Special session meets goals of Gregoire, most attendees

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.