Source: https://www.inversecondemnation.com/inversecondemnation/property_tax/
Timestamp: 2019-04-22 12:43:01+00:00

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Posts categorized "▪ Property tax"
There's a category of cases in which it isn't difficult, with reasonable accuracy, to predict the ultimate outcome without knowing much about the substantive law. The recent ACA and marriage cases, for example. You kind of just know how they're going to come out. Bush v. Gore, 531 U.S. 98 (2000), was another one of those. Because the practical and political forces at play in those and similar cases overwhelm the legal objections no matter how technically and logically correct they appear, and the justices in the majority probably end up making their decisions based on pragmatic as well as their (perceived) policy inclinations. The opinions and dissents get dressed up with citations to precedent and the like, but what really seems to drive these cases is their practicalities.
It seems to us that today's 5-4 decision in Arizona State Legislature v. Arizona Independent Redistricting Comm'n, No. 13-1314 (June 29, 2015), is one of those. Not because it was what non-lawyers might say is a "result-oriented" decision that was compelled by the justices' politics, but rather because there's no obvious solution to the case that merges the obvious law with the practicalities. On one hand, it would seem obvious that the the term "legislature" in the Elections Clause really does mean The Arizona Legislature, and not generically "the legislative process." At least as a starting point that acknowledges the plain language of the constitutional text, and very likely the intent of the framers. On the other, not only does Arizona have a redistricting/reapportionment commission that has been around for a while, so do several other states, Hawaii included, and a ruling declaring those commissions unconstitutional when they undertake congressional redistricting would cause a lot of humbug in those states, and throw the issue of how to divide up a state's population for electing the House of Representatives into politically-charged state legislatures. These commissions seem to work reasonably well, and many have been in existence for a while without objection. So the question arose: what was the Court going to do in a challenge brought by the Arizona Legislature which objected to the people of Arizona taking away the Legislature's power and delegating it to a commission?
Well, we have our answer today in that case -- which we previewed here ("Is the Hawaii Reapportionment Commission About To Go The Way Of The O'o Bird?") -- with the Court's majority concluding that "Legislature" doesn't really mean "the legislature," and the people of Arizona constitutionally delegated the power assigned to "the legislature" in the Elections Clause to the Arizona redistricting commission. Read the majority opinion of Justice Ginsburg and the lead dissent of Chief Justice Roberts for the reasons why. Reasonable minds differ, and at least in this case we're okay with that, even if we guessed there was no way the Court would force commission states to throw the process back to their legislatures, even if the constitution required it. A challenge brought earlier -- like way earlier, when these commissions were originally created -- may have had a better go.
A sidebar: the opinions in this case reminded us of a somewhat similar case we litigated (and eventually lost, 3-2, at the Hawaii Supreme Court). In that case, the people of the County of Kauai adopted an amendment to their county charter by popular vote that would have limited the ability of the county to increase property taxes. When the measure was adopted by an overwhelming vote, it was challenged in state court by the County of Kauai, which sued the Mayor of the county to enjoin enforcement, arguing that the delegation in the Hawaii Constitution of the property tax power "to the counties" really meant "only to county councils." We represented the ballot proponents, who intervened to object on standing grounds: the County, we argued, could not be the plaintiff as it wasn't injured, and the defendant could not be the Mayor, as he wasn't the party who allegedly did anything wrong. It was the county council members who should have been the plaintiffs, and the County itself should have been the defendant. But the council members were too scared politically to be the actual plaintiffs, so they spent public funds and hired outside private counsel to represent the County.
Long story short, we lost the case, with three Hawaii Supreme Court justices agreeing that the County did not have standing as a plaintiff. Instead of dismissing the case, however, the majority dropped the County as plaintiff, made it the defendant, and essentially allowed an advisory opinion to be rendered. On the merits, the majority concluded that the term "to the counties" is really a delegation of exclusive power "to county councils."
Compare that to the Arizona case, in which the majority concluded that the Arizona legislature had standing because it had its power to redistrict taken away ostensibly unconstitutionally, and on the merits that "legislature" means the people exercising legislative functions. In other words, the Elections Clause only requires the legislature redistrict, but doesn't require any particular form of state government, so delegation of the power by initiative is okay. A "committee of the whole" argument.
See why it reminds of the Arizona case?
As we noted in our earlier post on that case, it could have had a big impact on Hawaii, which, like Arizona, accomplishes both Congressional and state redistricting and reapportionment via a commission. We didn't adopt ours by initiative like Arizona, at least directly. Ours was created by the 1978 constitutional convention, which was ultimately ratified by popular vote. No substantive difference, however. If today's ruling had gone the other way, Hawaii's reapportionment commission would likewise been at least partially unconstitutional.
So the Commission can breathe easy, at least for now.
We say "for now" because the bigger challenge is on the calendar for the next Supreme Court term, the Texas "one person, one vote" case which we wrote about here. However that case goes, it won't impact the Hawaii Reapportionment Commission directly like the Arizona case might have, but rather could prohibit the Commission from counting population the way it currently does, and overturn 50 years of Hawaii practice which excludes active duty military from being represented in the state legislature.
Like the Arizona case, we think we know which way this one is going to turn out, and why. But we're not going to say, just yet.
[Update #1: a report from last night's community meeting, "Railing Against Honolulu's $6 Billion Rail Project" ("Honolulu Mayor Kirk Caldwell and his top transit official took their licks from a decidedly anti-rail crowd during a boisterous town hall meeting at Washington Middle School on Wednesday."
There's been a lot of breathless reporting over the past couple of weeks about the skyrocketing cost of the 20-mile, 21-station Honolulu rail project. Cost estimates to build the line from Ewa to Ala Moana Center started off in the range of $3.5 billion, but anyone who was paying attention knew this wasn't anywhere in the ballpark. Sure enough, over time, the figure kept moving upwards. Now we're at, what, $6.5 billion, more or less? And there's nothing to indicate this is the upper limit except more promises that this figure is the light at the end of the proverbial tunnel.
Several state legislators are even holding a community meeting tonight (Monday, March 30, 2015) to let the people vent, and HART and the Mayor are going to dutifully show up and take any public lumps that may be coming their way.
But will anything come of this and the other (and we're paraphrasing here) "we're shocked, we tell you, shocked!" reactions to the revelations that the rail is going to cost more to build and perhaps operate than originally promised?
We predict no, that this is mostly political theater designed to assuage the public, when there's virtually no chance the project will get derailed or even scaled back, whatever it eventually costs. So despite all of the present posturing and prostrating before the public by officials, make no mistake: it's now too late to do anything but pay for the thing. New York City Mayor Bloomberg accurately projected the attitude of public officials when it comes to marquee projects such as Brooklyn's Barclay Center, "Nobody's gonna remember how long it took. They're only gonna look and see that it was done."
Besides, construction of the rail is already underway, and we know what that means.
The Hawaii Legislature is reviewing whether to extend the "sunset" period for the extra General Excise Tax that we pay in the City and County of Honolulu. Our prediction: the Legislature will extend the tax. It has to. Maybe not as long as the city administration would like, but extend the GET increase it will, despite the noise being made. And the Legislature will keep on doing so until the project is paid for. Update: see Update #2 above.
And how about the cost of running the thing, once built? A recent public meeting of HART's Transit-Oriented Development Committee revealed the preferred method to finance operation and maintenance (and it's no big secret): Tax Increment Financing. According to Wikipedia (which is, in this case, accurate), "TIF is a method to use future gains in taxes to subsidize current improvements, which are projected to create the conditions for gains above the routine yearly increases which often occur without the improvements." In other words, you pay for a project now by predicting that the project itself will raise property values in the future. HART is predicting -- mostly accurately, we think -- that property values along the rail corridor will rise as a result of rail being nearby. Whether they are within the City's contemplated "TOD" zone which will allow for more intensive and creative development than traditional zoning, or even outside of the TOD zones, where property values may increase due to the general gentrification that is predicted as a result of the rail. Bottom line: property taxes are likely going up. And the difference between what Honolulu property taxpayers pay now and what they will pay with the increased value -- the "tax increment" in "TIF" -- is what will pay for the rail.
This is what voters voted for, after all, when they, like Sgt. Deux Deux said "si" to the creation of HART (and the rail). From here forward, we all must say "oui."
Weird headline from KITV. No, owners whose property is taken for the rail aren't "profiting" if they are able to get more for their land than what the condemning agency offered; "just compensation and damages" are required by the constitution, and if they are able to obtain more, in many cases that still leaves them undercompensated and simply means the condemnor's offer was inadequate.
But besides the headline, KITV does a good report on last night's community forum on property owners' rights in eminent domain which we sponsored.
Here's one for the regulatory takings mavens, because it has just about every conceivable issue: ripeness, res judicata (yes, arugment was that the complaint was filed both too early and too late), Rooker-Feldman, the Tax Injunction Act, and an analysis of whether the property owner's complaint stated a claim for relief under the Takings Clause.
At issue in Coleman v, District of Columbia, No. 13-1456 (D. D.C. Sep. 30, 2014) was the District's statutory provision which allowed it to place a lien on properties whose owners do not pay their full property tax bill, and then sell the property at auction if the lien is not satisfied. So far so good - this scheme isn't that much different from similar provisions in virtually every state. The problem with DC's system is that "the law permits the taking of not only the amount of delinquent taxes, plus any costs, fees, and interest, but also the entirety of the original owner's equity in the property." Slip op. at 6 (footnote omitted).
So the guardian of Benjamin Coleman, a 76-year old veteran who suffered from severe dementia and therefore did not pay a $133 property tax bill for his home, was not too pleased when the District auctioned off the home to satisfy the lien, and then kept the difference between the amounts owed ($133 plus penalties, interest, and fees, a total of about $5,500) and the home's fair market value of $200,000. After a DC court foreclosure suit, Coleman's home was auctioned to a third party who eventually sold it for $71,000.
The Tax Injunction Act only prohibits courts from enjoining or restraining an assessment of taxes, and the complaint was not seeking to do so, only impose liability for the taking of Coleman's surplus equity.
The District also asserted the takings claim was not ripe under Williamson County because Coleman had not sought compensation via the DC courts. The court held, however, that the DC courts have not expressly recognized inverse condemnation as a cause of action. See slip op. at 24 ("The possibility that a court could fashion such an action is not sufficient to render Mr. Coleman's claim unripe.").
As for Rooker-Feldman (the doctrine which prohibits federal district courts from hearing cases which in effect seek appellate review of a state court judgment) the court held it did not apply. Yes, by attacking the foreclosure judgment, Coleman was, in some sense, seeking federal court review of the DC court's decision. But his federal complaint wasn't seeking to overturn the DC court's foreclosure judgment, and only asserted that the DC statute which prohibited a homeowner from recovering the excess equity is a taking.
As we noted above, the District also asserted the claim was brought too late, in that Coleman could have raised and litigated the takings claim in the foreclosure suit in DC court. The federal court rejected the argument because Coleman's takings claim was only a "permissible" claim in DC court, and since he wasn't required to bring it there, he was not precluded from doing so in a subsequent lawsuit.
Finally, the court rejected the District's motion to dismiss for failure to state a claim. The issue boiled down to whether the U.S. Supreme Court had foreclosed the takings argument in earlier cases which may or may not have raised the same issue as Coleman presented. The district court concluded that the Supreme Court had not and thus concluded "if the tax-sale statute does not provide a right to the surplus and the statute provides no avenue for recovery of any surplus ... [and a] property interest in equity could conceivably be created by some other legal source," then "failure to provide an avenue for recovery of the surplus would appear" to be a taking. Slip op. at 46.
The court held that Coleman had a property interest in the surplus equity because the District had failed to rebut Coleman's claims in its briefs, which failed to argue the issue at all. "Accordingly, the Court must assume that Mr. Coleman established the existence of an independent property interest in the equity in his home, as well as the remaining elements of a Fifth Amendment Takings Clause claim." Slip op. at 48.
Check this out, an opinion from the Appellate Division of the New York Supreme Court in a tax assessment case, Jacobowitz v. Bd of Assessors, Town of Cornwall, No. D39807 (July 30, 2014. The court held that the Fourth Amendment's prohibition on warrantless searches and seizures means that a property owner did not have to let the Town's appraiser into her home to "conduct an interior appraisal inspection" related to her property tax assessment. Slip op. at 1.
Contrary to the Town respondents’ contention, the petitioner did not, by challenging the Town respondents’ assessments, “open the door” to inspection of the interior of her property against her will, in effect, waiving her Fourth Amendment rights (see Matter of Yee v Town of Orangetown, 76 AD3d at 111-112). “A waiver of constitutional rights must be knowing and intelligent” (id. at 111; see Fiore v Oakwood Plaza Shopping Ctr., 78 NY2d 572, 581, cert denied 506 US 823). On this record, there is no such waiver. The petitioner has, in a sense, placed the assessed value of her property in issue, and her act of challenging the assessments of her property is a relevant factor to consider in balancing the reasonableness of the Town respondents’ interest in seeking entry into the petitioner’s home for inspection against the petitioner’s privacy interests. However, the petitioner’s actions do not amount to a waiver of her Fourth Amendment right to privacy.
Slip op. at 8. It also didn't matter that the purpose of the entry was not for a police investigation, the usual subject of Fourth Amendment issues.
Finally, in order to get the warrant, the Town must show probable cause, meaning that it must demonstrate that the inspection it seeks is reasonable, "in the context of their need for the inspection -- to conduct an interior appraisal in order to arrive at an estimate of the fair market value of the petitioner's home and to defend themselves against claims of selective assessment[.]" Slip op. at 8. The court noted that part of that is an explanation of why it was necessary to enter the home at all, especially when the Town did not need to enter the home for its earlier assessments, and the challenged assessment is for tax year 2006 (and a view if the interior of the home in 2012 might no longer be relevant).
Thanks to our New York colleagues at Bulldozers at Your Doorstep for sending this one our way.
Here's one that we meant to post earlier, but slipped through the cracks.
In Oklahoma eminent domain actions, the issue of valuation is first presented to a board of three commissioners ("disinterested landowners") from the county in which the condemned property is located. The commissioners report to the court, and if one party doesn't care for the recommended compensation, the party may demand a jury trial.
In Independent School District v Taylor, No.110,709 (Nov. 27, 2013), the Oklahoma Court of Appeals held that a jury in such a case is entitled to hear evidence regarding value, even if the commissioners did not consider it. In that case, the commissioners recommended a value, but after a trial, the jury came back in with a higher award after the owner introduced evidence about the value of a billboard lease which had not been presented to the commissioners. The trial court granted the condemnor's request for a new trial because the commissioners had not considered the billboard lease evidence.
There is nothing in the statutory procedure preventing evidence relevant to the determination of just compensation from being presented at the jury trial just because it was neither presented to nor considered by the commissioners. The statutory procedure does not require the parties or, in particular, the landowner, to provide the conmmissioners with information, nor does it limit the jury trial to a review of the information provide to an/or considered by the commissioners.
Slip op. at 12. It's the commissioners' duty to assess compensation, not a property owner's. The court applied the maxim that eminent domain statutes -- because it is a "forced sale" into which the owner is compelled -- "must be strictly construed in the landowner's favor and against the condemnior." Slip op. at 13.
The court rejected the argument that landowners would use this to sandbag the commissioners in order to get an award of attorneys' fees. In Oklahoma, a court has the discretion to award fees if the jury's award exceeds by 10% the commissioners' valuation. The court noted that where a property owner "strategically withholds inconspicuous damage elements form the commissioners but presents those damage elements at a subsequent jury trial," the trial court "may determine an award of such fees to be inappropriate." Slip op. at 16.
This decision is a good reminder of the place of the jury in determining just compensation, even in those states that use commissioner or similar procedures. This raises a couple of questions. First, what about states like New York, where you cannot get a jury trial in eminent domain? Second, a question that's not quite about juries, but the nature of the court. We're talking about whether the Court of Federal Claims -- an Article I court that sits without a jury -- can be delegated the exclusive power to hear inverse cases against the federal government seeking just compensation. We don't know the answers to those questions, but this case got us to thinking.
Our Owners' Counsel colleague Robert Nichols (isn't that the best name ever for an eminent domain lawyer?) represented the property owner.
Yesterday, according to the coconut wireless, was the official last day on the Hawaii Supreme Court for Associate Justice Simeon Acoba. State court justices and judges face mandatory retirement at age 70, and Justice Acoba's birthday is coming up in March.
While time marched on, so did the process for selecting his successor on the court. Governor Abercrombie has nominated a circuit court (trial) judge, and the Senate Judiciary has scheduled a hearing on the confirmation for next week. Le roi est mort, vive le roi.
While his body of work is large, we didn't want to let this moment pass without singling out three opinions authored by Justice Acoba: the first a 3-2 majority opinion in favor of property owners, the other a 2-justice dissent in a case involving a municipality's power to sue itself, and a final stand-alone dissent. The first two, as you may already suspect, are in cases in which we were counsel.
County of Hawaii v. C & J Coupe Family Ltd. P’ship, 119 Haw. 352, 198 P.3d 615 (2008). A case in which Justice Acoba, writing for a 3-justice majority over vociferous dissent, upheld the right of private property owners who are on the business end of an abuse of the eminent domain power, concluding that "although our courts afford substantial deference to the government's asserted public purpose for a taking in a condemnation proceeding, where there is evidence that the asserted purpose is pretextual, courts should consider a landowner's defense of pretext." One of the rare cases in which the Hawaii Supreme Court came down on the side of property owners.
County of Kauai ex rel. Nakazawa v. Baptiste, 115 Haw. 15, 165 P.3d 916 (2007) (Acoba, J. dissenting). Justice Acoba, joined by now-also-retired Justice Duffy, entered a magnificent dissent in a case about whether the people of Kauai had the right to control their property taxes by amending their County Charter. The issue in the case was one of procedure, with the primary question being whether Kauai officials (who had opposed the charter amendment) could bring a county-funded lawsuit against the county to invalidate it. While we lost that case, the opening paragraph of Justice Acoba's dissenting opinion was a salve which lessened the sting: "With all due respect, our role is to protect the judicial process, not to subvert it. In sua sponte deleting Defendant-Appellee Kauai County Council (County Council) as a defendant in this case and adding it back as the putative plaintiff in order to create a supposed controversy between the County Council and Defendant-Appellee Mayor of Kauai (Mayor) and Defendant-Appellee Finance Director of Kauai (Finance Director), the majority does exactly that, manipulating the lawsuit so as to create a controversy that did not in fact exist when the suit was filed, when it was decided by the Circuit Court of the Fifth Circuit (the court), when it was appealed to this court, and when it was argued by the parties before us." He called them out, and rightly so.
Rivera v. Dep't of Labor & Indus. Relations, 100 Haw. 348, 60 P.3d 298 (2006) (Acoba, J., dissenting). In this dissent, Justice Acoba reaffirmed the need for appellate oral argument and explained why it is important, even if it may not change the outcome ("Justice must be seen to be done."). This was a time when the Hawaii Supreme Court conducted orals in only the most rare of cases. We can now say that not having oral arguments was a huge disservice to the public, to the litigants -- and, we think, to the court itself -- and the court, thankfully, has since reversed course and regularly holds orals, we believe in no small part due to Justice Acoba's influence and pressure to do so.
We first appeared before Justice Acoba when he was Judge Acoba on the circuit court bench, and was assigned as the motions judge for the First Circuit. This was back in the days before the managerial system, where you pretty much drew whatever judge was available on your day, and all major motions in civil cases were assigned to a single judge. He was stern, but tolerant of young lawyers flailing about in his courtroom, and would sometimes offer practical advice from the bench. In our last argument before the Supreme Court that was still true, and Justice Acoba was always an active questioner who could be counted on to get to the heart of the issue in your case and press you hard on it. And his on-bench demeanor and questioning was no indication of where he'd end up -- he'd press both sides equally.
We never felt it right during Justice Acoba's active tenure to thank him for these rulings. It just felt inappropriate to "thank" a sitting judge or justice for doing the thing you believe is legally required. But we're going to take this opportunity of his retirement, and despite the painful parting shot which he joined in Kauai Springs, to do so now.
Mahalo, Justice Acoba. You will be missed.
Here's one of those owner-puts-up-a-fence-that-is-actually-on-his-neighbor's-property situations, this time with a very Hollywood twist.
The owner, you see, was Larry Hagman, of Dallas and I Dream of Jeannie fame. Seems the fence between his Ojai, California property and that of his neighbors, a religous group, was .44 acres into their land, and Hagman claimed it by adverse possession. In Hagman's quiet title action, the trial court granted him summary judgment.
In Hagman v. Meher Mount Corp., No. B239014 (Apr. 3, 2013), the Court of Appeal affirmed. The court held that Meher Mount's property is not immune from adverse possession by virtue of it being owned by a "public benefit corporation," because that is not the same as a "public entity." The latter are "vested with some degree of sovereignty." Slip op. at 4. Even though public benefit corporations like Meher Mount require government approval, "[t]hey are not owned or operated by the government. They do not possess any of the traditional incidents of soverign authority such as the power to tax or to condemn property." Id. at 5.
As for Meher Mount's argument that J.R. had not shown that he paid the property taxes and mosquito assessments on the land during the prescription period, the court held that Meher Mount did not pay property taxes, so Hagman was not required to either. And the mosquito assessment? Not a "tax" according to the court. See id. at 9-10.
The Courrt has denied certiorari in Corboy v. Louie, No. 11-336, the case asking the Court to review the Hawaii Supreme Court's dismissal of a challenge to the property tax exemptions conferred on lessees of Hawaiian Homesteads. The petitioners claim this is an unconstitutional race-based classification, but the Hawaii Supreme Court dismissed for lack of standing (the petitioners had not applied for Hawaiian Homestead leases because they are ineligible to receive them).
Here's the order, in the event you want to see it for yourself.
This case had been kicking around on the docket since December 2011, and it was only on the Term's last day that the Court finally said no.
Lost in all the excitement over today's ruling in the the Obamacare case that turned out not to be today, is this little tidbit for those from Hawaii. The Court yet again did not make a decision whether to grant cert in Corboy v. Louie, No. 11-336, which had been scheduled for last Thursday's conference. This is the case asking the Court to review the Hawaii Supreme Court's dismissal of a challenge to the property tax exemptions conferred on lessees of Hawaiian Homesteads. The petitioners claim this is an unconstitutional race-based classification, but the Hawaii Supreme Court dismissed for lack of standing (the petitioners had not applied for Hawaiian Homestead leases because they are ineligible to receive them).
This case was originally scheduled for the Court's December 9, 2011 conference, but that was put off when the Court asked the Obama Administration to file an amicus brief, which it eventually did. The petitioners responded to that brief, and the case was put back on the conference calendar for June 21, 2012. Thus, we expected today's order list to tell us whether cert had been granted or denied, but it contained no reference to the case. Mystery solved when the Court's docket entry was updated to reflect consideration of the petition at the Thursday, June 28, 2012 conference. Whether this additional delay reveals anything about whether the Court will grant the petition is anyone's guess.
Given that the last day of the current Term is Monday, June 25, we're not quite sure when the order list from the June 28 conference will be released. But whenever that is, we will bring it to you, so stay tuned.
Final Brief In Case Challenging Hawaiian Homes Property Tax Exemption As Racial Discrimination: SG's Assertion That HAWSCT Decision Was One Of State Law "Dead Wrong."
Here is the final brief (Petitioner's response to the SG's inviation amicus) in Corboy v. Louie, No. 11-336 (cert. petition filed Sep. 15, 2011), the case asking the U.S. Supreme Court to review the Hawaii Supreme Court's dismissal of a challenge to the property tax exemptions conferred on lessees of Hawaiian Homesteads. The petitioners claim this is an unconstitutional race-based classification, but the Hawaii Supreme Court dismissed for lack of standing (the petitioners had not applied for a Hawaiian Homestead lease).
A. The Solicitor General’s assertion that the decision below rests on an independent and adequate state ground is dead wrong. Although he repeats the Hawaii Supreme Court’s claim that its decision rested on state law (U.S. Br. 9-11), saying it is so does not make it so.
1. As we have explained (Pet. 20-22), this Court routinely reviews decisions in which a purported state-law reason for declaring a case nonjusticiable is intertwined with the merits of the underlying federal question. The Solicitor General does not dispute that fact. Indeed, he never really grapples with the fact that the ostensible state-law basis of the decision below is inextricably bound up in whether the native Hawaiian classification is permissible.
The Hawaii Supreme Court ruled that petitioners could not challenge the racially discriminatory taxation scheme because they did not also seek to participate in the racially discriminatory leasehold program. But that is just an indirect way of saying that use of a transparent proxy for race (lessee status) is permissible and that the only potentially cognizable constitutional injury is the additional and separate leasehold benefit that is explicitly conditioned on an applicant’s race.
Br. at 1-2 (emphasis original).
Here is the Court's docket entry. The case is now scheduled for the Court's June 21, 2012 conference. Stay tuned.
Here's more on Armour v. City of Indianapolis, No. 11-161 (June 4, 2012), the case in which a 6-3 majority of the Supreme Court held that the City's decision to forgive the balance owing for homeowners who had not fully paid the sewer assessement, while not issuing refunds to their neighbors who had already paid in full.
The last article got us to thinking: if the primary reason that the Court held that the refusal to provide refunds was not irrational was that it was too much administrative hassle to cut the checks, doesn't that mean the tail is wagging the dog? Aren't the mechanics of returning the money secondary -- or even irrelevant -- to the question of whether the City can legally keep it? If the Court can conclude that it is not irrational to keep money because it is too much humbug to return it, doesn't that just take you in a big logical circle?
That's the essence of today's opinion in Armour v. City of Indianapolis, No. 11-161 (June 4, 2012), in which a 6-3 majority upheld the City's decision to forgive the balance owing for homeowners who had not fully paid the assessement, while not issuing refunds to their neighbors who had already paid in full.
The majority held that the City had a "rational basis" in effect to charge Homeowner A nearly 30 times as much for the same service as Homeowner B because it would be too much "administrative hassle" (to quote CJ Roberts' dissent) to process refunds to those who had fully paid the assessment. Since no suspect classification was involved, the City's actions are reviewed only for minimum rationality. Which, as we know, means "any excuse."
For many years, an Indiana statute, the "Barrett Law," authorized Indiana’s cities to impose upon benefited lot owners the cost of sewer improvement projects. The Law also permitted those lot owners to pay either immediately in the form of a lump sum or over time in installments. In 2005, the city of Indianapolis (City) adopted a new assessment and payment method, the "STEP" plan, and it forgave any Barrett Law installments that lot owners had not yet paid.
Slip op. at 1. And the reward for the approximately 25% of the homeowners who did the right thing and paid in full? The City's thanks, and a big "SUCKER" stamp for their foreheads from the Court.
The federal government has filed its invitation brief in Corboy v. Louie, No. 11-336 (cert. petition filed Sep. 15, 2011), the cert petition asking the U.S. Supreme Court to review the Hawaii Supreme Court's dismissal of a challenge to the property tax exemptons conferred on lessees of Hawaiian Homesteads.
The cert petition argues that the refund claimants have standing, and that the Equal Protection Clause prohibits state and local tax exemptions that are "available only to members of a certain race." The State of Hawaii's Brief in Opposition argues that the these are questions of state law, and that the Court should not grant cert.
The case was scheduled for the Court's conference on December 12, 2011, but the Court postponed consideration of the case and invited the Obama Administration to weigh in with a brief, because the petition draws into question the constitutionality of the Hawaiian Homes Commission Act and the constitutionality of a part of the Hawaii Admission Act. When federal laws are so questioned, the federal government is required to be notified, and it may file a brief in the case. The petitioners did, but the Solicitor General's office did not weigh.
As a result of the Supreme Court's invitation (such "invitations" are never declined!), it now has, and the feds have strongly supported the State in arguing that the standing questions are matters purely of Hawaii law, and the Hawaii Supreme Court's dismissal is grounded in "independent and adquate" state law, meaning that it is immune from Supreme Court review under Michigan v. Long, 463 U.S. 1032 (1983). The SG's brief also argues alternatively that if federal standing law is applied, the petitioners are alleging only "taxpayer standing" and not an individualized injury. Finally, the brief argues that whether the rule of Rice v. Cayetano, 528 US. 495 (2000) is applicable should be left for a future case. Perhaps the most interesting parts of the SG's brief are its recitation of Hawaii history (pages 1 - 3), and its noting of "recent and ongoing legal developments" (the State's recent legislation instituting a "process for the indigenous native people of Hawaii to reorganize as a sovereign government").
Here is the Court's docket entry. We will bring you more if additional briefs are filed, and when the case is put back on the Court's conference calendar.
Here's one for your California readers. You know Proposition 13, the provision in the California Constitution that limits property tax increases, and allows reassessment of value only upon a change of ownership, and you either love it or hate it: to some it insulates property owners from being forced out of their homes by uncontrolled property taxes, to others it is responsible for the downfall of California as the Golden State.
A property owner's acquisition of replacement property for property taken in "eminent domain proceedings" in which the taken property is acquired by a "public entity," is not a "change of ownership." But what about when new property is purchased to replace property sold under threat of condemnation to a private developer who is teamed up with a government redevelopment agency -- is that a "change of ownership" such that the property is assessed at current market rates?
In Duea v. County of San Diego, No. D058333 (Cal. Ct. App. Feb. 29, 2012, published Mar. 27, 2012), the California Court of Appeal (4th District) concluded that it was. But the court's conclusion was not the result of an analysis of Prop 13, but was based on a procedural point of administrative law: the property owner did not exhaust his remedies, and the evidence before the agency supported its findings.
Duea owned San Diego property that was part of a "ballpark district" in which his property was slated for condemnation in order to build a new stadium and related development (a boutique hotel). The commercial redevelopment portion of the project would be carried out by a private developer. Adjacent properties were acquired after the City's redevelopment agency instituted condemnation proceedings, but "acquisition of [Duea's] original property by formal condemnation proceedings was either stopped or delayed as a result of a series of third-party lawsuits filed against the ballpark project." Slip op. at 4.
Duea eventually sold his property to the private developer. He then purchased replacement property, and sought to invoke Proposition 13's protection and have the base year value of his old property transferred to the new property. The parties agreed that "'the transfer of ownership of the [original] property to [the developer] was for use in connection with the Ballpark and Ancillary Projects, and that it would have condemned the property under its power of eminent domain if [Duea] had failed to execute the sale.'" Slip op. at 5. After an unsuccessful visit to the county board of euqalization, the trial court concluded the sale was a "private sale."
The court's conclusion is based entirely on its analysis that Duea did not exhaust his administrative remedies, had in effect waived his argument that the private developer was acting as an agent for the"public entity," and that he could not supplement the administrative record. Nonetheless, the opinion is worth reading. Check it out, especially if you are in California. More about the case here.
Today was the day we were to have found out whether the Supreme Court would review Corboy v. Louie, No. 11-336 (cert. petition filed Sep. 15, 2011). That's the case seeking review of the Hawaii Supreme Court's opinion which concluded that challengers to the property tax exemptions conferred on lessees of Hawaiian Homesteads lacked standing to bring suit. More from today's Star-Advertiser report Court might hear case testing state benefits for Hawaiians.
Today, however, the Court released an order inviting the U.S. Solicitor General to express the views of the federal government, usually a sign that the Court has some interest in a case. No doubt the Court asked for the SG's views because the cert petition draws into question the constitutionality of the Hawaiian Homes Commission Act and the constitutionality of a part of the Hawaii Admission Act. When federal laws are so questioned, the federal government is required to be notified. The petitioners did, but the SG did not weigh in with a brief. Now he will (yes, it is an "invitation" but it's one of those inviations that is never turned down).
Although the SG is often referred to as "the tenth Justice" because the Court pays close attention to his or her arguments, it is by no means certain that the Court will accept those arguments, nor is it certain on which "side" the SG will weigh in on. For a recent example, see the PPL Montana case in which the Court invited the SG to file an amicus brief. He filed a brief urging the Court to deny the Petitioner's requrest for certiorari. The Court rejected that argument and agreed to review the case. The SG then filed a merits brief in support of the Petitioner, and presented oral argument supporting the Petitioner.
Some background in the Corboy case. Only "native Hawaiians" are eligible to lease homestead land, and thus only those possessing the appropriate blood quantum are entitled to the property tax exemptions. The Hawaii court dismissed the case for lack of jurisdiction, holding the petitioners lacked standing to challenge the exemption since they had not sought homestead leases (leases for which they were ineligible because they are not native Hawaiians).
We'll keep following this case and post the SG's brief when filed.
Final Briefs In Hawaii SCOTUS Case: Is The Hawaiian Homes Property Tax Exemption Racial Discrimination?
Update: The Court has invited the Solicitor General to provide the views of the federal government, so we're still on hold.
At its December 9, 2011 conference, the U.S. Supreme Court will consider whether to review Corboy v. Louie, No. 11-336 (cert. petition filed Sep. 15, 2011). That's the case seeking review of the Hawaii Supreme Court's opinion which concluded that challengers to the property tax exemptions conferred on lessees of Hawaiian Homesteads lacked standing to bring suit.
Some background. Only "native Hawaiians" are eligible to lease homestead land, and thus only those possessing the appropriate blood quantum are entitled to the property tax exemptions. The Hawaii court dismissed the case for lack of jurisdiction, holding the petitioners lacked standing to challenge the exemption since they had not sought homestead leases (leases for which they were ineligible because they are not native Hawaiians).
Because the petition draws into question the constitutionality of the Hawaiian Homes Commission Act and the constitutionality of a part of the Hawaii Admission Act, the U.S. Solicitor General was served a copy, but the SG has not weighed in.
We'll keep following this case. Look for the results of the Court's conference on December 12, 2011.
Hawaii Supreme Court Nominees Will Be Public - Courthouse News Services writes about the case in which we represent the Star-Advertiser in its case to compel the governor to publicly disclose the lists of judicial nominees he receives from the Judicial Selection Commission. More on the case here. The Reporters Committee for Freedom of the Press also reported on the story here.
Beyond "NIMBY" - a post on Legal Planet, a blog produced by enviro lawprofs, advocates that we abandon the term NIMBY. I like "I GOT MINE."
Reason hit & run posts John Paul Stevens: Kelo Was No Big Deal. Then why you keep bringing it up, Your Honor? Gideon Kanner responds. Come on, you know you want to click that link.
From Patty Salkin's Law of the Land Blog, the latest in the vested rights issue: Oregon Supreme Court Examines Vested Rights and Holds Bad Faith Cannot be Considered in Measure 49 Calculation.
Via Julie Tappendorf's Municipal Minute blog: Sewer Tax Discrimination Case to be Decided by Supreme Court. This is a case to follow, and we will be posting the cert petition in that case shortly.
Amicus Brief In Hawaii SCOTUS Case: Is Hawaiian Homes Property Tax Exemption Racial Discrimination?
The Pacific Legal Foundation, the Cato Institute, Professor Paul M. Sullivan, The Grassroot Institute of Hawaii, and the Goldwater Institute have filed this amicus brief, supporting the cert petition filed last month in Corboy v. Louie, No. 11-336 (cert. petition filed Sep. 15, 2011).
That's the case seeking SCOTUS review of the Hawaii Supreme Court's opinion concluding that challengers to the property tax exemptions conferred on lessees of Hawaiian Homesteads lacked standing. Only "native Hawaiians" are eligible to lease homestead land, and thus only those possessing the appropriate blood quantum are entitled to the tax exemptions, and the Hawaii court dismissed the case for lack of jurisdiction, holding the petitioners lacked standing to challenge the exemption since they had not sought homestead leases (leases for which they were ineligible because they are not native Hawaiians).
The core issue of this case is whether a state and its municipalities may enforce property tax schemes that require some citizens to pay higher taxes because of their race. The State of Hawaii and its four counties allow leaseholders of certain public lands—the Hawaiian ceded lands—to pay little or no property taxes. By definition, only "native Hawaiians," a term held by this Court to be a racial classification, may lease the ceded lands. Thus, the state and county tax structures that afford benefits only to the leaseholders of the ceded lands grant preferences to, and discriminate against, Hawaiian citizens on the basis of their race. The authority for this discriminatory treatment comes from both federal and state laws.
The state and county tax exemptions are "inextricably tied to an ancestral requirement." Appendix A (Opinion of the Supreme Court of Hawaii (Apr. 27, 2011) (Acoba, J., concurring)) to Petition at 62a. The Homestead Act, as incorporated by the Hawaii Constitution, relies upon the same ancestral definition of native Hawaiian that was found to be a racial classification in Rice. 528 U.S. at 515. All racial or ethnic classifications imposed by any level of government "are constitutional only if they are narrowly tailored measures that further compelling governmental interests." Adarand, 515 U.S. at 227. The state’s race-based tax exemptions cannot survive this strict scrutiny level of review.
In a cert petition filed yesterday, five Hawaii taxpayers argue that they have standing to challenge the constitutionality of property tax exemptions conferred on lessees of Hawaiian Homesteads. Only "native Hawaiians" are eligible to lease homestead land, and thus only those possessing the appropriate blood quantum are entitled to the tax exemptions.
The state's Brief in Opposition, if any, is due in thirty days.
Yes, the government took your property. But it wasn't an exercise of its eminent domain authority. When you don't pay your tax bills, the government can foreclose on your property, and sell it. Which it did. Inverse condemnation complaint dismissed.
involves the taxing power, not the eminent domain of the government.").
In What's At Stake in Stop the Beach Renourishment, Lawprof D. Benjamin Barros posts a comprehensive summary of "judicial takings" case accepted for review by the US Supreme Court, Stop the Beachfront Renourishment, Inc. v. Florida Dep't of Environmental Protection, No. 08-11 (cert. granted. June 15, 2009). Raises several interesting points and worth a read.
I've received a few interesting comments and e-mails on an earlier post ("Why Hawaii Can't Vote On Property Taxes") about the Ohana Kauai property tax charter amendment and how it was declared unconstitutional by a 3-2 Hawaii Supreme Court.
I know you're addressing strict legal interpretations here at inversecondemnation.com, but I feel compelled to mention that giving the direct power to tax to the electorate does not necessarily mean that it will be exercised fairly and wisely. To deprive the electorate of ability to directly set tax policy through charter amendments does not deprive them of the ample power they have to effect tax policy through their choice of elected representatives and their ability to remove unresponsive representatives. It also permits elected representatives to make wise and balanced decisions fair to all taxpayers many of which have no right to vote. These decisions may then also be enacted with an eye to economic consequences which are often overlooked by the electorate. My primary concern over the Ohana Kauai charter amendment was that it would tend to shift the property tax burden to non-owner occupants such as owners of rental units who in turn must pass this along in rent increases to their non-home owning, less affluent tenants.
I recall talking to a less than affluent renter I know who voted for the amendment because he wanted to prevent tutus from being forced to sell their homes due to rising property taxes. This was one of the several heart-wrenching and effective pleas that were voiced during the public debate regardless of their factual validity. He had no clue that by voting for the amendment, he might just as likely be voting to indirectly increase his own rent. As we all know, government is reluctant to reduce spending in the face of lower revenues when it can increase them simply by raising taxes, especially when the heavier financial burden is shifted to non-voters, the uninformed and minority classes of taxpayers.
It's true that the voters are not presently without remedies, and that reasonable people can differ regarding whether establishing or amending property tax policy by direct democracy is a good idea from a philosophical or political standpoint. At issue in the Baptiste case, however, was not whether a property tax cap or whether allowing voting on taxes was a good idea or not, but but whether judges are the ultimate arbiters of that question. In the end, the 3-2 majority of the Hawaii Supreme Court held they are.
Faced with a budget shortfalls and declining revenue projections (and what level of government these days isn't?), the Honolulu City Council voted today to raise property taxes and eliminate a property tax credit that would have softened the raise for some homeowners. See the reports here and here. It also voted to raise the bus fare from $2 to $2.50 for a single fare (with corresponding increases in monthly pass fares), up the vehicle weight tax 25% this year and an additional 25% next year (Hawaii taxes automobiles by weight, not by age as California does), and quadruple parking rates at the Honolulu Zoo.
There's been a lot of rumbling lately from Hawaii taxpayers about decreasing government expenditures and controlling property tax rates, but a few years ago, after years of pleading with their elected representatives for relief, Kauai voters actually did something about it. They voted to amend the Kauai Charter themselves to establish a baseline property tax rate and cap yearly increases. That charter amendment -- known on Kauai as the "Ohana Kauai" amendment after the grassroots citizens' group that drafted the proposal and gathered enough signatures to put it on the ballot -- passed by an overwhelming margin.
Under the Ohana Kauai charter amendment, property taxes for owner-occupied homes were capped at 1998-1999 amounts for taxpayers who purchased their homes in 1998 or earlier, and capped at the amount paid in the year of purchase for homes purchased after 1998. The measure also limited tax increases to 2% per year. It was designed to bring a measure of certainty and predictability to residential real property taxes, as homeowners would know from year-to-year their maximum tax liability, and county officials would know how much tax revenue to expect from resident homeowners.
[A]lready saddled with his purchase, [the existing homeowner] does not have the option of deciding not to buy his home if taxes become prohibitively high. To meet his tax obligations, he might be forced to sell his home or to divert his income away from the purchase of food, clothing, and other necessities. In short, the State may decide that it is worse to have owned and lost, than never to have owned at all.
Kauai's similar experiment in citizen-initiated property tax revolts would have a different outcome. After the Ohana Kauai amendment was placed on the November 2004 ballot, in the run-up to the vote, virtually every Kauai elected official attacked the measure, with the Mayor and the members of the County Council leading the charge. They advanced the predictable claims: rolling back property taxes and capping increases would hamstring their ability to deliver vital government services such as police and fire (they took the usual approach of threatening police and fire services first and not last) and, most importantly, claimed the amendment would limit the County’s expenditures on the public worker’s union. However, since 1998, the Kauai budget had risen 50%, and the 2005 budget had increased 25% over the previous year’s alone. With Kauai government spending at a record $123 million, the officials’ cries apparently rang hollow with voters: in spite of the organized and well-financed opposition, in November 2004 the voters of Kauai approved the measure by a nearly two-to-one margin.
The County officials did not accept the political defeat lightly, and instituted what can only be described as a "friendly" lawsuit. The Kauai County Attorney sued the Mayor (her boss), the County Council (who finance her office), and the Finance Director, claiming the Hawaii Constitution -- which provides that "counties" may establish property tax law -- grants county councils a monopoly on that issue. In other words, the people of Kauai were without the legal authority to amend their county charter on the subject of property taxes -- only the County Council could set and change property taxes. The County vs. County lawsuit asserted the voter-enacted measure was void because the term "counties" in article VIII, section 3 of the Hawaii Constitution really means "county councils." The lawsuit was, to say the least, a novel procedure: the County Attorney represented both the plaintiff and the defendants, and the litigation was funded by a $250,000 war chest of taxpayer money, budgeted by the defendant County Council to hire Hawaii’s largest private law firm to represent the plaintiff to attack the charter amendment.
Four Ohana Kauai homeowners intervened in the collusive lawsuit -- somebody had the defend the charter after all. They asserted the plaintiff lacked standing and the complaint sought an advisory opinion, and that government officials should not be able to manufacture a lawsuit in which they were both the plaintiff and the defendants, fund the case with public money, and represent both sides in litigation. The Kauai county trial court disagreed, held the case was justiciable, and voided the charter amendment, ruling that only county councils may set property tax policy, and the people have no right to vote to amend the county charter regarding property taxes.
Up to the Hawaii Supreme Court the homeowners went, arguing first that the officials-versus-themselves lawsuit sought a nonjusticiable advisory opinion, and the case should have been dismissed before the court reached the merits. The second issue raised was whether the Hawaii Constitution delegated the property tax power to county councils when it said it delegated the property tax power to the "counties."
In the end, a sharply divided Hawaii Supreme Court ruled 3-2 that the case was justiciable and government officials have standing to manufacture a lawsuit, the county attorney may represent both the plaintiff and the defendant, and the county council could take a quarter million dollars of taxpayer money and spend it on private lawyers to assist in the anti-citizen lawsuit. On the merits, the majority struck down the Ohana Kauai charter amendment as unconstitutional, holding only county councils have the property taxation power. See County of Kauai ex rel. Nakazawa v. Baptiste, 165 P.3d 916 (Haw. 2007).
As the lawyer who ended up with the short stick, I naturally preferred the opinion of the two dissenting justices who excoriated the opinion in unusually strong terms (check it out here), accusing the majority of factual manipulations and procedural sleight-of-hand, suggesting the majority’s decision to define "county" as "county council" and preclude popular voting on property taxes was more driven by politics and the majority’s notions of good policy than by a principled analysis of the law.
But a dissenting opinion is by defintion a minority report and not the law, so even though we fought the good fight and (I continue to believe) had the better arguments, those arguments did not carry the day. The Hawaii Constitution, according to the three-justice majority of the Hawaii Supreme Court, gives county councils a property tax monopoly.
And that, dear reader, is why Hawaii voters do not have a direct say in property taxes.
For more about this case, visit our summary page, which includes links to a Wall Street Journal report on the decision, an article with a legal focus I wrote for the ABA State and Local Government Law News, an op-ed I wrote for the Honolulu Advertiser, all the briefs of the parties and amici, oral argument transcripts, and on and on.
University Avenue in Berkeley, California -- the main entry to the city hosting the flagship campus of the University of California system -- is not exactly a grand introduction: the street is rutted with potholes (a trip west of San Pablo Avenue can be especially bone-jarring), the median strip was revamped as a "xeriscape" a few years ago at a six-figure cost but still looks mostly like a weed patch (ok, a water efficient weed patch), and vacant storefronts with semi-permanent homeless encampments in their doorways line the street. And University Avenue is not unique. The city's other main drags - Shattuck, MLK, Jr. Way, Ashby, Sacramento, Telegraph, and College are in similar (or worse) condition.
The classic Berkeley home - a creaky Victorian with drafty windows, a Wedgewood stove and musty furnace - will undergo a drastic makeover under the city's aggressive new plans to fight global warming.
Within the next few years, the city is likely to mandate that all homes meet strict energy standards. In many cases this would mean new double-paned windows, insulation in the attic, walls and floors, a new white roof that reflects heat, a forced-air furnace and high-efficiency appliances.
The cost: upward of $33,800.
"The improvements will not only save energy, they'll make the home less drafty and more comfortable," said Billi Romain, the city's sustainability coordinator. "There are many benefits not just for the city, but for the homeowner."
In the beginning, the city will offer incentives, such as rebates and financial assistance, for homeowners to comply. But within a few years, the city will start imposing penalties for those who don't meet the standards, said Timothy Burroughs, the city's climate action coordinator.
"We want to emphasize that this is in people's interest," he said. "If we're serious about reducing our emissions, it's only possible if virtually every building achieves significant improvements in energy efficiency."
No deadlines or specific standards have been set yet. But the city's goal is for all of Berkeley's 23,000 homes and 25,000 duplexes and apartment units to reduce energy use by 35 percent by 2020.
In some cases, the standards can be met relatively inexpensively, [Billi] Romain said. Caulking, sealing, insulation and new appliances - an investment of under $10,000 - can reduce energy use by more than 25 percent.
Don't forget that Berkeley has one of the most restrictive residential rent-control ordinances in the country, so property owners will most likely have to absorb these costs themselves, despite the promise of "financial assistance" from the cash-strapped city.
But that's OK because "this is in people's interest."
Not to worry, Berkeley homeowners, you can always work a second job as an "energy auditor," "sustainability coordinator," or "climate action coordinator."
How often in an appellate opinion does the court use the term "glom?"
[The Appellee] gloms onto the "police power" aspect of the definition [of regulatory fees] in arguing that "Medeiros plainly concern[ed] the 'police power' of 'criminal investigative services,' not a user fee as suggested by [the state]."
No matter what you may think of the phraseology of Hawaii Insurers Council v. Lingle, No. 27840 (Haw. Dec. 18, 2008), the decision is important because who can take your money, how they go about doing it, and what happens to your money afterwards, matters. As Chief Justice John Marshall famously wrote in McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), "the power to tax is the power to destroy," and that may be even more true today where the power to regulate and impose fees may be the same thing.
Under Hawaii law, only the state Legislature and the various County Councils can impose taxes: the Legislature has the general taxation power, and the Councils have -- at least according to a recent decision by the Hawaii Supreme Court -- the exclusive power to determine property taxes. In Hawaii Insurers Council, the Hawaii Supreme Court held that assessments imposed by the state Insurance Commissioner were not unconstitutional "taxes" when imposed -- they were "regulatory fees" -- but the Legislature's transference of $3.5 million of the collected funds into the general fund violated separation of powers.
The facts of the case are relatively straightforward and are set out in the opinion, so we won't repeat that effort. Read the slip opinion for the details. The short story is that the State of Hawaii no longer funds the Department of Commerce and Consumer Affairs from the general fund, but by user fees and fees imposed on regulated industries, including the insurance industry. The Insurance Regulation Fund contained the monies collected by the Insurance Commissioner. By statute, the money in the IRF could not be transferred to the state's general fund. Included in the insurance division's budget was a "reserve of surplus funds" to be used to cover expenses and contingencies that may arise in the insurance industry (the rehabilitations, insolvencies, etc., we have all become very aware of recently on a national level). In 2004, the Legislature decided to change the statute and transfer $4 million of this money into the general fund, but that amount was cut by the Governor's line-item veto to $2 million. The following year, the Legislature transferred an additional $1.5 million to the general fund.
A lawsuit by the Hawaii Insurers Council followed, and eventually the Intermediate Court of Appeals held, among other things, that the assessments were "taxes" because they were not allocated to defraying the costs of providing services to the insurance industry and were not proportionate to the benefits received. See Hawaii Insurers Council v. Lingle, 117 Haw. 454, 459-60, 184 P.3d 769, 775 (Haw. Ct. App. 2008). The Hawaii Supreme Court partly agreed, and partly did not. The court first discussed its earlier opinion in State v. Medeiros, 89 Haw. 361, 973 P.3d 736 (1999), which identified two permissible types of fees: user fees (those charged for the use of an item of facility), and regulatory fees which include those imposed by an agency to cover the expenses of regulating an industry. At the end of the day, the Hawaii Supreme Court disagreed with the ICA and held that the fees imposed by the DCCA were not illegal "taxes" or "user fees," but were constitutional "regulatory fees" Ben Lowenthal does a good job of summarizing the court's reasoning here.
The legislature's promulgation of the transfer bills amounted to an impermissible blurring of the distinction between the executive power to assess regulatory fees and the legislative power to tax for general purposes. We therefore hold that the transfer bills unlawfully sought to transform $3,500,000 of legitimate regulatory fees into general tax revenue....As such, the $3,500,000 that was moved into the general fund pursuant to the transfer bills must be returned to the CRF so that they may be used for the regulation or benefit of the parties upon whom the assessments were imposed.
Slip op. at 41-42 (footnote omitted). While the opinion does not expressly say so, what seems to animating the court's decision is that the Legislature's raid of the funds crossed some indistinct and not-quite-defined line because when the IRF funds were placed into the General Fund, they could be spent in the same way as collected taxes. The court established a bright-line rule: agencies collect fees and legislatures tax, and never the twain shall meet. In other words, if the government collects a fee in order to regulate an industry, it better use the money collected to regulate the industry.
Finally, the court easily disposed of the equal protection class-of-one disparate treatment claim, holding there was a rational basis for requiring a regulated industry to pay for the costs of regulation. The court also rejected the State's claim that HIC did not exhaust administrative remedies, holding that the administrative process cannot make constitutional determinations, and consequently, there were no administrative remedies to exahust.
New Article Published: "Because They Can: Judicially Excising the People from the Definition of 'County' in the Hawaii Constitution"
The ABA Section on State & Local Government has published my article "Because They Can: Judicially Excising the People from the Definition of “County” in the Hawaii Constitution" in the State & Local Government Law News (Spring 2008).
The article is a summary and analysis of County of Kauai ex rel. Nakazawa v. Baptiste, 165 P.3d 916 (Haw. 2007), the 3-2 decision in which the Hawaii Supreme Court creatively overcame justiciability problems to hold that the term "the counties" in the Hawaii Constitution's provisions regarding property taxes means "county councils." In doing so, the court invalidated a voter-enacted Kauai charter amendment that would have rolled back property taxes to 1998 levels, and set a yearly cap on increases. The dissenting justices accused the majority of "subverting the judicial process," and would have dismissed the case for lack of standing.
The article is posted on the ABA's web site here. For those of you who are not section members and don't receive a copy in the mail, the article is reposted here. More on the case, including the majority and dissenting opinions, a Wall St. Journal story about the decision, and the briefs and oral arguments, is posted here.
California's Flash Report posted my op-ed "Hawaii Government Sues Itself to Quash Property Tax Relief -- And Wins" about the Kauai real property tax charter amendment appeal.
In August, by a 3-2 vote, the Hawaii Supreme Court determined that the term "county" in article VIII, section 3 of the Hawaii Constitution means "county councils." The majority held that only county councils may establish property tax policies, and that voters of the county have no power to do so directly by amending their county charter.
The majority first determined that it was perfectly acceptable for government officials to be both the plaintiffs and the defendants, and sue each other in a friendly lawsuit in which the County Attorney represented both sides. The majority also approved of the county council hiring a private law firm to prosecute the case in which it was a defendant, with $250,000 of public funds.
The dissenting justices accused the majority of "subverting the judicial process" by ignoring standing and justiciability requirements by rearranging the parties after oral arguments, and by attributing the arguments of the defendants to the plaintiff. Disclosure: I had a dog in this hunt, as I was counsel for the homeowners/intervenors who challenged the collusive lawsuit.
Here are all the inversecondemnation.com posts on the case: opinion, briefs, oral argument transcripts, commentary, and the Wall Street Journal's take on the case.
lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.
"SLAPP" means a strategic lawsuit against public participation and refers to a lawsuit that lacks substantial justification or is interposed for delay or harassment and that is solely based on the party's public participation before a governmental body.
Haw. Rev. Stat. § 634F-1 (emphasis added).
In City of Riverside v. Stansbury, Nos. E040125 & E040973 (Cal. Ct. App. Oct. 12, 2007), the California Fourth District Court of Appeals held that a lawsuit by a local government against the proponents of an initiative was not an anti-SLAPP suit. The court held that the lawsuit, which sought a declaratory judgment that an initiative designed to curb eminent domain abuse was not a proper subject for voters. The lawsuit was not a SLAPP because it was "directed not at protected conduct, as required under the anti-SLAPP statute, but rather, at the validity of the proposed initiative."
After citizens placed an initiative on the local ballot that would have curtailed the city's eminent domain power, the city sued the proponents of the measure. The initiative was apparently in reaction to the US Supreme Court's decision in Kelo v. City of New London, 545 U.S. 469 (2005), which held that the use of eminent domain for "economic development" did not always violate the Fifth Amendment's Public Use Clause. The measure mandated that "neither this City nor any of its subdivisions shall use eminent domain to take private property without the consent of the owners to be used for economic development." It also limited how the City could dispose of property taken by eminent domain, and prohibited the City from undertaking "a contractual obligation to use its powers of eminent domain." More on the case and some interesting background from Eminent Domain Watch here.
The City sued the person who submitted the measure as well as the group that backed it, claiming that the initiative was beyond the power of the city's voters, since in California initiatives are limited to matters of local concern, and eminent domain is a matter of statewide concern. In response, the defendant filed an anti-SLAPP motion, which the trial court granted.
disputing, in a preelection challenge, the validity of the initiative.
Slip op. at 11. Anti-SLAPP statutes are designed to prevent lawsuits against citizens that are meant to chill expression of first amendment rights, and it certainly seems like the City's lawsuit would have that effect -- it would take a very committed citizen to propose an initiative if she knew that by doing so, she would be subject to being named as a defendant. The court held that the lawsuit did not implicate Stansbury's petition rights because "there is no constitutional right to place an invalid initiative on the ballot. Slip op. at 13 (emphasis original). This seems like circular logic because it assumes the initiative is invalid, the very cause of action that forms the basis for the City's complaint.
What appears to have driven the court's result is its belief that if the lawsuit were to be barred by the anti-SLAPP statute, local governments would not be able to bring pre-election lawsuits challenging the constitutionality of initiatives. Slip op. at 2 ("if the trial court’s ruling is allowed to stand, no one could ever challenge an initiative’s constitutionality prior to the election"). Why this is a bad thing is not explained.
Maybe they should just move to Hawaii: the Stansbury case is reminiscent of the recent "Ohana Kauai" property tax charter amendment case, County of Kauai ex rel. Nakazawa v. Baptiste, 115 Haw. 15, 165 P.3d 916 (2007). In that case, when county officials claimed to doubt the constitutionality of a voter-approved charter amendment capping property taxes, they didn't sue the proponents of the measure as in Stansbury. Instead, they sued themselves. When government officials sue each other to strike down a law they disagree with, of course no one is going to raise an anti-SLAPP defense. The County Attorney (Nakazawa) sued the Mayor (Baptiste), the County Council and the County Finance Director, seeking a declaratory judgment that the charter amendment was beyond the power of county voters. The Hawaii Constitution delegates property tax power to "the counties," and the county officials argued that term meant "county councils." The Hawaii Supreme Court agreed after first holding that the "county vs. county" lawsuit was procedurally proper.
Hat tip to the California Public Law Blog for bringing the Stansbury case to our attention. Tom Caso adds his thoughts about the decision in his blog post "City’s pre-election challenge to initiative not a SLAPP."
You can read the court's Findings of Fact, Conclusions of Law, and Order here.
I won't be commenting on this decision since my colleagues Ken Kupchak, Mark Murakami and I are the attorneys for the property owner, but the statement of the family that owns the land is below.
Circuit Judge Ronald Ibarra has decided in favor of a local Kona family, ruling that the County of Hawaii illegally sold its power of eminent domain to Scottsdale, Arizona-based luxury developer Hokulia. In the County-Hokulia Development Agreement, the County allowed Hokulia to control what property would be seized, permitted Hokulia's lawyers to threaten the Richards Family and its neighbors, and forced the County to bring lawsuits against its own citizens to take their property.
The court ruled that the County-Hokulia Development Agreement violated state law because it illegally transferred the County's power to take the property by eminent domain to Hokulia. The Richards Family's property was targeted by the developer for its "Hokulia Bypass," a road connecting the "luxury golf course real estate development project" to Mamalahoa Highway.
The court struck down the first of the County's multiple attempts to take a portion of the Richards Family's property for the Bypass because the County "did not have a proper public purpose." The court found "[i]f the government attempts to delegate its power of eminent domain to a private party in an agreement whereby the developer controls what property is taken and pays for all expenses, and the private party is able to demand the government institute eminent domain proceedings against other private property owners, then the attempted delegation is illegal and void."
The court also invalided the portion of the County-Hokulia agreement that would have required the Richards Family and their Onouli neighbors to reimburse Hokulia for the cost of the road.
Under the judge's ruling, however, the County will be able to build the Bypass since a second attempt to take the property did not suffer the same legal defects as the first. The court awarded the Richards Family over $200,000 in compensation for the taking of their land.
"These cases were never about whether another road is needed in Kona," said Richards Family spokesman Charles Coupe. "Our family fought for our rights and the rights of our neighbors because we couldn't believe that the County could sell governmental powers to the highest bidder. It didn't seem right that the County could agree to allow Hokulia to take our property for Hokulia's road, and then pass back the cost of the road to us."
After Hokulia directed the County to start eminent domain process in October 2000, the Richards Family called upon Kenneth Kupchak, Robert Thomas, and Mark Murakami, the legal team at Honolulu-based Damon Key Leong Kupchak Hastert (www.hawaiilawyer.com), to protect their rights in court.
"It has been a long fight, but it has been worth it," said Coupe, "Our family knew this wasn't right, and we would stand up for our rights and our neighbors' rights again, if necessary."
"In a democracy, the people get the government they deserve" states the old dictum. That pretty much sums up one response to The Wall Street Journal story This Side of Paradise about the "Ohana Kauai" property tax charter amendment case. A WSJ reader proposes: "It's Simple: Vote Them Out."
The need to restrain local taxation in Kauai may be compelling; but there is another, and undiscussed, option. Vote out the recalcitrant mayor and/or governing council and replace them with officials for whom controlling the level of taxation is a high priority. Who knows? Faced with the broader issues of local government, Ohana Kauai's voters may be able to impel all manner of improvements in local policy and administration.
He's got a point, of course. Removing unresponsive elected officials from their positions, either by voting for the other guy in the next election or by recall (the Kauai Charter provides in Article XXVII for the recall of any elective officer serving a four-year term) theoretically is always an option to the people of Kauai dissatisfied with their representatives' judicial engineering of the Baptiste litigation (with the taxpayers' money, no less). The theory, however, is far removed from the reality, especially in incumbent-friendly Hawaii, where elected officials possess a distinct advantage and rarely vacate their offices involuntarily.
Perhaps de Tocqueville's statement that "[a] democratic government is the only one in which those who vote for a tax can escape the obligation to pay it" is more appropriate.
▪ National Spotlight on the "Ohana Kauai" Property Tax Charter Amendment Case — Wall Street Journal: "This Side of Paradise"
The Wall Street Journal posts "This Side of Paradise," about the "Ohana Kauai" property tax Charter Amendment case, County of Kauai ex rel. Nakazawa v. Baptiste, No. 27351 (Aug. 6, 2007).
In that 3-2 decision, the Hawaii Supreme Court over a vociferous dissent, held that friendly government officials have standing to manufacture lawsuits against each other to challenge a charter amendment enacted by a vote of the people, and that the Hawaii Constitution delegates property tax power exclusively to "county councils."
The Pacific Legal Foundation's Robert Thomas stepped in, arguing the case before the Hawaii Supreme Court on Feb. 15, 2007, on behalf of four property owners. Honolulu attorney Gary Slovin, for the county, countered that allowing people to vote on taxes would create "chaos." A few members of the County Council publicly agreed. The Hawaii Government Employees Association, fearing government jobs held by union members might be cut, issued a statement to say that giving residents power over taxes was an "absurd proposition."
Full article here. One WSJ reader's response here.
Kauai's newspaper posts "Ohana amendment decision the result of classic Hawaii politics," a commentary by Walter Lewis, one of the Kauai homeowners who intervened in the County vs. County lawsuit, an effort by county officials to strike down a voter-enacted property tax relief charter amendment.
The typical lawsuit involves a real controversy between the plaintiff and the defendant or defendants with actual or threatened injury to the plaintiff. These fundamental conditions did not exist in the Ohana measure case. Ever. The plaintiff and all the defendants wanted the same result and, as we all know, had no dispute among them and prosecuted this lawsuit with over $250,000 of taxpayer money to get political cover. And the County was unable to point to anything in the Ohana measure that was or would be injuring it.
Sunday update: Charley Foster's letter to the editor responding to the commentary.
My thanks to Sandy Brodie and Karlos deTreaux for having me on their "Kauai Soapbox" program today on KKCR-FM 92.7, where we discussed the "Ohana Kauai" property tax charter amendment case and recent decision by the Hawaii Supreme Court.
Or download the podcast here (52mb mp3).
Tune in on Tuesday, Aug. 21, at 4 pm Hawaii Standard Time to the "Kauai Soapbox" radio show on radio KKCR (live streaming audio available).
I'll be a guest, speaking about the "Ohana Kauai" property tax charter amendment case. Hope you can listen in.
Here is a summary of all the posts on the "Ohana Kauai" Charter Amendment case, in which the Hawaii Supreme Court in a 3-2 decision held that friendly government officials have standing to institute lawsuits against each other to challenge a charter amendment enacted by a vote of the people, and that the Hawaii Constitution delegates property tax power exclusively to "county councils."
The Rick Hamada show (KHVH 830-AM) discussed the Kauai property tax decision with Hawaii State Senators Colleen Hanabusa (Senate President, D-Waianae) and Sam Slom (R-East Oahu) earlier this week, and has posted a podcast of the radio show (23mb mp3) at HonoluluTownPodcast here.
SEN. SAM SLOM: All of a sudden. I mean remember when everything was 5-0?
RICK HAMADA: Everything was 5-0.
SEN. COLLEEN HANABUSA: Oh it hasn't been for a long time on the supreme court.
SEN. SAM SLOM: Not for a while. But the interesting makeup here was Acoba -- Justices Acoba and Duffy, who voted in the minority -- which actually is the right decision -- and boy, did Acoba slam the chief justice Moon. And rightfully so. The words that he used -- and I read the briefs -- I read the opinions -- he used the word "manipulate" three times. And that's exactly what the chief justice did in reaching their ruling. I mean, they took two ends of the same defendants and made them into plaintiffs, you know, in the appellate process. As if, you know, they were opposing parties. But they were both on the same side. And they really dissed the idea that the taxpayers can have something to do with this. The facts of the case are not in dispute. The fact that the counties have the power is not in dispute. But this has tremendous ramifications not only for Kauai, but for Let Honolulu Vote, and for any opportunity for taxpayers to get a handle on real property taxes, and other taxes by "the counties."
SEN. COLLEEN HANABUSA: You know, I think the interesting thing was that -- I didn't read this opinion, I read the Ninth Circuit opinion on the other case we are going to talk about [the challenge to OHA]. On this one, when you look at it, it seems to be on the same basic issue, which is standing. Because I think what the minority, or dissenting opinion, was going to say, was trying to say, was that we don't have a controversy. So we shouldn't even cover this.
SEN. SAM SLOM. Create one.
SEN. SAM SLOM: Right. Right. Kauai Council.
SEN. COLLEEN HANABUSA: And they are fighting each other. And they don't really care, because they voted -- I would guess -- to put this on the charter amendment, or something along those lines. And then, let it go accordingly. So to create a dispute -- and even Baptiste isn't saying there is a true controversy -- the question is at what point does the judiciary then step in.
SEN. SAM SLOM: Instead of ruling on something versus making -- not only making the law -- but rearranging the people. That's what -- I mean that was a really sharp dissent by Acoba. I was really surprised, quite frankly.
SEN. COLLEEN HANABUSA: This is an interesting grouping, because you know that Duffy has all those -- Governor Lingle put Duffy on. Duffy has always been Ben Cayetano's choice. Because when Mario Ramil was put on, he just went ballistic on it. And he said it should have been Duffy.
SEN. SAM SLOM: But, you've got to take your hat off to Pacific Legal Foundation and Robert Thomas who has done such a yeoman's job, and he is one of the top attorneys in the country in terms of eminent domain and property rights and all that -- and if you go back to the origins of this case on Kauai, the government officials laughed and pooh-poohed at this group of citizens and property owners that they weren't going to get anywhere at all. Not only did they get anywhere, they won their case and everything else. And that's why it takes certain members of the state supreme court to, you know, unlawfully and inappropriately interfere with the judicial process. And thank god the CJ will be forced to retire, when, in two years? Three years?
SEN. COLLEEN HANABUSA: No, his term is 2010. September 2010.
LegalNewsline posts "Paradise doesn't include setting own tax rates, Hawaii SC rules."
"Because [it] usurps the county government's/county council's 'functions, powers and duties relating to the taxation of real property,' we hold that the Charter Amendment is unconstitutional," wrote Chief Justice Ronald Moon, with Justices Steven Levinson and Paula Nakayama.
But dissenting Justice Simeon Acoba, joined by Justice James Duffy accused the minority of "manipulating the lawsuit so as to create a controversy that did not in fact exist."
"The only way the merits in this case are reached by the majority is through the manipulation of the parties and the lawsuit -- a course that, in my view, fosters unwise and dangerous precedent," Acoba wrote.
Ohana Kauai (OK), the group that brought the original charter, charged the County with pulling legal fast ones to bring the case to the Supreme Court, the Honolulu Advertiser reported.
"Kauai officials sued each other to invalidate [the charter], with the county attorney representing both sides of the case," OK attorney Robert H. Thomas of Pacific Legal Foundation told the Advertiser. "We're disappointed the court allowed this fabricated lawsuit to go forward."
The Hawaii Reporter went further, slamming the opinion as "anti-democratic" in a column last week. "The Court decided that the voters are not the proper or appropriate authority to make that decision," the author wrote.
A friend of mine who lives on the mainland says, "there's no sense living in paradise when you have to work like hell." Recent increases in property values and the associated increase in property taxes have only served to make this worse. What is interesting to me is that the state and county governments of Hawaii do not seem motivated to do anything significant to help the state's residents.
The suit was essentially filed by the county of Kauai, against the county of Kauai. So, the county sued itself and won. Image that! Kauai is not the only place where voters are fighting back against local government attempts to cash in on the recent raise in property values. This article recounts similar actions across the country.
Predictably, much ado is made, especially in the dissent, about the County playing both sides of the case and the resulting lack of “actual controversy.” Not a proud moment for the Court, even though this decision comes as no surprise.
So what happened is this. Back in 2004 the people on Kauai overwhelmingly voted to support a property tax cap. Nearly 3 years later the Surpreme Court turns over a decision made by the people. This is sad, so very sad. When are we going to be able to stop government from running over us when a branch of that same government now says "your vote doesn't count."
The editorial in today's Honolulu Star-Bulletin, "Court right to reject Kauai tax referendum," reflects a pretty gross misunderstanding of the issues in the Kauai property tax decision, and of the limited role of the courts in a democratic society.
Kauai Mayor Bryan Baptiste and the County Council both opposed the initiative, and the county attorney brought it to court by suing the mayor, the Council and the county's finance director. Two high court justices cast dissenting votes in the absence of disagreement among the officials.
In sua sponte[*] deleting Defendant-Appellee Kauai County Council (County Council) as a defendant in this case and adding it back as the putative plaintiff in order to create a supposed controversy between the County Council and Defendant-Appellee Mayor of Kauai (Mayor) and Defendant-Appellee Finance Director of Kauai (Finance Director), the majority does exactly that, manipulating the lawsuit so as to create a controversy that did not in fact exist when the suit was filed, when it was decided by the Circuit Court of the Fifth Circuit (the court), when it was appealed to this court, and when it was argued by the parties before us.
The majority's formulation of a controversy does not comport with any rule, statute or legal doctrine. It is not unanticipated then, that the County has not argued that it is acting "on behalf" of the County Council, or that the County Council has not maintained that it should be dropped as a defendant from the suit under HRCP Rule 21, or that the parties have not contended realignment in the manner imposed by the majority is an appropriate remedy. Nor is it unexpected that the majority does not cite to any case in which an appellate court has engaged in the methodology the majority employs in this case in order to engender a controversy.
With all due respect, our role is to protect the judicial process, not to subvert it.
Those are very strong sentiments, but were totally ignored by the editorial.
Except for amendments to the state Constitution and state charters, voters have no direct control over state or county lawmaking, leaving that job to elected officials at those levels. Such a representative form of government protects Hawaii from the disastrous free-for-all style of California politics.
the state Supreme Court has acted to protect the county from a potential budget nightmare by ruling that the initiative was unconstitutional.
In the absence of a controversy, the case should be dismissed. Assuming arguendo any alleged "practicality" or judicial efficiency applies (even in contradiction to the cases relied on by the majority itself), neither can be a proper justification for deciding cases outside the expressed prescription in the declaratory judgment statute that an actual controversy or real antagonistic interests must exist in the case as presented to us. With all due respect, the torturous route taken by the majority to reach the merits suggests an intrusiveness beyond the appropriate and reasoned exercise of judicial power.
Moreover, not all wisdom resides in the judiciary. In our democracy, governance is a tripartite function. We may decide the legal limits within which the parties may act, but what choices they should make within those limits and what would be in their best interest to effectuate once the law is applied, is prudently and lawfully committed to them. Accordingly, I would dismiss the appeal.
However, the Supreme Court agreed with the lower court that the amendment violated the state constitution. Article VIII, Section 3 of the Hawai`i Constitution states that "all functions, powers and duties relating to the taxation of real property shall be exercised exclusively by the counties." The county argued, and the court accepted, that by "counties" the constitution means "county councils" or "county governments."
This strikes me as an arbitrary reading of the constitution - though the court does dress it up in "original intent" garb, claiming that committee notes reveal that the true meaning of "counties" is something more specific than what the document actually says.
Here we have a case in which the county did in fact properly exercise its power concerning the taxation of real property - in this case by a ballot initiative amending the county charter. In order to take the win away from the voters of Kaua`i County, the court has invented a rule. It has said that, while the constitution says counties have the exclusive power to regulate property taxes, what the constitution really means is county councils have that power.
I think the court's reasoning is flawed and its conclusion wrong. And I base this not on any opinions I have regarding the political issues involved. I actually have no strong feelings one way or another about the tax policy that would result from the amendment and that was ultimately blocked by the court. I have no idea which would result in the best policy. Instead, I'm offended at the arbitrary (one almost suspects result-oriented) reasoning by which the court created ambiguity in the constitutional text where none really existed.
It's worth reading his whole analysis.
A Supreme Court majority of Justices Ronald Moon, Steven Levinson and Paula Nakayama allowed the suit. But in a minority opinion, Supreme Court Justices Simeon Acoba and James Duffy chided the majority for "manipulating the lawsuit so as to create a controversy that did not in fact exist."
Acoba and Duffy argued that the case should have been dismissed because there is no difference of opinion between the county officials who are suing and those who are being sued.
"There is no actual controversy among the parties to the amended complaint because they all agree that the subject Charter Amendment is 'invalid,' " they wrote. They argued that the appeal should have been dismissed.
"We're disappointed that the court allowed this fabricated lawsuit to go forward," said Thomas, who filed the appeal for the 'Ohana Kaua'i leadership, made up of Gordon G. Smith, Walter S. Lewis, Monroe F. Richman and Ming Fang.
A bid to cap property taxes through a Kauai County Charter amendment was declared unconstitutional by the state Supreme Court this week.
The court's 3-2 ruling also bars anyone but government officials from setting tax policy, eliminating the possibility of voter-initiated tax relief measures in any county, said one lawyer involved in the proceedings.
"This decision represents a real loss to the people of Kauai," said lawyer Robert Thomas, of the Pacific Legal Foundation, which lost the appeal. "It has told them that their votes don't count."
The decision stems from a Kauai County Charter amendment, dubbed the "Ohana Amendment," that would have rolled back property taxes for resident homeowners to their 1998 levels, and capped increases at 2 percent per year.
Voters responding to exponential increases in property taxes overwhelmingly supported the measure in 2004.
"Thus, because the charter amendment usurps the county government's/county council's 'functions, powers and duties relating to the taxation of real property,' we hold that the charter amendment is unconstitutional" under the Constitution, Justices Ronald Moon, Steven Levinson and Paula Nakayama wrote in the majority opinion.
The state Supreme Court has ruled a Kauai County charter amendment approved by voters in 2004 to roll back property taxes is invalid.
The high court held the state constitution prevents citizens from changing property tax policy through the ballot box.
The charter amendment would have rolled back property taxes to 1998 levels for those who have lived in their homes since then.
The State Supreme Court killed an effort by Kauai homeowners to control property taxes.
The homeowners won an islandwide vote to limit taxes in the county charter. A lower court overturned the results.
Homeowners appealed, but on a 3-2 vote, the state's highest court ruled voters in Hawaii are not allowed to change tax laws.
▪ Whose "County" is it, Anyway?
I'm reposting an op-ed published by the Honolulu Advertiser last year regarding the implications of the Kauai property tax case.
Whose county is it, anyway?
According to Kaua'i government officials, how much property tax homeowners pay is an issue too important to be trusted to the people who pay them.
In recent years, the median value of Kaua'i homes has soared to nearly $700,000, a 48 percent increase this past year alone. The staggering prices are the product of a hyperactive market fueled by speculation, and investors flush with cash willing to pay top dollar for modest properties.
A rise in market value has little benefit to those who have no intention of selling. When a neighbor's home sells, or is upgraded by a new owner, all of the properties in the neighborhood see an increase in assessed value, which the tax collector uses to justify increased property taxes.
There is little a homeowner can do, except challenge the assessment through the often byzantine maze of local bureaucracy, with only a slight chance of success.
Since 1998, the average Kaua'i homeowner experienced a nearly 50 percent increase in property tax, and county coffers are bulging. But middle-class families of longtime Kaua'i residents, seniors and others on fixed incomes are in danger of being taxed out of their homes.
After years to trying to convince their elected officials to provide tax relief, the people of Kaua'i exercised their right to change the system themselves. Local homeowners proposed an amendment to the Kaua'i Charter to roll back property taxes to 1998 levels for owner-occupied homes.
For those who bought their homes after 1998, property taxes are based on the assessment at the time of purchase. Yearly tax increases for all resident homeowners are capped at 2 percent.
Under this system, resident homeowners are not at the mercy of an unpredictable and volatile housing market and are able to plan their property-tax liability from year to year and to budget accordingly.
And there is no surprise to the new purchaser, who is able to factor future property-tax liability into the decision to buy.
The charter amendment was placed on the November 2004 ballot, and in the run-up to the vote, virtually every Kaua'i elected official attacked the measure, with the mayor and the County Council leading the charge.
They claimed it would adversely affect their ability to provide services. However, since 1998, the Kaua'i budget has risen 50 percent, and the current budget increased 25 percent over last year's alone. Kaua'i government spending is now a record $123 million.
In spite of the organized and well-financed opposition, the people of Kaua'i approved the measure by a nearly 2-to-1 margin. Instead of accepting this decisive political defeat, Kaua'i officials went to court.
The Kaua'i county attorney sued the mayor, the finance director and the County Council. The claim: the County Council has a monopoly on property-tax policy, and the people of the county had no right to propose and vote on the charter amendment.
To top it off, the county attorney represents both sides in the lawsuit. The litigation is backed by a $100,000 war chest of taxpayer money, budgeted for private lawyers hired to attack the charter amendment.
Four local homeowners intervened in the officials-against-themselves case. They argued that government officials should not be able to concoct a lawsuit, in which they are both the plaintiff and the defendant, in order to gain court approval for their claimed real-property-tax policy monopoly.
The Kaua'i Circuit Court voided the charter amendment, ruling that only county councils may set property-tax policy, and the people have no right to do it themselves by amending their charter.
The homeowners have now appealed to the state Supreme Court because the people — not just local politicians — have the right to vote and decide on how property taxes are imposed.
Until now, this case has received scant attention beyond Kaua'i's shores, but Honolulu property owners should take notice.
With similar market forces at work and an average 26 percent increase in property value, Honolulu homeowners are beginning to rethink whether property taxes should be tied to an unpredictable housing market that penalizes long-term owners for not selling their properties.
Would Honolulu's politicians consider enacting a measure like Kaua'i's? If the Kaua'i case is any guide, it is doubtful.
Property-tax relief only comes when government officials understand that if they don't provide it, the people will. Or when the people — fed up with inaction of government officials — do it themselves.
If the arguments of Kaua'i officials prevail on appeal, however, the right of the people to directly set property-tax policy will be lost forever. If this occurs, any incentive for government officials to reform the current property-tax system will drop dramatically.
In the end, this case will determine whether "we the people" determine how much property tax we are willing to bear, or whether the politicians alone have control.
The Hawai‘i Supreme Court has invalidated a voter-approved charter amendment its proponents say was intended to save millions in tax bills for thousands of property owners who own their homes and live in them.
In an Aug. 6 ruling, the court permitted the county to file a lawsuit to prevent Mayor Bryan Baptiste, then-finance director Michael Tresler and the Kaua‘i County Council from implementing the Ohana Kaua‘i measure, which was approved in the November 2004 General Election.
The court also ruled the charter amendment violated a provision of the Hawai‘i Constitution that gives exclusively taxing authority to the county councils from each island.
But Ohana Kaua‘i won on one count — that its measure didn’t violate the county charter, as contended by the county.
Pacific Legal Foundation Managing Attorney Robert Thomas presented oral arguments in County of Kauai v. Baptiste on Feb. 15, asking the Hawaii Supreme Court to support a Kauai taxpayer-driven county amendment that rolls back island property taxes to 1998 rates and caps the annual property tax hike at 2 percent.
Five months later on Aug. 6, 2007, 3 of 5 justices in a majority report authored by Chief Justice Ronald Moon, ruled against the Kauai taxpayers.
The Hawai'i Supreme Court has ruled that the state constitution prevents residents of a county from changing property tax policy through the ballot box.
The court ruled that the "'Ohana Kaua'i" charter amendment approved by Kaua'i voters in 2004 was invalid. The court said in its decision that the state constitution delegates property taxation authority to the county government, not to the people.
"This decision says that it is government officials who have the exclusive say on property taxes, not the people who pay them," said Robert Thomas, attorney with the Pacific Legal Foundation, which represented 'Ohana Kaua'i leaders Gordon G. Smith, Walter S. Lewis, Monroe F. Richman, and Ming Fang.
In sua sponte deleting Defendant-Appellee Kauai County Council (County Council) as a defendant in this case and adding it back as the putative plaintiff in order to create a supposed controversy between the County Council and Defendant-Appellee Mayor of Kauai (Mayor) and Defendant-Appellee Finance Director of Kauai (Finance Director), the majority does exactly that, manipulating the lawsuit so as to create a controversy that did not in fact exist when the suit was filed, when it was decided by the Circuit Court of the Fifth Circuit (the court), when it was appealed to this court, and when it was argued by the parties before us.
In accomplishing the alteration of this lawsuit, the majority misconstrues the amended complaint, in effect substituting the County Council in place of Plaintiff-Appellee County of Kauai (County) as the plaintiff, and misapplies the rules of court, in this case Hawai`i Rules of Civil Procedure (HRCP) Rule 21, in order to drop the County Council as a named defendant. HRCP Rule 21 was never intended to authorize a realignment of the parties in order to birth a controversy, but is applied in the cases when an underlying controversy exists in the first place. But most tellingly, there cannot be a controversy between two sides of a lawsuit where, as in this case, "both [sides] desire precisely the same result." Moore v. Charlotte-Mecklenburg Bd. of Educ., 402 U.S. 47, 48 (1971) (per curiam).
Under these circumstances, there are no manageable limits to the approach employed by the majority -- moving a party from one position to another position in the same lawsuit allows this court to decide what case will be deemed justiciable at its own behest. If it can do that in this case, then the majority can do the same in any case. The only way the merits in this case are reached by the majority is through the manipulation of the parties and the lawsuit -- a course that, in my view, fosters unwise and dangerous precedent.
(Emphasis added). And that's just the first page-and-a-half of thirty-one total pages.
The complete dissenting opinion is published here.

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