City lodging tax upheld in court
July 3, 2008 · Updated 12:47 PM
"Joel Douglas, the owner of the Coachman Inn, recently lost a lawsuit he brought against the city of Oak Harbor claiming the City Council violated its own procedures and municipal codes when passing a lodging tax increase last year.Douglas was upset that the Council doubled the lodging tax - an extra tax people pay for a hotel stay - from 2 to 4 percent last fall. In court, he claimed that it costs him money to collect and pay the tax, and he loses customers because of it.But the win for the city means that the tax increase on hotels is valid, according to City Attorney City Bleyhl. An island-wide committee will soon be able to start using the tax money on a large marketing effort promoting all of Whidbey Island.Island County Superior Court Judge Alan Hancock released a 41-page memorandum decision on cross-motions for summary judgement July 28. He states that while the city's process of passing the ordinance may have seemed confusing and out-of-the-ordinary, he concluded that the city council substantially complied with the introduction requirement.In other words, the city's process was not perfect, but it was good enough.In his lawsuit, which was argued by Coupeville attorney Ken Pickard, Douglas claimed that the ordinance increasing the lodging tax was invalid because the lodging tax increase was not introduced at one council meeting and then voted on at the next.Under the Oak Harbor municipal code, a new ordinance or a budget amendment shall be introduced at least one meeting prior to the one it is considered for passage. The code is supposed to ensure that the public has time to comment on an issue before the council makes a final decision.While it can certainly be argued that the city did not inspire public confidence in the way in which it proceeded, Hancock wrote, the record indicated that the council was advised of Douglas's arguments in opposition to the increase before making its decision to pass the ordinance.At a council meeting Oct. 19, 1999, the council members discussed the lodging tax increase after a couple of employees from the Coachman Inn spoke in opposition to the proposal. One of the employees read a letter from Douglas opposing the tax increase.On Nov. 3, the Council voted on the tax increase after two people spoke against it and 14 people - including representative from various chambers of commerce - spoke in favor of it. The council passed the increase with five votes in favor, no votes against and one abstention.Hancock ruled that the councilors introduced the issue at the Oct. 19 meeting by simply discussing it and that Douglas did get his opportunity to address the council.The council was concerned about passing the ordinance before the end of the year because of Initiative 695, which mandates that a government body cannot raise taxes without a vote of the people.After the ordinance was passed, Douglas served an administrative appeal to the city, wrote to the Department of Revenue requesting the department refrain from implementing the tax, and asked the U.S. Attorney's Office to investigate the matter. Each of the bodies refused to take action.On Nov. 12, 1999, Douglas filed his lawsuit against the city.Douglas said that many customers at the Coachman Inn in Oak Harbor have been angry and complained about the extra 2 percent tax on their bills, according to Hancock.According to Oak Harbor Interim City Supervisor Doug Merriman, the city starting collecting the tax earlier this year. The extra 2 percent will raise about $58,000 a year.The idea of increasing the so-called hotel/motel tax came from a consultant who proposed that the three Chambers of Commerce, the county, the two towns and one city on Whidbey work together and combine resources to create an island-wide advertising campaign. The goal of the marketing campaign is to bring more tourists to the island. Most hotel owners and managers, as well as the Bed and Breakfast Association, supported the tax increase because it will be used to bring more business to the island.In addition to Oak Harbor, Island County, Coupeville and Langley have all increase their lodging taxes and earmarked 2 percent for the joint marketing program. Together, the tax should raise about $180,000 a year. The new joint administration board has drafted an inter-local cooperative agreement to govern the campaign.Merriman said Douglas' lawsuit has held up the marketing effort, since the council wouldn't vote on the program until after the matter was resolved. According to Merriman, the joint marketing program will probably go before the City Council at a September meeting. "