Lawsuit bad for everyone
June 9, 2008 · Updated 3:52 PM
"Here lies the grave of John O'DeaWho died maintaining his right of wayHe was right - dead right - as he marched alongBut he's just as dead as if he'd been wrong.* * * * *This epitaph - apocryphal, no doubt - seems appropriate to the lawsuit local homebuilders have filed against the city.They challenge the legality of the city's building-permit surcharge, which was imposed, by its own terms, for the purpose of financing the Housing Trust Fund. To the builders, it's a clear case of right and wrong. Washington law says that construction and development can't be taxed to raise revenue, no matter how laudatory the purpose. What the city can do, they say, is levy a fee that covers the cost of the permitting process. But since the money raised by the surcharge is stated explicitly to be for other purposes, they argue, the surcharge is illegal.They may be right, and let's assume for the sake of argument that they are. Even so, it looks like the builders may have trained their legal guns on their own lower extremities.If nothing else, the lawsuit is bad public relations, especially given the timing. The first and so far only money spent from the Housing Trust Fund was appropriated earlier this month to help Habitat for Humanity buy land on Bainbridge Island for its widely praised homebuilding projects. The suit, then, pits a bunch of builders who have profited handsomely from the island's escalating housing costs against a bunch of folks who have been left behind by the same phenomenon.The builders are also undercutting the most appealing argument they have against impact fees - namely, that developers don't pay the fees themselves, but simply pass them on to buyers. Yet what the lawsuit asks for is a refund of the fees to the builders.They can't have it both ways. If they're passing the fees on, then they're not aggrieved by the surcharge. If they aren't, then they deserve political fallout on another front.There is also the reality that a victory by builders could well be short-lived. City officials say that the surcharge - 10 percent on building permits - doesn't go into the Housing Trust Fund at all. Rather, the city dedicates the surcharge to building services, and puts a like amount of money from the general fund into the housing fund.While that may be sleight of hand - and would seem to be contradicted by the statement of purpose in the resolution that set up the surcharge in the first place - it's pretty clear that any legal flaws may be easy to fix.And if the city has to give up the funds already collected, there's no reason that when it fixes the problem in the future, it couldn't impose fees high enough to play catch-up.Nor is the lawsuit itself likely to be a paying proposition. To make the lawsuit economical, the plaintiffs are seeking class-action status - to represent everyone who paid for permits since the surcharge was imposed in January 2000. (The three named plaintiff builders - Hillandale, Jefferson and Mueller - wouldn't get back much more than $2,000 apiece, at the maximum).But guess where attorney fees come from in a class-action suit? From the pot of money recovered. And with no more than $100,000 total at stake, legal fees are likely to eat up most of the recovery.Yes, the city council may want to reword the surcharge ordinance, directing funds to building services and providing a revenue-neutral amount for the Housing Trust Fund. Beyond that, the builders ought to forget about this one. They may be right in a legal sense, but this lawsuit is wrong. "