September 2007 | Small Business News
Ruling Against Taxpayers by State Supreme Court
by Malia Zimmerman
Hawaii Reporter
Editor's Note: These are excerpts from the complete story found at HawaiiReporter.com
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.
But it was how the chief justice went about crafting his 70-page majority decision that has Justice Simeon R. Acoba, Jr., and Justice James E. Duffy, Jr. peeved and engaged in a harsh exchange of words with Moon over what they are calling an “unwise and dangerous precedent.”
It started with Gordon G. Smith, Walter S. Lewis, Monroe F. Richman and Ming Fang and their simple plan to limit their skyrocketing property taxes and to curb the government spending driving the tax increases. Many residents, including those on fixed incomes, saw their property taxes double in 7 years.
The group’s members, who quickly grew to more than 100, believed their government officials — and their high property tax rates — were ultimately going to push people from their homes. Because property values were skyrocketing, with the median price of a home on Kauai exceeding $665,000 in 2005, representing a 48 percent increase in one year, and the rate of property tax imposed on the residents not changing, the local county government raked in the cash.
Soon, two thirds of its total operating budget, now $122 million, was being collected from property tax, with total property tax collections shooting up from $31 million in 1999 to $67 million in 2005. As the property tax collection grew, so did the size of county government, but the population of 65,000 increased at only a modest pace.
Hoping they could reason with county officials, Ohana Kauai members tried to persuade Kauai County Council’s seven members to embrace property tax relief, but they were ignored. Members of Ohana Kauai say their government representatives were quickly becoming greedy, out-of-control spenders. The only option they had been to get the issue on the ballot in the next election with 3,000 signatures they successfully collected. The amendment passed with two-thirds of the vote despite a last minute opposition campaign mounted by Kauai Mayor Brian Baptiste, Kauai County’s 7 council members and public union leaders.
That should have been the end of the story, but Kauai property owners wouldn’t live happily ever after, in lower taxed homes, after all. Rather than accepting the voters’ decision, county officials conspired to kill the amendment, filing a lawsuit against the county administration over the amendment claiming it was illegal. In what became known as County of Kauai ex rel. Nakazawa v. Baptiste, the state’s Fifth Circuit Court sided with the county government.
The judge ruled the charter amendment was not actually a charter amendment rather it was a ballot initiative that levied or repealed a tax, which is not legal under Kauai County Charter.
This logic passed muster with the judge even though the charter amendment was accepted as such by the Kauai County Clerk before the election and put on the ballot by the very county officials challenging it.
Pacific Legal Foundation appealed on Ohana Kauai’s behalf saying it was unheard of for a case to move forward with the government suing itself and both sides wanting the same outcome.
Honolulu attorney Gary Slovin, retained at $250,000 by the county to present its case to the Hawaii Supreme Court, argued that allowing people to vote to limit the taxes they pay would create chaos. County council members said Kauai voters could take this issue so far, they might decide they shouldn’t have to pay taxes at all.
Powerful public union members, such as Russell Okata of the Hawaii Government Employees Association, who have a great deal at stake if the county taxpayers had a say in how much they are taxed, sat in the front row during oral arguments to support the county’s position. The HGEA joined in the case with a friend of the court or “amicus” brief. From there, the case took a series of strange twists, all driven by Moon.
During the 5 months it took for Hawaii Supreme Court to issue a ruling, Chief Justice Moon did something two of his peers called “dangerous.”
The 67-year-old Moon took the Kauai tax case apart like a jigsaw puzzle. When he put it back together in a 70-page decision against Kauai’s taxpayers, he not only changed who the plaintiffs and defendants were, he added in his own research to support his case manipulation.
Moon left Justice Acoba, Jr., stunned enough to issue a lengthily scathing dissenting opinion supported by Justice Duffy, Jr. Acoba wrote: “With all due respect, our role is to protect the judicial process, not to subvert it. … 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.
Moon went even further than switching the parties around and doing his own research — he made up his own argument — which became the main argument on which he based his majority report. Neither Pacific Legal Foundation’s Thomas nor the county’s private attorney Slovin had either argued for or against Moon’s argument or even had a chance to counter it.
In the end, Justices Steven Levinson and Paula Nakayama ignored Acoba’s harsh warning and backed Moon in siding with the Kauai county government. They said in essence that property taxpayers have no right to determine how much they are taxed and that only the county and the mayor has that power.
Pacific Legal Foundation attorney Thomas says the decision represents a “real loss to the people of Kauai.” “We’re disappointed that the court allowed this fabricated lawsuit to go forward. It has told the people of Kauai that their votes don’t count, and that if government officials disagree with a result, they can create lawsuits against themselves, funded by public money, asking a court to strike down a vote. This decision says that it is government officials who have the exclusive say on property taxes, not the people who pay them.”
There are not many realistic options to appeal — possibly none — but Lewis and his group will review their options anyway.
After the 2004 election, and in the midst of all the legal battles, the Council passed a bill that mandates property taxes will not be increased by more than 2 percent per year. “We are happy that happened,” Lewis says.
Several constitutional lawyers consulted for this story who did not want to be named because they fear retaliation from the chief justice or his peers, say Moon’s “cowboy” tactics, while not uncommon, are not democratic or proper. They note the only way to override the damage that Moon caused to Hawaii’s democratic process with this ruling is through a Constitutional Convention, which could allow the public to clarify whether the term “counties” in the Hawaii State Constitution means exclusively “county councils,” rendering the people’s of Kauai authority to amend their Charter moot, or whether it is the people of the county who have control over their government.
The question of whether Hawaii voters want a Constitutional Convention comes up every 10 years on the General Election ballot. Hawaii voters will be able to vote in the 2008 election on whether or not they want to hold a Constitutional Convention. The last “Con-Con” was held in Hawaii in 1978.
Hawaii voters backed a Con-Con in 1998, but upon a challenge, the Hawaii Supreme Court ruled that blank votes counted as “no” votes against the Con-Con, rather than simply not counting for or against the Con-Con, so it was never held.
The Supreme Court’s majority and dissenting opinions may be found at Pacific Legal Foundation’s website: http://www.pacificlegal.org
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