Unclear ballot language resulted in a courtroom victory for anti-racist organizers, a decision that could gut funding for King County’s juvenile detention facility and, it turns out, screw over local renters who have likely been indirectly paying for the project.
Ending the Prison Industrial Complex (EPIC), a Black-led organizing group, won its first major victory in court when its attorney, Knoll Lowney, successfully argued that the language of the ballot measure that voters approved in 2012 to tax themselves to pay for the youth detention center allowed the county to raise property taxes for only one of the nine years that the levy was meant to endure.
The decision could remove as much as $150 million of the $210 million needed to build the facility, according to Lowney’s estimate. It would also mean that the county collected excess property taxes between 2014 and 2017.
The decision raised two connected questions for Real Change: If the county overcharged property owners, how would it give the money back? Could it ensure that everyone who put money toward property taxes — including renters — benefited from the process?
The answers appear to be “it depends,” and “almost certainly not,” respectively.
If the court decision stands, King County must compensate property owners for the overcharge.
If the court decision stands, King County must compensate property owners for the overcharge.
It’s unlikely that renters — who may have paid that cost in increasing rent prices — will ever see a dime returned to them.
Taxing dilemma: Who gets the money?
It was surprisingly difficult trying to pin down just what happens to overcharged property taxes and whether renters could be compensated.
Messages to the King County Assessor’s Office went unanswered. The Tax Foundation redirected us to a land policy think tank. The Department of Revenue answered some technical bits, but sent us to the Department of the Auditor when it came to what, exactly, the money legally raised under the levy could be used for. The Department of the Auditor’s spokesperson tried to send us back to the Department of Revenue.
We couldn’t even get a call back from the Freedom Foundation, which one might expect would jump on the chance to celebrate tax money flowing back to the people, waving the “Don’t tread on me” flag to the beat of the national anthem.
No one we contacted really knows what this decision means.
That’s because no one we contacted really knows what this decision means.
“There are no other scenarios or cases that I’m aware of in my government career — which spans 27 years now — where this scenario has popped up and they have had to refund taxes because they were levied incorrectly,” said Toni Nelson, the finance consultant with the Municipal Research and Services Center (MRSC), an organization that consults with local governments on such thorny issues.
Later Nelson said she could think of one example of property taxes gone awry, but it wasn’t perfectly analogous to the current dilemma.
There was a situation sometime in the 1990s, Nelson recalled, where Seattle was forced to return money to taxpayers, but details were thin and the mechanism by which the money was repaid was unknown. Thanks to the internet, and more specifically digitized Seattle Times archives, we found it.
The year was 1995. Remember 1995? A mixed bag. It was the birth year of the World Trade Organization, the time that Mississippi leapt 131 years into the future and ratified the 13th Amendment, the year that the first O.J. Simpson verdict came down and Montell Jordan released the Billboard Hot 100 hit “This Is How We Do It.”
It was also the year that the Washington State Supreme Court nixed a fee charged to property owners in the city of Seattle, directing the city to return millions of dollars.
In 1992, a younger, more innocent, pre-tech boom Seattle decided that it wanted to do something completely normal and invest in its infrastructure. The city levied a monthly $2-per-residence charge intended to raise $17 million to fill in potholes and the like.
Until the courts weighed in, according to The Seattle Times, the city had collected $12 million.
But residents sued the city, arguing that the $2 charge clashed with the state constitution’s uniformity clause, a provision that means government may not tax property of the same type at a different rate. It’s the same reason that we can’t have other nice things, like a graduated income tax.
The way it was collected, a property owner in a $60,000 home paid the same $2 per month as someone in a $2.4 million mansion. It means that, based on property values, the owner of the $60,000 home was paying a rate 40 times higher than the owner of the mansion, according to a report by The Seattle Times’ Peter Lewis.
The city was forced to spend thousands of dollars mailing property owners a refund checks that ranged from about $40 to $60.
The city was forced to spend thousands of dollars mailing property owners a refund checks that ranged from about $40 to $60. Roughly 3,500 decided to just let the city keep the cash because, at the end of the day, the pot holes were still there.
But that’s it. A case so old it would be able to drink to its own absurdity is the only precedent Washington has, and since then the laws have changed. According to the Department of Revenue, taxing districts no longer send checks in the mail. Instead, they must credit a future property tax bill with the amount that was overcharged.
Unless a court specifies another remedy, King County would deduct the overcharges from next year’s property tax bill.
Renters pay taxes too
But what about the renters?
When refund checks arrived in mailboxes across Seattle in 1996, they only went to property owners, not renters. In the event of a credit on future property taxes, the same would be true if funds intended for the Children and Family Justice Center went back to the property owners of King County.
The practice is based on the simple notion that property owners pay the taxes, not renters. In this instance, however, it’s unlikely that “property owners” and “tax payers” can be used interchangeably.
Washington’s perpetual state of manufactured scarcity — legislated into existence with bans on income tax and the lack of a capital gains tax — has led to an overreliance on regressive forms of taxation, particularly property and sales taxes. The Seattle Times reported in June that rents are surging throughout King County, and point to property taxes as one of many culprits responsible for the increases.
Property taxes rose 35 percent over four years in King County, wrote Mike Rosenberg, a business reporter for The Times. Much of that increase was due to other voter-approved initiatives like the 2012 Proposition 1 meant to fund the youth detention center.
“I’m not sure there is any practical mechanism for refunding rent, even if a landlord desired to do so."
It is likely that renters are shouldering a portion of the property tax burden, but it’s impossible to say how much. Joan Youngman of the Lincoln Institute of Land Policy, a Massachusetts think tank, told Real Change that even an economist with perfect information would have difficulty ascertaining how much of a renter’s monthly payment went to property taxes.
The amount varies in part based on how much slack is in the market. In a market with high vacancy rates, it would be economically unwise to increase rents to cover higher property taxes because renters can opt for a cheaper apartment.
But King County in general and Seattle in particular have white-hot property markets, giving owners greater opportunity to pass rising costs through to renters.
Tenant advocates Violet Lavatai, interim executive director for the Tenants Union, and Xochitl Maykovich, a spokesperson for Washington Community Action Network, weren’t optimistic that renters would see any of the benefit of future property tax breaks.
While both tried to be charitable, Lavatai and Maykovich say the majority of property owners are likely as not to keep the cash.
“There are good landlords, but I don’t think they’d give that back to their tenants,” Lavatai said.
Smaller landlords, those who own one or two units, are less likely to raise rents to cover additional property taxes because they value stable, long-term tenants, said Sean Martin, spokesperson for the Rental Housing Association of Washington.
Even if they or others did raise their rents, there are too many variables to determine how much money to give back, he wrote in an email.
“I’m not sure there is any practical mechanism for refunding rent, even if a landlord desired to do so,” Martin wrote.
In short, renters — who make up 51 percent of the residents of Seattle and over 40 percent of the residents of King County — will see an unknown amount of their wealth transferred to property owners, should the Court of Appeals decision stand and the money gets returned.
And it’s still unclear what happens to folks who sold their homes in recent years, some out of an inability to keep up with rising property taxes.
Lavatai has a strong suspicion who those people are.
“The majority of people who lost their homes because of their property taxes are people of color,” she said.
So even a triumph in the courtroom to defund a project that perpetuates a school-to-prison pipeline that disproportionately impacts Black and Brown young people turns into a double-edged sword for communities of color in Seattle.
Ashley Archibald is a Staff Reporter covering local government, policy and equity. Have a story idea? She can be can reached at ashleya (at) realchangenews (dot) org. Twitter @AshleyA_RC
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