Tidbits from the past week

As is often the case, in the last week a number of things happened in local city government that flew under the radar. For your reading pleasure…

Fair Chance Housing case gets a new supplemental authority

We’ve been waiting a very long time for the court to rule in Yim vs. City of Seattle, a challenge to the city’s Fair Chance Housing ordinance. The case was referred over to the state Supreme Court in 2019 to answer two questions under state law, related to the standard for analyzing substantive due process claims. In November 2019, the state Supreme Court gave its surprise answer: the federal standard — and in the process discarded decades of precedential case law. The Supreme Court also offered its interpretation of that federal standard.

With that answer in hand, the case resumed early last year back in federal court to proceed on a motion for summary judgment based on the plaintiffs’ claim that the Fair Chance Housing ordinance violates their due process rights. The plaintiffs accepted the state Supreme Court’s ruling that the federal standard applies, but took issue with its interpretation of that standard — and pointed out that a state court’s interpretation of federal law is not binding on a federal court.  The City of course disagreed. All the briefs were filed by late May, and the parties have been waiting for a ruling ever since.

Last week the plaintiffs filed a “Notice of Supplemental Authority,” which is how lawyers point out a newly-decided case that is relevant, after their own briefs have been filed. In this instant, it’s Pacific Coast Horseshoeing School vs. Kirchmeyer, a decision by the Ninth Circuit Court of Appeals and decided last June. The case dives into the issues of when the government may or may not regulate content; in this case, the State of California required certain students to pass an examination before enrolling in any post-secondary school (including a horseshoeing school). The school and student had sued, arguing that the state was impermissibly regulating speech: the school’s right to teach its curriculum to students. A lower court had said that it was conduct, and not speech that was regulated; the Ninth Circuit reversed that ruling and determined that the state was regulating speech.

The Yim plaintiffs submitted the case for the court’s attention because of similarities to the issues related to whether the Fair Chance Housing ordinance, which bars landlords from even looking at the criminal record of a potential tenant, regulates conduct or speech.

The plaintiffs included in its Notice of Supplemental Authority an interpretation — essentially a new brief — on the new case and how it should be applied. Apparently the City objected to that, most likely because it doesn’t have the opportunity to respond with its own brief, so at the end of the week the plaintiffs withdrew their original filing and submitted a new one with only three paragraphs: an apology of sorts, a pointer to the new case, and a reference simply to the overlapping questions of law that the case pertains to. But even if the court will ignore it, it’s still interesting to read the plaintiffs’ thoughts on how the new case applies.

The Burke-Gilman Trail Missing Link, still on hold

Since the 1980’s, the city has been trying to fill in the “missing link” of the Burke-Gilman Trail through the maritime/industrial district in Ballard. The “Ballard Coalition,” a group of business and labor interests, have fought to stop it, including most notably challenging the city’s SEPA analysis of the project, issued in May 2017. The Coalition filed a challenge with the Seattle Hearing Examiner, which was assigned to Ryan Vancil, at the time the Deputy Hearing Examiner. Vancil heard the case in November and December of 2017.

Here’s the twist: Vancil did not disclose that at the time he was applying for his boss’s job as Hearing Examiner, which had recently become vacant. The Hearing Examiner is appointed by the City Council.

Vancil handed down his decision on the “missing link” SEPA case on January 31, 2018. Literally the next day, on February 1, the Council announced that they had chosen Vancil as the new Hearing Examiner. Vancil was confirmed by vote of the Council on February 5.

The Ballard Coalition appealed Vancil’s decision to King County Superior Court, alleging both mistakes in the decision and more notably that Vancil had violated the “Appearance of Fairness Doctrine” by presiding over and deciding the case while applying for the Hearing Examiner job. The judge dismissed the claim. The Coalition appealed to the state Court of appeals.

Last week the Court ruled unanimously that Vancil had, in fact, violated the appearance of fairness doctrine, and ordered a new hearing in front of the Office of the Hearing Examiner — and one can assume that Vancil will assign it to a deputy in his office, rather than handle it himself. From the ruling:

Deputy Hearing Examiner Vancil served as a neutral decision-maker in a matter while simultaneously seeking appointment to a higher position from an interested stakeholder. Because he did not disclose the potential conflict to the parties, the proceedings could appear to be unfair to a reasonably prudent and disinterested person. We reverse the trial court’s summary judgment in favor of the City, enter summary judgment for the Coalition, and remand for a new hearing.

Assume that the new hearing will take place later this year, followed by another round of appeals, and perhaps by the end of 2022 there might be a final resolution. Maybe.

Tweaking the payroll tax

Today the Council formally introduced a bill making an amendment to the payroll tax it passed last summer. The original tax ordinance says that the entire amount that an employer pays an employee is subject to the tax if the employee:

  • is primarily assigned to Seattle;
  • performs 50% of more of their work in Seattle; or
  • resides in Seattle and does not perform 50% or more of their work in a single city.

According to a memo prepared by the Council’s staff,

In the fall of 2020, tax administration staff with the Department of Finance and Administrative Services (FAS) conducted a rulemaking process and then published a Director’s Rule for the payroll tax. During the rulemaking process, FAS staff received numerous questions from businesses about how to apply the payroll assignment methodology included in the ordinance. Some businesses questioned whether it was fair to apply the full measure of the payroll tax when employees split their time between work in Seattle and work in other jurisdictions.

The amendment addresses this by allowing businesses a second option for how to determine the applicable payroll tax: employers may allocate payroll expenses based on the proportion of that employee’s hours that were worked in Seattle. Employers must choose for each year which of the two rules to apply to all of their employees (they don’t get to choose for each individual employee).

The memo points out that since employers get to choose which of the two methods to use, and will almost certainly choose the one that lowers their tax bill (including administrative costs), this amendment will result in a reduction in payroll tax revenues for the city. However, it’s impossible to tell how much, in part because the city doesn’t even have a solid estimate of how much revenues the original payroll tax would bring in. The employment data that the city gets from the Washington State Employment Security Department does not provide the necessary information for an accurate model.

While the memo doesn’t mention it, there are almost certainly legal reasons why this amendment is being introduced as well, related to the dubious practice of taxing companies for wages paid when the work isn’t being performed in Seattle. The city is already being sued by the Seattle Chamber of Commerce over the payroll tax, though for other reasons.

The bill will be taken up tomorrow morning in the Council’s Finance and Housing Committee.

I hope you found this article valuable. If you did, please take a moment to make a contribution to support my ongoing work. Thanks!