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Covell v. City of Seattle, 127 Wash.2d 874, 905 P.2d 324

Facts

Libby Covell and John Backus, representing a class of residential property owners, filed a class action against the City of Seattle after the city imposed a residential street utility charge. The charge was set at $2 per month per housing unit for single-family residences and $1.35 for multiple-family residences, and was included in the annual property tax statement. The plaintiffs argued that the charge was unconstitutional as it violated the uniformity requirement of the Washington Constitution, as it was not imposed uniformly based on property value.

Pursuant to this enactment, the City of Seattle passed an ordinance establishing a street utility in 1992. The ordinance calls for the collection of a street utility charge for the use or availability of the streets.

Issue

Is the residential street utility charge imposed by the City of Seattle an unconstitutional property tax rather than a regulatory fee?

The principal issue is whether this charge is an unconstitutionally imposed property tax.

Rule

A charge imposed by a governmental entity is considered a tax if its primary purpose is to raise revenue rather than to regulate, and if it does not have a direct relationship to the service received by those who pay the fee.

Whether a charge imposed by a governmental entity is a tax or a regulatory fee depends upon three factors which have been identified in prior cases of this court.

Analysis

The court analyzed the nature of the street utility charge and determined that its primary purpose was to raise revenue for street maintenance and improvements, rather than to regulate the use of city streets. The court found that the charge did not meet the criteria for a regulatory fee, as it was not based on the actual use of the streets by the property owners and did not provide a direct benefit to them. The court compared the charge to previous cases where similar charges were deemed taxes due to their revenue-raising intent.

The court found that the primary purpose of the charge is to raise revenue. Given the absence of a regulatory purpose, it is insignificant that the funds collected are to be expended 'for transportation purposes only' (a broad category indeed).

Conclusion

The Supreme Court concluded that the residential street utility charge was an unconstitutional property tax and reversed the lower court's decision. The court also ruled that the taxpayers were entitled to attorney fees under the common-fund theory.

Consequently, the street utility charge, as assessed, must be declared unconstitutional.

Who won?

Taxpayers prevailed in the case because the court found that the street utility charge was unconstitutional as it functioned as a tax rather than a regulatory fee.

Taxpayers prevailed in the case because the court found that the street utility charge was unconstitutional as it functioned as a tax rather than a regulatory fee.

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