The Seattle Star Newspaper, May 19, 1924, Page 16

THE SEATTLE STAR | FACTS YOU SHOULD KNOW | The Public Is Entitled to the Truth Regarding , Street Railway Taxation for 1919 To the Citizens of Seattle— N December 31, 1918, the city enacted Ordinances 39025 and 89069 providing for the issuance of utility bonds and the purchase of the street railway property then owned by Puget Sound Power & Light Company. The ordinances took effect thirty days after their approval. On February 10, 1919, the city and the company entered into the contract in the form set forth and prescribed by Ordinance 39069. There was then pending a suit by certain taxpayers to enjoin the city and the company from consummating the contract. The form of contract prescribed by Ordinance 39069 and the contract as executed contained the following provision: “That state, county and municipal taxes levied against the property for the year 1919 shall be paid bef the same shall become delinquent, by the respective parties hereto in ounts proportional to the respective periods of time that said parties respectively in possession of said property during the year 1919.” At the time the ordinances were enacted and the contract executed the property had not been assessed for taxation for the year 1919. The city and the company both desired to con- summate the contract before the 1919 taxes should become a lien upon the property, but as the contract was not to be con- summated until the Supreme Court of the State had passed upon its valadity it was not known whether the property would be subject to taxation for the year 1919 or not. Ordinance 39069 and the contract prescribed by such ordi- nance, therefore, provided for the apportionment of the tax for the year 1919 if such tax should become a lien upon the prop- erty, in accordance with the length of time each party should be in possession of the property during that year. Ordinances $9025 and 89069, together with the other ordinances relating to the transaction and the contract prescribed by Ordinance 39069 were placed before the Supreme Court of the State of Washington in the litigation then pending. What the Supreme Court Decided On March 5, 1919, the Supreme Court, in the case of Twickell vs. Seattle and the company, 106 Wash. 82, held all of the ordinances and the contract valid. "The court said: “We are satisfied the plan and bonds will not create any indebtedness against the city and that the City Council has authority to consummate sthe purchase without the sanction of the qualified voters * * *, “All of the ordinances are closely interrelated and each of the last three tie and refer to the plan or system Ordinance No, 39025 by con- taining specific reference thereto. We are satisfied the power of the city has been exercised in the manner provided by the law.” Ordinance 39069 provided in Section 3: “No officer, agent or employe of the City of Seattle shall have power, by agreement, acquiescence or estoppel, to In any way modify, waive, abrogate or alter said contract and agreement or any portion or part thereof.” The contract prescribed by Ordinance 39069 also provided: “In case this agreement or any portion thereof, or in ease the ordi- nance providing for the making of this agreement or any provision thereof, or in ease the ordinance providing for the issuance of the utility bonds to be issued in payment for the property, or any provision of said ordi- nanee, be declared invalid by the courts on appeal, then upon the happening of such event or events this agreement shall cease and termi- nate forthwith, unless said invalidity be corrected and validated by the passage of appropriate legislation at the 1919 session of the State Legis- lature, or (in case it can be thus validated) by the passage of appropriate ordinance by the City Council of Seattle within sixty (60) days after such decision by the courts on appeal.” As the Supreme Court held all of the ordinances and the contract valid there was no necessity for any validation by either the Legislature or the City Council. Ordinances and Contract Held Valid On March 15, 1919, the State Tax Commissioner singled out the property described in the contract from all other prop- erty in the State and assessed it at a date earlier than any assessment had ever been made by his office. This was done because the State Tax Commissioner knew that the contract would probably be consummated during the month of March, 1919. All of the real estate described in the contract was assessed as personal property. On March 81, 1919, the company delivered to the city a deed for the property with a tax provision in accordance with the contract, surrendered its street railway franchise, dis- missed its appeals then pending in the Supreme Court of the United States and of the State, and in all respects complied with the contract. The city accepted the deed and delivered to the company the bonds required by the ordinances and contract. The city entered into possession of the property on the same day and has been operating it ever since, In_April, 1919, the city and the company filed with the State Tax Commissioner a protest against the assessment made by him. In the fall of 1919 the County Commissioner for King County and the City of Seattle levied taxes upon the assess- ment. The amounts of principal of the taxes so levied are as follows: State of Washi Clty of Seat ‘ School District No. 1, Seattle County of King 93,127.68 City Represented to Court It Would Pay Valid Tax Thereafter the company instituted suit against King County and its officers to enjoin the collection of the taxes. The city was made a defendant. The complaint prayed that if the taxes should be held valid then the city and the company should be decreed to pay the taxes in accordance with the pro- visions of the contract between the parties and the deed deliv- ered by the company to the city pursuant to such contract. The city filed a cross-complaint against King County, its officers and the company. In its cross-complaint the city alleged: “XVIII. That under tho contract executed between the cross complainant and the cross-defendant Puget Sound Traction, Light & Power Company hereinabove mentioned, and In the conveyance executed by the said cross-defendant, it is provided that if at the time of the delivery of such conveyance any lien should have attached to the property, or any part thereof, for the year 1919, for any tax for sald year, and if such tax should become collectible, the same should be paid, before It became delinquent, by the cross-complainant and the eross-defendant Puget Sound Traction, Light & Power Company in amounts proportional to the respec tive periods of time that said parties should respectively be in possession of the property during the year 1919, said clause being in words as follows: “ ‘That state, county and municipal taxes levied against the property for the year 1919 shall be paid, before the same shall become delinquent, by the respective parties hereto, in amounts proportional to the respective periods of time that said parties are respectively in possession of said property during the year 1919.’ “That the cross-complainant took possession of said property at 11 p.m. on March 31, 1919, and that under said clause in said contract should the tax herein be adjudged valid and a collectible lien against the property the cross-defendant Puget Sound Traction, Light & Power Company will pay one-fourth of the amount of such tax and the cross: complainant the remaining three-fourths.” In the prayer of its complaint the city prayed: “4. ‘That if any alleged tax upon the property, or any part thereof, or on account of the property, or any part thereof, be held valid, then, prior to delinquency in the payment thereof, that the proportion to be paid by the cross-defendant Puget Sound Traction, Light & Power Com- pany and by the cross-complainant be decreed, and that said proportion be fixed as follows: That the Puget Sound Traction, Light & Power Company be charged with one-fourth thereof, and the City of Seattle be charged with three-fourths of the amount of such tax.” The Superior Court decided the case against the city and the company. They appealed to the Supreme Court of the State. The Supreme Court on June 12, 1922, after having granted a rehearing, affirmed the judgment of the Superior Court. In July, 1922, the company in writing requested the city to join with it in paying the taxes under protest and carry- ing the case to the Supreme Court of the United States, so that if the taxes should finally be held invalid the money paid under protest would be returned to the city and the company. The city did not answer the communication of the com- pany. Courts Held Tax Valid Lien on Railway | The city and the company carried the case to the Supreme Court of the United States and that court affirmed the judg- ment of the Supreme Court of the State. The company as- sumed, as a matter of course, that the validity of the tax hav- ing been finally determined and the tax being a lien upon the property, the city would join with the company in paying the tax with interest, in accordance with Ordinance 39069 and the contract and deed entered into and executed pursuant to such ordinance. The Supreme Court of the State, in its decision holding that the property was subject to taxation and that the tax was a lien upon the property decided that— “If the property had a lien upon it when it was purchased by the municipality, the municipality, like an individual, would take the property subject to the tien,” And also said, quoting from a previous decision: “The city had the right of contract and in the absence of any law exempting it from the burdens of its trade it was bound to meet them.” On the 12th of May, 1924, the company request- ed the city to join with it in paying the taxes, and of- fered to pay its portion of the taxes either to the city for payment to the County Treasurer, or direct- ly to the County Treasurer, the city at the same time to pay its share of the taxes. ‘ Until the opinion of the Corporation Counsel was given just a few days ago there wag not the slightest intimation ever given to the company that repudiation of the obligation to pay the city’s share of the taxes for 1919, as prescribed in Ordi- nance 39069 and the contract and deed entered into and exe- cuted pursuant to such ordinance, was contemplated. The city received the property of the company conveyed on the faith of an ordinance enacted by the city prescribing the form of contract to be executed by the company and the city and a decision of the Supreme Court of the State of Washing- ton, holding that such ordinance and contract were valid, and after collecting upwards of $25,000,000 from that property threatens to repudiate its obligation. It even hopes to have the county officials disregard their duty to satisfy the taxes out of the street railway property upon which the taxes are a specific lien and endeavor to coerce payment by threatening to seize property of the company on which it has paid all of its taxes, because the city will not join with the company in paying the taxes for the year 1919 upon the street railway property as the city by its ordinance and contract expressly agreed to do. Large Portion of Tax Levied by City Itself __ Two hundred and ninety thousand dollars of the taxes, with interest, which the city is attempting to repudiate, repre- sents taxes levied by the city itself upon the street railway property after itmade its contract to pay them, which amount it is now trying to have collected from property of the com- pany on which all taxes have already been paid. Instead of levying upon the street railway system, which owes the tax, or even upon other property of the company located within the city limits, official threat is now made that one of the company’s power plants, on which all taxes have been paid, will be levied upon. Above the legal aspects of the case stand the moral principles involved. Citizens of Seattle, tax- payers and non-taxpayers, are entitled to know all the facts, and it is to be hoped that no action, which in itself will mean actual repudiation of a valid con- tract, will be upheld by public sentiment. No nation, no state, no city, no individual can afford to repudiate its honest obligations. Puget Sound Power & Light Co. By A. W. LEONARD, Its President.