During the run up to the passage of a linkage resolution there was a great deal of angst in the developer and builder community. One response was a legal one. Just before the passage of the resolution some noted local land use attorneys sent a red flag letter to the Mayor pointing out that the proposed linkage tax had serious legal problems. Here’s the letter. The question is, in what ways does the linkage tax differ from the Bargain. I’ll take a closer look at that later, but here’s their letter in full which was publicized widely at the time. 

October 10, 2014

Via Email

Councilmember Mike O’Brien
Chair, PLUS Committee
Seattle City Council

Re: Legality of Proposed Development Tax in “Linkage Fee” Resolution

Dear Councilmember O’Brien:

As members of Seattle’s land use legal community, we have serious concerns about the Council’s rush to adopt the resolution without significant public discourse regarding the legality of a new tax on development–one which has never before been utilized in Washington State. It is likely that this tax, as the centerpiece of the City of Seattle’s “affordable housing strategy,” will actually increase the cost of housing. Seattle should not be so motivated to follow San Francisco’s lead, where housing prices continue to skyrocket either in spite of, or because of, similar square footage taxes. In our collective experience practicing land use law in Washington, we fail to find any legal authority for this tax on development. We urge the Council to slow down, fully consider this significant policy shift and its implications, and ultimately choose a course that complies with the law. This letter provides a brief overview of some of our legal concerns.

The consultants advocating for the development tax have relied heavily on their California experience, but have failed to note the key difference between the states. California has a state law that allows this type of tax. Washington does not. In fact, Washington explicitly prohibits cities from imposing taxes, fees, or charges, either direct or indirect, on development: RCW 82.02.020. None of the few exceptions to the prohibition, discussed below, applies to the proposed development tax.

• Growth Management Act (“GMA”) Impact Fees: The exception for GMA impact fees only applies to the statute’s list of “public facilities,” which does not include affordable housing. Therefore, the GMA impact fee exception does not apply.
• Voluntary Agreement: Developers may make voluntary payments in lieu of a dedication of land or to mitigate direct impacts. However, the proposed tax is not voluntary, there is no dedication of land, and the nexus study establishes only indirect impacts (and no project-specific impacts). The tax is not a voluntary agreement.
• Incentive Zoning Provisions: The City’s existing incentive zoning program is based on RCW 36.70A.540, which allows cities to incentivize private development of affordable housing. As the Council’s public documents repeatedly note, however, there is no incentive component to the proposed development tax. It simply adds a cost to development while providing nothing in return. Thus, the tax is not incentive zoning.

The City of Seattle’s general zoning authority cannot override the state’s prohibition of taxes, fees, or charges on development. Washington courts have read RCW 82.02.020 broadly and we believe will not hesitate to strike down the new tax, if adopted. If the City believes an exception to that prohibition does apply, then that needs to be explained in public, with a meaningful opportunity for comment.

Even if the City could establish that the tax is allowed under RCW 82.02.020, however, the development tax raises serious constitutional concerns. And, to be clear, according to the rules set forth in Washington cases, this is a “tax,” not a “fee,” because its primary purpose is not to regulate development, but to raise funds to accomplish a desired public benefit. The Washington State Constitution prohibits cities from adopting taxes without express legislative authority, and the legislature has not authorized this tax. This tax also raises Federal Constitutional concerns under the United States Supreme Court’s recent decision in Koontz v. St. John’s River Water Management District.

Our state courts have a history of protecting constitutional rights, and have invalidated City ordinances on constitutional grounds. The legal foundation of this development tax is at least as flawed as that supporting the City’s 1980’s-era housing preservation ordinances the Washington Supreme Court struck down in multiple decisions, and we fear the Council is rushing to adopt California policy that will fare just as poorly in Washington courts.

The affordable housing shortage presents a major challenge for the City, and we look forward to working with the Council to find creative, lawful solutions that actually deliver more housing to the hardworking women and men who make our City function. However, as the Washington Supreme Court has written, the shortage of affordable housing is a societal burden to be borne by society at large. There is no legally supportable justification for imposing this tax on those who seek to develop the housing, office, and commercial space necessary for our City to grow and thrive. We strongly urge the Council not to adopt the proposed development tax resolution as its significant policy shift deserves a much closer and more deliberative review.

Sincerely,

Glenn Amster, Josh Brown, Jessie Clawson, Steven Gillespie, Rich Hill, Aaron Laing, David Mann, Don Marcy, Melody McCutcheon, Randall Olsen, Nancy Bainbridge Rogers, Pat Schneider and Chuck Wolfe.

 

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