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STATE OF WASHINGTON
County of Jefferson
In the Matter of Agreeing to a }
Settlement in the Lawsuit Known as }
Kittitas County Cause of Action No. }
98-2-00283-5 }
RESOLUTION NO. ~O
WHEREAS, a lawsuit was filed against 20 of Washington's counties by
CenturyTel of Washington, Inc. (previously Telephone Utilities of Washington, Inc.) because
they claimed that the State Department of Revenue overvalued the Plaintiff's operating property
and failed to comply with the apportioning and equalizing requirements of RCW 84.12.350 for
the assessment years 1996 and 1997; and,
WHEREAS, the Attorney General of the State of Washington, acting on behalf of
the Counties has negotiated a settlement agreement for the above named cause; and,
WHEREAS, after reviewing the terms of the settlement, the Jefferson County
Assessor, Treasurer and Prosecuting Attorney recommend that it would be in the best interest of
the County to agree to the settlement as negotiated.
NOw, THEREFORE, BE IT RESOL VED, that Jefferson County, a municipal
corporation of the State of Washington, by and through its County Commissioners, hereby
authorizes the Office of the Attorney General for the State of Washington to enter into settlement
with Plaintiff CenturyTe1 of Washington, Inc. with respect to Kittitas County Cause of Action
No. 98-2-00283-5 according to the terms outlined in the September 6, 2000 memo to this County
from Assistant Attorney General Cameron G - Comfort.
BE IT FINALLY RESOL VED, Jefferson County hereby requests "Filed" copies of
all pleadings or agreements filed with the Superior Court to formalize the resolution and closure
of this civil lawsuit.
Resolution No78-00: Agreeing to a Settlement in the Lawsuit Known as Kittitas County Cause of Action No. 98-2-00283-5 Page: 2
APPROVED AND ADOPTED this /3 ~ day of - '9<>ft;;,k2000.
APPROVED AS TO FORM:
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Jefferson County Prosecuting Attorney
Juelanne Dalzell
JEFFERSON COUNTY PROSECUTING ATTORNEY
Courthouse - P.O. Box 1220
Port Townsend, Washington 98368
Telephone (360) 385-9180 FAX (360) 385-0073
Jill Landes, Deputy Prosecutor
Michael Haas, Deputy Prosecutor
Theodore M. Cropley, Deputy Prosecutor
David W. Alvarez, Deputy Prosecutor
Cameron G. Comfort, AAG
Attorney General's Office
400 General Administration Building, PO Box 40123
Olympia, WA 98504-0123
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September 20, 2000
JEffŒSCiN CiJU\\-;'f
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Re:
CenturyTel of Washington v. State of Washington
Kittitas County Cause No. 98-2-00283-5
Dear Mr. Comfort:
After review of the proposed settlement with my elected Assessor and
Treasurer, please be advised that they approve of this settlement. I enclose for
your records a Resolution adopted by this County's elected County Commissioners
authorizing you to settle the lawsuit on the terms described in your memorandum
dated September 6, 2000.
Thank you for your excellent work on behalf of Jefferson County.
VerY truly yours,
~~~e~
Chief Civil Deputy Prosecuting Attorney
Cc: County Commissioners (w/o Ene.)
Treasurer Morris (w/o Ene.)
Assessor Westerman (w/o Ene.)
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Christine O. Gregoire
ATTORNEY GENERAL OF WASHINGTON
400 General Administration Building. PO Box 40123 . Ol~pia W A 98504-0123
MEMORANDUM
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September 6, 2000
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TO:
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Assessors, proSecutors, and Treasurers of th~ follcwing Counties:'
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Adams
C1allam
Clark
Columbia
Ferry
Franklin
Grant
Grays Harbor
Jefferson
King
Kittitas
Lewis
Lincoln
Mason
Okanogan
Pacific
Pierce
Spokane
Stevens
Wahkiakum
FROM:
Cameron G. Comfort
Assistant Attorney General, Revenue Division
SUBJECT:
CenturyTel of Washington, Inc. (previously Telephone Utilities of
Washington, Inc.) v. State of Washington, Department of Revenue, et at.,
Kittitas County Cause No. 98-2-00283-5
Dear County Assessors, Prosecutors, and Treasurers:
The Department has reached a tentative agreement with plaintiff CenturyTel of
Washington, Inc. (previously Telephone Utilities of Washington, Inc.) to settle the property tax
refund lawsuit filed by CenturyTel against the Department and, the above counties. The
Department believes the proposed resolution is favorable to both the Department and the counties
and, accordingly, 'it strongly hopes that you will support the proposal.
CenturyTel's lawsuit involves the 1996 and 1997 assessment years (taxes paid in 1997
and 1998). In its complaint, CenturyTel alleges:
. The Department of Revenue overvalued CenturyTel's operating property by overstating
the true and correct actual cash value of CenturyTel's operating property and failing to
properly apportion and equalize said amount to the general assessment level in each
county as required by RCW 84.12.350. As a result of this overvaluation, CenturyTel's
property taxes are illegal and excessive.
. The Department of Revenue's overvaluation of CenturyTel's operating property violates
the Equal Protection CIause of the- 14[h Amendment of the United States Constitution and
...-...
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, .
ATTORNEY GENERAL OF WASHINGTON
County Officials
September 6, 2000
Page 2
the Uniformity Clause of the Washington State Constitution, Art. 7, Sec. 1 (Amendment
14).
CenturyTel specifically contends that the Department's errors resulted in reconciled values for
both the 1996 and 1997 assessment years that exceeded the fair market value of its taxable
operating property by at least $25 million each year. Following discovery, and subsequent
discussion and negotiation oet'.veen the parties, the Department and CenturyTel agreed that
CenturyTel's reconciled value should be reduced by $12,500,000 for each assessment year. This
amounts to approximately a six percent reduction in value per assessment year. As a part of the
settlement process, the Department informed CenturyTel that it would need to present the
tentative settlement to the counties for input and comment. That is the purpose of this
memorandum letter.
The proposed settlement will dispose of all of CenturyTel's claims for the 1996 and 1997
assessment years, as well as preclude the company from fù.ing property tax refund suits for the
1998, 1999, 2000 and 2001 assessment years. In addition, to minimize the impact on the
counties and so as not to require the payment of refunds, CenturyTel has agreed, in lieu of
refunds, that the reductions in its 1996 and 1997 assessments (adjusted for the time value of
money) may be applied to CenturyTel's 2000 and 2001 assessments. Accordingly, the settlement
will specify as follows.
. CenturyTel will dismiss with prejudice the lawsuit filed in Kittitas County against the
Department and your county.
. For the 2000 assessment year, the Department initially determined a tentative value Îor
the company's taxable operating property of approximately $255,000,000. (For
comparison purposes, the Department's value for CenturyTel's taxable operating property
in Washington for the 1999 assessment year was $252,944,000). During July's hearing
before the Department's Utility Section, CenturyTel presented an appraisal arguing for a
value of $203,000,000. In settlement, CenturyTel agrees to accept a value of
$253,000,000 for the 2000 assessment year. From that figure, $15,300,000 will be
subtracted (to reflect a $12,500,000 reduction for the 1996 and 1997 assessment years,
adjusted by the rate of interest applying to property tax refunds).
. For the 2001 assessment year, CenturyTel agrees to a value based on $253,000,000, plus
or minus the percentage change in net booked plant between the 2000 and 2001
assessment years, and again minus $15,300,000 (to reflect the remaining $12,500,000
reduction for the two assessment years at issue in the litigation, again adjusted by the time
value of money).
ATTORNEY GENERAL OF WASHINGTON
County Officials
September 6, 2000
Page 3
An attractive feature of the tentative settlement is CenturyTel's agreement not to challenge
any of its assessments up to and including the 2001 assessment, thus promoting certainty for at
least the next several years. Moreover, the issues raised by CenturyTel do not appear to be
continuing ones and settlement should not impact current and future assessments, or valuation
practices. In addition, defense of this suit would result in CenturyTel's examination of the
defendant counties' assessment practices, which undoubtedly would be time consuming and
costly. Furthelmore, the reductions 111 this year's and next year'::; assessments should have
minimal impact on the state, counties, and most taxing districts. In fact, unless a taxing district is
at its statutory rate cap, that district should not see any reduction in tax collections as a result of
the settlement. Instead, the same amount of tax should be collected through the marginally
higher tax rate imposed on all taxpayers in the district, including CenturyTel.
Even though the Department remains confident that the 1996 and 1997 assessments of the
company are defendable, each case that goes to trial obviously involves a certain degree of risk.
There is no guarantee that the defendants will prevail on all of the issues raised in this lawsuit.
Consequently, the Department and its attorneys, in consultation with the counties, must analyze
each case based on the degree of risk and the cost of litigation. In our view, a settlement which
appropriately accounts for the degree of risk and the cost of litigation, which minimizes or
eliminates the payment of refunds, and which provides to the state and counties for a period of
time a measure of predictability and certainty, is one that must be given serious consideration.
Here, the proposed settlement meets each of these objectives.
We would like your input and comment as to the proposed settlement. If you have any
questions or concerns, please feel free to call Sandy Guilfoil at (360) 570-5860; Steve Yergeau at
(360) 570-5877; or me at (360) 753-5528. If we do not hear from you by September 27,2000;
the Department will assume that you are in accord with the views expressed in this memorandum
and wish to settle CenturyTel's claims in this lawsuit along the lines proposed herein. Thank you
in advance for your attention to and consideration of this matter.
Very truly yours,
(-- - G.
~
Cameron G. Comfort
Assistant Attorney General
cc:
Sandy Guilfoil
David Saavedra
Steve Yergeau
Mary Fairhurst
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JEFFERO.,.. cOUN'N o>:AT - PORT TOWNOEND, w"""..an>N
Juelanne Dalzell
Lc~AD,
See; fÀG8,'/ria
JEFFERSON COUNTY PROSECUTING ATTORNEY
Courthouse - P.O. Box 1220
Port Townsend, Washington 98368
Telephone (360) 385-9180 FAX (360) 385-0073
Jill Landes, Deputy Prosecutor
Michael Haas, Deputy Prosecutor
Theodore M. Cropley, Deputy Prosecutor
David W. Alv""" D'puty P,o"..to, CØIFIIIIIl
To:
Assessor Westennan, Treasurer Morris and the
Board of County Commissioners
David Alvarez, Civil DP A
CenturyTel of Washington v. State of Washington and
All 39 Counties
Monday, September 11,2000
From:
Re:
Date:
Colleagues: It now appears that there has been a reasonable settlement reached to
settle this lawsuit. The settlement is not final unless each of the Counties that are
Defendants in this matter agrees that the settlement is acceptable and should be entered
into. That is why this memo has come to you.
The lawsuit arose because, according to the Plaintiff CenturyTel, the State
Department of Revenue overvalued the Plaintiff s operating property and failed to comply
with the apportioning and equalizing requirements ofRCW 84.12.350 for the assessment
years 1996 and 1997. This memo WILL NOT discuss the accuracy of such a statement.
But should we accept this proposed settlement? The second full paragraph on
page 3 ofthe letter from AAG Comfort explains why, from a legal perspective, this
would be a positive resolution of this lawsuit for the State and for Jefferson County. I
concur in those thoughts. However, the suggested settlement has financial implications
for the County. The County would NOT NEED TO REFUND any money it has
previously collected and presumably spent.
In brief, the proposed settlement would reduce the actual cash value of
CenturyTel's operating property from about $250 million in the year 1999 to $235 million
in the year 2000 to $220 million in the year 2001. These numbers are very rough and
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they assume an absence of inflation, no depreciation of assets (if applicable) and ignore
any new equipment or plant CenturyTel might have added to its inventory. The easiest
way to think of these reductions in assessed value is that the assessed value of the
CenturyTel operating equipment drops by six percent (6 %) in the year 2000 and by an
additional six percent (6 %) in the year 200l. In return, CenturyTel would be,prohibited
from challenging its assessments for the years 1998 through 2001, thus providing all of us
with some certainty.
As stated above, there are no legal reasons not to agree to support the proposed
resolution of this lawsuit. And there are many legal reasons to accept this proposal But,
the Assessor and the Treasurer should detennine the financial consequences, if any, to
Jefferson County of this settlement before the County makes any decision as to whether
or not to enter into this agreement.
If we wish to state our opposition to this proposal we must do so to the Office of
the Attorney General no later than September 22, 2000. Please keep that deadline in
mind and contact me with any thoughts in this regard.
If the County chooses to accept this proposed settlement, then it probably would be
done via a Resolution that could be part of the "Consent Agenda" confinning our
approval of the proposed agreement.
00 annJ 4
David Alvarez, Extension 2l9.
Chief Civil Deputy