Lakehaven Water and Sewer District offices in Federal Way. File photo

Lakehaven Water and Sewer District offices in Federal Way. File photo

Federal Way wins court case for water and sewer tax

Tax is expected to generate about $1 million in revenue each year.

The City of Federal Way now has the authority to tax water and sewer utilities, the city announced June 18.

In March 2018, the Federal Way City Council passed an ordinance to impose a 7.75-percent tax on water and sewer utilities not already paying excise taxes to the city.

Lakehaven Water and Sewer District, along with co-plaintiffs Highline Water District and Midway Sewer District, challenged the legality of the ordinance on two fronts, alleging the ordinance is not authorized by state law and that it is unconstitutional.

The State Supreme Court affirmed the Superior Court’s ruling and granted summary judgment to the city.

“The Legislature properly delegated the city authority to impose the excise tax on the districts, and the governmental immunity doctrine does not shield the districts from the excise because they perform a proprietary function in providing water-sewer services to ratepayers,” the decision stated. “The districts lack standing to bring their constitutional claims challenging the tax.”

Federal Way Mayor Jim Ferrell said: “I’m extremely gratified that our state’s highest court agreed with the city’s position. We are pleased this matter has been resolved. During these difficult financial times, this additional revenue will help provide vital services for the people of this community.”

Moving forward, the tax is expected to generate about $1 million in revenue for the city each year. The city is expected to receive an additional $1.8 million in revenue that was being held in an escrow account while the case was being decided over the last year and a half.

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