxing power in municipal corporations.

The nature of a tax is not determined by the label. Sheehan, 155 Wn.2d at 814 (J.M. Johnson, J., dissenting). Rather, “ ‘[t]he character of a tax is determined by its incidents, not by its name.’ ” Harbour Vill. Apts. v. City of Mukilteo, 139 Wn.2d 604, 607, 989 P.2d 542 (1999) (alteration in original) (quoting Jensen v. Henneford, 185 Wash. 209, 217, 53 P.2d 607 (1936)). The basis for levying is not solely determinative, e.g., whether it is calculated with reference to the value of property, “it may be a property tax.” High Tide Seafoods v. State, 106 Wn.2d 695, 699, 725 P.2d 411 (1986) (emphasis added). The key to identifying a property tax is whether the tax is triggered by the simple fact of property ownership, creating an “ ‘element of absolute and unavoidable demand.’ ” Harbour Vill., 139 Wn.2d at 611 (Talmadge, J., dissenting) (quoting Black v. State, 67 Wn.2d 97, 99, 406 P.2d 761 (1965)). A tax is an excise where “(1) the obligation to pay ... is based upon the voluntary action of the person taxed in performing the act, enjoying the privilege, or engaging in the occupation [subject to the tax], and (2) the element of absolute and unavoidable demand is lacking.” Arborwood Idaho, L.L.C. v. City of Kennewick, 151 Wn.2d 359, 367, 89 P.3d 217 (2004) (citing Covell v. City of Seattle, 127 Wn.2d 874, 889, 905 P.2d 324 (1995); High Tide Seafoods, 106 Wn.2d at 699).

“It is elementary that the power of taxation, subject to constitutional limitations, rests solely in the legislature. Municipal corporations have no inherent power to levy taxes. Their powers are derived through legislative grant, and are strictly construed. No implications are indulged to expand the powers granted.” Kelly, 176 Wash. at 690 (emphasis added). Accord Covell, 127 Wn.2d at 879; Margola Assocs. v. City of Seattle, 121 Wn.2d 625, 854 P.2d 23 (1993).

“If there is any doubt about a legislative grant of taxing authority to a municipality, it must be denied.” Okeson v. City of Seattle, 150 Wn.2d 540, 558, 78 *775P.3d 1279 (2003) (citing Pac. First Fed. Sav. & Loan Ass’n v. Pierce County, 27 Wn.2d 347, 353, 178 P.2d 351 (1947)). Accord Arborwood, 151 Wn.2d at 374-75.

DOL stopped collecting MVET in 2000 because it was repealed by Initiative 695. DOL’s table was put back into use only following this court’s decision in Amalgamated Transit Union Local 587 v. State, 142 Wn.2d 183, 11 P.3d 762 (2000). It was repealed again by Initiative 776. The second repeal was enjoined pending this court’s resolution of the legal challenge to Initiative 776. See Pierce County v. State, 150 Wn.2d 422, 78 P.3d 640 (2003).

Where the language of an initiative enactment is “ ‘plain, unambiguous, and well understood according to its natural and ordinary sense and meaning, the enactment is not subject to judicial interpretation.’ ” Amalgamated, 142 Wn.2d at 205 (quoting State v. Thorne, 129 Wn.2d 736, 762-63, 921 P.2d 514 (1996)). “However, if there is ambiguity in the enactment, the court may examine the statements in the voters pamphlet in order to determine the voters’ intent.” Id. at 205-06 (citing Thorne, 129 Wn.2d at 763). See Biggs v. Vail, 119 Wn.2d 129, 134, 830 P.2d 350 (1992) (if there is ambiguity, extrinsic aids, such as legislative history, may be used to determine legislative intent).

These “Blue Books” are frequently used for loan purposes.

In HTK Management, L.L.C. v. Seattle Popular Monorail Authority, 155 Wn.2d 612, 121 P.3d 1166 (2005), this court also approved the unconstitutional taking of property in Pioneer Square by Monorail.