Case Title: Kain/Waller v. Myers

Citation: 

Docket Number: S51105

State: oregon

Court: Oregon Supreme Court

Date: 2004-05-25T00:00:00Z

Document:
FILED:  May 25, 2004
IN THE SUPREME COURT OF THE STATE OF OREGON
KRIS KAIN
and JOANN WALLER,
Petitioners on Review,
v.
HARDY MYERS,
Attorney General,
State of Oregon,
Respondent on Review.
JOANN WALLER
and KRIS KAIN,
Petitioners on Review,
v.
HARDY MYERS,
Attorney General,
State of Oregon,
Respondent on Review.
(SC S51105, S51106)
(Consolidated for Opinion)
En Banc
On petitions to review ballot titles.
Submitted on the record February 24, 2004.
Margaret S. Olney, of Smith, Diamond & Olney, Portland,
filed the petitions for petitioners.
Steven R. Powers, Assistant Attorney General, Salem, filed
the answering memoranda for respondent.  With him on the
answering memoranda were Hardy Myers, Attorney General, and Mary
H. Williams, Solicitor General.
DURHAM, J.
Ballot titles referred to Attorney General for modification.
DURHAM, J.
Petitioners in these consolidated ballot title
proceedings challenge the Attorney General's ballot titles for
two proposed initiative measures that would amend the Oregon
Constitution.  For the reasons stated below, we refer the ballot
titles to the Attorney General for modification.
The two proposed measures are closely related in
substance.  Initiative Petition 111 (2004) provides:
"The Constitution of the State of Oregon is
amended by adding the following section, which section
shall read:
"Section 1.  For tax years beginning on or after
January 1, 2005, the total amount of ad valorem
property taxes levied or imposed on a single family
residence and the parcel of land upon which it is
located, including taxes levied to pay the principal
and interest payments on bonded indebtedness and for
serial levies, operating levies, and other such add-on
taxes, shall not exceed the equivalent of Two Hundred
Dollars ($200.00) per month."
For that proposed initiative, the Attorney General
certified the following ballot title:
"AMENDS CONSTITUTION:  CAPS PROPERTY TAXES ON SINGLE-
FAMILY RESIDENCE AND THE LAND UPON WHICH IT IS LOCATED
"RESULT OF 'YES' VOTE: 'Yes' vote caps property
taxes on single-family residential properties to $200
per month; reduces revenue to schools, other local
governments under certain circumstances.
"RESULT OF 'NO' VOTE:  'No' vote rejects property
tax cap; retains existing tax system limiting rates,
limiting assessed-value growth, setting permanent tax
rates, allowing voter-approved temporary taxes.
"SUMMARY:  Amends Constitution.  Constitution
currently limits ad valorem property tax rates that
provide funding to schools, other local governments;
limits growth in assessed property value to three
percent annually; sets permanent tax rates; allows
voter-approved temporary local option taxes above those
rates.  Beginning 2005, measure caps total ad valorem
property taxes on each single-family residence and land
upon which it is located to equivalent of two hundred
dollars per month.  Cap applies regardless of
property's assessed value.  Measure limits local option
taxes, bond pledging authority.  Reduces revenue to
schools, local governments when taxes on assessed
property value of any single-family residential
property combined with local option taxes total more
than equivalent of two hundred dollars monthly; does
not provide replacement funds.  Other provisions."
Initiative Petition 112 (2004) provides:
"The Constitution of the State of Oregon is
amended by adding the following section, which section
shall read:
"Section 1.  For tax years beginning on or after
January 1, 2005, the total amount of ad valorem
property taxes levied or imposed on a single family
residence and the parcel of land upon which it is
located, including taxes levied to pay the principal
and interest payments on bonded indebtedness, and for
serial levies, operating levies, and other such add-on
taxes, shall not exceed Two Thousand Dollars
($2,000.00) per year.  Beginning with the 2005 tax
year, the cap enacted by this section shall increase
two percent per annum."
For that proposed initiative, the Attorney General
certified the following ballot title:
"AMENDS CONSTITUTION:  CAPS PROPERTY TAXES ON SINGLE-
FAMILY RESIDENCE AND THE LAND UPON WHICH IT IS LOCATED
"RESULT OF 'YES' VOTE:  'Yes' vote caps taxes on
single-family residential properties to $2000 annually;
increases limit annually; reduces revenue to schools,
local governments under certain circumstances.
"RESULT OF 'NO' VOTE:  'No' vote rejects property
tax cap; retains existing property tax system limiting
rates, limiting assessed value growth, setting
permanent rates, allowing voter-approved temporary
taxes.
"SUMMARY:  Amends Constitution.  Constitution
currently limits ad valorem property tax rates that
provide funding to schools, other local governments;
limits growth in assessed property value to three
percent annually; sets permanent tax rates; allows
voter-approved temporary local option taxes above those
rates.  Beginning 2005, measure limits total ad valorem
property taxes on each single-family residence and land
upon which it is located to two thousand dollars
annually; limit increases two percent annually.  Cap
applies regardless of property's assessed value. 
Measure limits local option taxes, bond pledging
authority.  Reduces revenue to schools, local
governments when taxes on assessed property value of
any single-family residential properties combined with
local option taxes total more than two thousand dollars
annually; does not provide replacement funds.  Other
provisions."
Each proposed measure would impose a single maximum
limit on property taxes levied or imposed on a single family
residence and the land upon which it is located.  Initiative
Petition 111 would set that limit at $200 per month.  Initiative
Petition 112 would set that limit at $2,000 per year and, in
addition, would increase that limit two percent per annum.
Due to the similarity of the proposed measures, the
Attorney General has certified ballot titles for the proposed
measures that also are similar.  Petitioners, in turn, have filed
nearly identical challenges to each certified ballot title.  As
the following discussion indicates, we reach the same disposition
regarding each challenge.
We begin with petitioners' challenge to the certified
ballot title for Initiative Petition 111.  Petitioners assert
that the caption that the Attorney General certified is
insufficient because it fails to "reasonably identif[y]," in 15
words or less, "the subject matter of the state measure."  ORS
250.035(2)(a).  According to petitioners, the Attorney General's
reference in the caption to a "cap" on residential property taxes
fails to disclose that the proposed measure would create a
fundamental change in the relationship between a property's
assessed value and the calculation of ad valorem property taxes
payable on the property.  Petitioners contend that the true
subject of the proposed measure is the transformation of Oregon's
system of property taxation from one based in significant part on
the property's assessed value to one that, due to the cap,
assesses taxes at a flat amount regardless of the property's
assessed valuation.
The Attorney General responds that, if the people adopt
Initiative Petition 111, property taxpayers will continue to face
assessments of the value of their residential property by local
taxing authorities, but the proposed measure will cap any
assessment of taxes on the property at a specific dollar level. 
The Attorney General also argues that two recent measures,
"Measure 5," Article XI, section 11b, of the Oregon Constitution,
and "Measure 50," Article XI, section 11, of the Oregon
Constitution, imposed various limitations on property taxes
without regard to the property's value.  As a result, the
Attorney General argues, voters will understand that Initiative
Petition 111 similarly would impose a property tax cap that
applies to all properties regardless of their assessed valuation. 
The Attorney General also contends that the point that
petitioners raise is an effect of the proposed measure, not its
subject matter, and, therefore, it more appropriately receives
mention in the summary rather than the caption.  Finally, the
Attorney General explains that he chose not to mention
petitioners' point in the caption because that would focus voter
attention on one effect of the proposed measure, thus improperly
elevating the importance of one effect over the proposed
measure's other effects.
This court reviews the Attorney General's ballot title
to determine whether it is in substantial compliance with
statutory requirements.  ORS 250.085(5).  The caption must state
or describe the proposed measure's subject matter "accurately,
and in terms that will not confuse or mislead potential petition
signers and voters."  Greene v. Kulongoski, 322 Or 169, 174-75,
903 P2d 366 (1995).  Greene also states:
"The caption is the cornerstone for the other portions
of the ballot title.  As the headline for the ballot
title, it provides the context for the reader's
consideration of the other information in the ballot
title."
Id. at 175 (citation omitted).
Because of its importance to the entire ballot title,
the caption must use terms that reasonably identify the proposed
measure's subject matter and do not understate or overstate the
scope of the legal changes that the proposed measure would enact. 
For example, in Fred Meyer, Inc. v. Roberts, 308 Or 169, 777 P2d
406 (1989), the proposed measure would have created a right to
gather signatures for initiatives and referenda at shopping
malls.  The proposed ballot title caption stated that the
proposed measure would protect petitioning activity.  This court
determined that, in that context, "the verb 'protects' could, for
some voters, be misleading and does not reasonably identify the
subject of the measure."  Id. at 174.  The court so held because
the word "protects" implied, incorrectly, that the proposed
measure simply asked the voters "to confirm the existing state of
the law.  In fact, the state of the law is in issue and a
motivating reason for mounting this initiative effort."  Id.
To determine the subject matter of a proposed measure,
we first examine its words and the changes, if any, that the
proposed measure would enact in the context of existing law.  We
then examine the words of the caption to determine whether they
reasonably identify the proposed measure's subject matter.  See
Phillips v. Myers, 325 Or 221, 225-26, 936 P2d 964 (1997)
(illustrating principle).  We turn now to that analysis. 
As noted, Initiative Petition 111 would enact a single
maximum limit, $200 per month, on the property taxes that taxing
entities may impose on a single family residence and the parcel
of land on which it is located.  Petitioners, using average
property tax data from Multnomah County, provide the following
example, which the Attorney General does not challenge, to
explain the proposed measure's operation.  According to
petitioners, if the proposed measure passes, a property taxpayer
whose residential real property has a value of $126,000 (the
average assessed value of residential real property in Multnomah
County) or more will pay $2,400 per year ($200 per month) in
property taxes regardless of the assessed value of the property. 
The limitation operates in that example as a ceiling on the total
amount of property taxes payable, not as a limitation either on
the rate of property taxation or on the growth in assessed
valuation of property.  The Attorney General summarizes the
proposed measure's operation in the following sentence in the
ballot title summary: "Cap applies regardless of property's
assessed value."
The creation of a ceiling, or "cap," of that kind on
property taxes payable would represent a significant change in
the method by which taxing entities levy property taxes on
residential real property in Oregon.  Although the web of
statutory definitions and other provisions of law that govern ad
valorem property taxation in Oregon is complex, the value of the
property in question plays, and always has played, a role of
fundamental importance in the determination of the taxpayer's tax
obligation.  The following brief discussion of some of the
elements of Oregon's law of ad valorem property taxation
demonstrates that point.
ORS 307.030(1) provides:
"All real property within this state * * *, except
as otherwise provided by law, shall be subject to
assessment and taxation in equal and ratable
proportion."
ORS 308.210(1) requires every county assessor to
"proceed each year to assess the value of all taxable
property within the county, except property that by law
is to be otherwise assessed.  The assessor shall
maintain a full and complete record of the assessment
of the taxable property for each year as of January 1,
at 1:00 a.m. of the assessment year, in the manner set
forth in ORS 308.215.  Such record shall constitute the
assessment roll of the county for the year."
ORS 308.215(1) requires the assessment roll that the assessor
prepares to include, among other things, "[t]he real market value
of the land, excluding all buildings, structures, improvements
and timber thereon," "[t]he real market value of all buildings,
structures and improvements thereon," and "[t]he total assessed
value, maximum assessed value and real market value of each
parcel of real property assessed."  ORS 308.215(1)(e), (f), (i).
Oregon law requires a full market valuation of all real
property that is subject to ad valorem taxation.  ORS 308.232
provides:
"All real or personal property within each county
not exempt from ad valorem property taxation or subject
to special assessment shall be valued at 100 percent of
its real market value.  Unless the property is subject
to maximum assessed value adjustment under ORS 308.149
to 308.166, the property shall be assessed at the
property's assessed value determined under ORS
308.146."
ORS 309.100 provides property owners with an administrative
process that allows them to seek a reduction in the assessed
value of their property.  Once the assessment process establishes
the assessed value of the property, and the owner has exhausted
any appeals of the assessment of value, authorized governmental
entities levy their ad valorem taxes.  See ORS 310.050 to 310-125
(describing tax levy procedures).  In general, the taxpayer's ad
valorem property tax obligation, subject to applicable exemptions
and other limitations provided by law, is the product reached by
multiplying the total authorized tax rate certified by the taxing
entities by the assessed value of the taxpayer's property.
Article XI, section 11, of the Oregon Constitution
(Ballot Measure 50) which the people adopted in 1997, created a
maximum assessed value on property for ad valorem tax purposes
and a limitation on increasing the property's maximum assessed
value.  The legislature subsequently adopted legislation to
implement the 1997 constitutional provision.  See ORS 308.142 to
308.166 (providing special definitions and method for determining
maximum assessed value and assessed value in light of Article XI,
section 11).  Article XI, section 11b, of the Oregon Constitution
(Ballot Measure 5), which the people adopted in 1990, created two
categories of maximum allowable property taxes, one for schools
and the other for government operations, that applied for each
$1,000 of the property's real market value.  Those limitations,
however, do not undermine the significance of the property's
assessed value in the computation of a taxpayer's ad valorem tax
obligation.  Properly viewed, those limitations operate on or
begin from the same starting point:  the value of the property
that is subject to taxation.
The foregoing discussion demonstrates that imposing a
ceiling on total ad valorem property taxes that, as the Attorney
General agrees, applies regardless of the property's assessed
value, would alter significantly the structure of ad valorem
property taxation in Oregon.  The shift that the proposed measure
would make to the current scheme that relies heavily on the
assessed value of the affected property is, in our view, an
important part of the proposed measure's subject matter. 
Accordingly, the caption must disclose that aspect of the
proposed measure to comply substantially with ORS 250.035(2)(a).
We are not persuaded by the Attorney General's
contention that voters will know that the proposed measure
applies its tax limit to all properties regardless of value
because Measure 5 and Measure 50 also created property tax
limitations that, in general, did not distinguish between
properties with a high or low value.  We can only speculate about
what Oregon voters might recall at this point about the specifics
of Measures 5 and 50.  ORS 250.035(2)(a) requires that the
caption identify the proposed measure's subject matter.  The
proposed caption cannot identify the subject matter of the
proposed measure, in the statutory sense, by assuming that voters
are aware of its subject matter instead of stating it.  See Garst
v. Myers, 329 Or 529, 533-34, 992 P2d 451 (1999) (requiring
modification of caption that announced "changes" in judicial
election process but failed to inform voters what the changes
would be).
We similarly disagree with the Attorney General's claim
that the caption need not indicate that the property tax cap
would apply regardless of a property's value because that feature
would be merely an effect of the proposed measure that he may
disclose in the summary instead.  As discussed above, we have
concluded that that feature goes to the heart of the proposed
measure and is part of its subject matter, not merely one effect. 
The Attorney General's caption properly states that the
proposed measure would "cap[] property taxes."  The caption then
consumes 12 more words in describing the kind of property to
which the cap would apply.  As a result, the Attorney General had
no words remaining with which he could describe the proposed
measure's subject matter completely.
A similar problem arose in Phillips.  In that case, the
proposed measure would have created new rules for both the
appointment and election of candidates to judicial office.  One
provision of the proposed measure would have prohibited laws or
rules limiting free speech by candidates for judicial office. 
The Attorney General's caption stated:
"'AMENDS CONSTITUTION:  CHANGES JUDICIAL ELECTION
PROCESS; EXPANDS JUDICIAL CANDIDATES' CAMPAIGN SPEECH
RIGHTS.'"
325 Or at 224.  The petitioners contended that the Attorney
General's caption failed to convey the breadth of the subject
matter of the proposed measure.  This court agreed, noting that
the Attorney General should have used the allotted words to state
accurately the full scope of the proposed measure's subject
matter:
"Turning to that issue, we conclude that the
Attorney General's Caption fails to comply
substantially with the foregoing statutory requirement,
because it gives undue attention to one aspect of the
proposed measure at the expense of a full description
of the general subject of the measure.  The proposed
measure affects appointments to some judicial offices,
as well as all elections for judicial office.  By
choosing to emphasize one of the many significant
changes that the measure would make in the process of
judicial elections, the Attorney General ran out of
words to say anything about the subject of judicial
appointments.  The combination of highlighting one
among many changes and omitting altogether coverage of
part of the subject matter of the measure makes the
Attorney General's Caption inadequate under the
statutory standard."
Id. at 226 (emphasis in original).
As in Phillips, the caption here affords undue
attention to one aspect of the proposed measure -- the kind of
real property to which the cap would apply -- at the expense of a
full disclosure of the subject matter of the proposed measure. 
We conclude that the omission of any coverage in the caption of
part of the subject matter of the proposed measure makes the
Attorney General's caption inadequate under the statutory
standard.
Petitioners also challenge the Attorney General's "yes"
vote result statement, which we repeat to aid our analysis:
"'Yes' vote caps property taxes on single-family
residential properties to $200 per month; reduces
revenue to schools, other local governments under
certain circumstances."
ORS 250.035(2)(b) requires "[a] simple and
understandable statement of not more than 25 words that describes
the result if the state measure is approved."
Petitioners contend, for reasons already discussed in
connection with the caption, that the "yes" vote result statement
is insufficient because it fails to identify the full scope of
the proposed measure.  They argue, as they did in connection with
the caption, that the "yes" vote result statement must disclose
that the proposed measure's adoption would "fundamentally alter[]
the relationship between assessed value and property taxes
paid[,]" because "the cap applies regardless of the property's
assessed value."  The Attorney General repeats his argument,
discussed above in connection with the caption, that the proposed
measure would not alter the assessed value of any taxpayer's
property but, instead, would place a cap on each taxpayer's
residential tax assessment.
As we stated above, the Attorney General's argument
understates the scope of the change that the proposed measure
would effect.  Although it is true that the proposed measure
would not modify the assessed valuation of any property, it would
apply the tax cap, as the Attorney General's summary indicates,
regardless of the assessed value of the property.  The result of
the proposed measure, therefore, would include a significant
change of the role of assessed valuation in the determination of
a taxpayer's tax obligation.  We conclude that the failure of the
Attorney General's "yes" vote result statement to disclose that
aspect of the proposed measure means that that statement does not
comply with statutory requirements. 
Petitioners also challenge the Attorney General's
insertion of the phrase "under certain circumstances" in the
"yes" vote result statement.  Petitioners contend that the
proposed measure would result in a loss of revenue for public
schools and local governments and that that consequence does not
rest on speculation.  The Attorney General responds that the
court should not speculate on the possible reduction in revenue
in each taxing district if the proposed measure should pass.  He
asserts that the certified "yes" vote result statement
"accurately describes that revenue to schools and other local
governments will be reduced if assessed taxes on any single-family residence and its underlying land total more than the
equivalent of two hundred dollars per month."
Addressing the Attorney Generals's last argument first,
we are unable to find the point of the Attorney General's
argument expressed in the "yes" vote result statement.  The "yes"
vote result statement does not indicate that the circumstance
that will reduce revenue to schools and other local governments
is the reduction in assessed taxes on any residential property
due to application of the cap in the proposed measure.  If the
Attorney General intended to convey that message in the "yes"
vote result statement, he did not succeed in doing so.  We
mention the point because, when he addresses the problems with
the ballot title noted above on referral, the Attorney General
also may modify the "yes" vote result statement regarding the
disputed phrase if he desires.  See Novick v. Myers, 333 Or 12,
17, 35 P3d 1017 (2001) (applying same rule).
The Attorney General also argues that removal of the
phrase "under some circumstances" from the "yes" vote result
statement would create the inference that the proposed measure
would reduce revenue under all circumstances and that petitioners
have not established the accuracy of that claim.  Petitioners
respond that this court has required the Attorney General to
disclose that a proposed measure would lead to a predictable
reduction in public revenue, but has not insisted on absolute
proof of that fact.  They rely on Novick, in which this court
required the Attorney General to describe in a "yes" vote result
statement the reduction in the General Fund that would result
from adoption of the proposed measure in question.  333 Or at 17.
Novick is distinguishable.  In Novick, the proposed
measure would have dedicated 10 percent of income tax revenues to
highway funding.  This court concluded that the proposed measure
necessarily would have reduced revenues in the General Fund by 10
percent and, as a consequence, also would have decreased funds
available for services paid from the General Fund.  Id. at 16. 
The ultimate result of the instant proposed measure arguably is
less certain.  Petitioner's arguments, and some of their
supporting data, would be sufficient to justify asserting that a
result of the proposed measure would be a revenue reduction. 
However, the Attorney General also could determine reasonably
that the facts about the scope of any potential revenue reduction
from the proposed measure are not known fully at this time. 
Either position is a reasonable one under the circumstances.  As
a result, we conclude that use of the phrase "under certain
circumstances" in the "yes" vote result statement does not
violate statutory requirements.
We turn next to petitioners' challenge to the ballot
title for Initiative Petition 112.  For the reasons identified
above, we also conclude that the Attorney General's caption and
"yes" vote result statement in the ballot title for that proposed
measure do not comply substantially with statutory requirements.
As a consequence of the foregoing, we refer the ballot
titles for each proposed measure to the Attorney General for
modification.  ORS 250.085(8).
Ballot titles referred to Attorney General for
modification.