Although it appears voters in Federal Way won’t get to vote on a referendum challenging a recently approved utility tax, a lawsuit against the city is moving forward.

After the Federal Way City Council voted 5-2 on March 20 to impose a 7.75-percent utility tax on Lakehaven Water and Sewer District customers, Federal Way resident Jack Sharlock started collecting signatures to get the measure on the ballot. Meanwhile, Lakehaven and several other utility districts on April 4 filed a lawsuit in King County Superior Court challenging the city’s authority to levy the tax.

Petition efforts

Sharlock and others involved had until Wednesday to gather more than 7,000 signatures from registered voters, or 15 percent of Federal Way residents who voted in the last general election. They collected close to 3,000 signatures, Sharlock said.

“I think because of the short time we really didn’t have time to organize the way that we would have liked,” Sharlock said. “For the most part it was an uphill battle.”

Sharlock said he is disappointed voters will not get to weigh in on the utility tax.

“My main goal was that this could go to the vote of the people,” he said. “As far as I am concerned, (the tax) is taking my freedoms away.”

Sharlock said he is also concerned that the tax could increase in the future.

“That 7.75 (percent) could go to a much higher percentage down the road – a percent here, a percent there,” he said. “There’s nothing in here to say where this money is going, except to say it is going to the general fund.”

The tax is one of several measures the city has implemented to help cover an approximately $850,000 budget deficit as well as generate additional revenue to deal with future expenses. The tax will generate about $980,000 a year.

“I think there are other things to do beside add another tax,” Sharlock said. “I think they really need to re-evaluate how they operate. You don’t overspend.”

Sharlock said he appreciated the support of the 40 to 50 volunteers who helped gather signatures.

“To be successful we probably needed 100-some people,” he said.

Volunteers set up a table in The Commons mall to collect signatures, while others went door-to-door. Sharlock said he and his wife gathered 400 signatures from door knocking.

“We tried to get into some of the other facilities, but we were not allowed because you can’t petition in the parking lots. They don’t want you in front of the business. They don’t want you to disrupt their customers,” Sharlock said.

Lawsuit

Lakehaven, along with the Highline Water District and Midway Sewer District, in the lawsuit claim “the city lacks the authority to levy an excise tax on such utility services under the government immunity doctrine that prohibits cities from imposing an excise tax on other municipal corporations, unless there is express constitutional or legislative authority permitting the levying of such taxes.”

The city maintains it has solid legal standing to impose the tax, Mayor Jim Ferrell said. The city already levies a 7.75-percent utility tax on gas, electric, cable, phone and other utilities.

“The city of Federal Way has been doing a great deal without going to the taxpayers without raising our rates,” Ferrell said. “We are trying to provide services to the community. This (utility tax) is very important to the future of this community.”

In 2016, Ferrell proposed levying the utility tax on Lakehaven to cover the cost of hiring additional police officers but found other revenue instead. The city collects a 3.6-percent franchise fee from Lakehaven, which will be replaced by the utility tax.

“In regard to the per unit cost to taxpayers, we are not talking about a lot,” Ferrell said.

On a $60 water and sewer bill, the 7.75-percent tax would cost $4.65.

The legal fees associated with the lawsuit are going to cost taxpayers, Ferrell said.

“It is very unfortunate Lakehaven has gone about this in an aggressive, litigious, egregious manner,” he said.

Lakehaven officials said the district has not started collecting the tax but is working with consultants to figure out how to implement its collection.

City and utility officials are working together to come to an agreement of how to handle the collection of the tax while the matter is being settled in court. Ferrell said it appears the amount collected above the 3.6-percent franchise fee will be set aside until the dispute is resolved.