With retired Washington state Supreme Court Chief Justice Gerry Alexander serving as discussion facilitator State Representative Sam Hunt (left) and Thurston First Bank president and CEO Jim Haley prepare to present their pro and con platforms, respectively, during a question & answer presentation at Olympia Rotary Club's Oct 10 luncheon. Steve Bloom sbloom@theolympian.com
With retired Washington state Supreme Court Chief Justice Gerry Alexander serving as discussion facilitator State Representative Sam Hunt (left) and Thurston First Bank president and CEO Jim Haley prepare to present their pro and con platforms, respectively, during a question & answer presentation at Olympia Rotary Club's Oct 10 luncheon. Steve Bloom sbloom@theolympian.com

Local

Wealthy King County donors bankroll Olympia ballot proposal

October 17, 2016 04:28 AM

UPDATED October 17, 2016 04:30 PM

Donations from wealthy King County philanthropists make up a significant portion of the nearly $192,000 that has so far flowed into the Opportunity for Olympia campaign — also known as Initiative 1 — in the weeks before the Nov. 8 election.

Initiative 1 calls for creating a public college tuition fund that would be funded by a 1.5 percent tax on all household income within Olympia city limits that exceeds $200,000 a year.

Even if voters say yes, the unprecedented initiative will likely face a state Supreme Court challenge over its constitutionality and whether cities have the power to tax income.

The Economic Opportunity Institute of Seattle drew up the blueprint for Initiative 1 and has been a driving force behind the initiative. The campaign has received most of its cash from a handful of donors: Seattle stockbroker Floyd Jones ($50,000); Seattle philanthropist Ann Wyckoff ($25,000); Seattle and Whidbey Island philanthropist Nancy Nordhoff ($27,500); Seattle author and Paccar heiress Judy Pigott ($20,000); and T. Cody Swift of the Riverstyx Foundation ($20,000).

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Many of these names donate regularly to the institute, and donors such as Pigott have publicly supported higher taxes for the wealthiest Americans. Although she declined an interview with The Olympian, Pigott deferred to a 2010 essay titled “I’m a Genetic Lottery Winner — Tax Me!” in which she supports the estate tax as a critical source of revenue and an incentive for the wealthy to “use their wealth for the greater good.”

Despite being a nonprofit organization, the Economic Opportunity Institute is allowed to raise money and campaign for Initiative 1. According to the IRS, such organizations can lose their nonprofit status by participating in partisan election activities to support or oppose a candidate.

But the Olympia initiative is not a partisan candidate. David L. Thompson, vice president of public policy for the National Council of Nonprofits, confirmed the legal distinction that allows nonprofit groups to support ballot initiatives.

“The IRS considers work on ballot initiatives to be lobbying, which is permissible,” Thompson told The Olympian. “The reason is that nonprofits are appealing to the decision maker — in this case the voter — to decide the fate of the ballot measure. Lobbying typically involves asking a decision maker (usually an elected official like a senator or representative) to vote a certain way on a specific piece of legislation.”

The Economic Opportunity Institute expects Initiative 1 to pass in November and has vowed to defend it in court, according to an emailed statement from executive director John Burbank.

“We will have to raise money for a robust legal defense against attacks from conservative, anti-education groups,” according to the statement. “We’re confident and proud of the initiative on the ballot — it was reviewed by some of the top legal minds in the state and we believe it will pass and survive legal challenge.”

Opposition and debate

The city of Olympia spent about $100,000 in an unsuccessful fight to keep the initiative off the ballot, said Mayor Cheryl Selby. This comes after city officials abandoned an attempt to craft an alternative proposal with similar goals that could withstand a legal challenge.

The mayor recently co-founded the new opposition group Olympians for Responsible Tax Reform, which is raising money to fund a mailing urging Olympia voters to reject Initiative 1.

Opponents have argued that initiative is less about college tuition and more about using Olympia as a test case for challenging the state’s income tax ban in court. Selby said the initiative could cost the city $300,000 to $400,000 to defend in court, and if approved, could require three full-time city employees to administer the scholarship program and collect the tax.

Selby also said the city could face a shortfall in administration costs while depending on voluntary declaration of tax income by the estimated 750 households that the income tax would apply to. According to the initiative, 5 percent of tax collections would go toward administration.

“It’s not about school loans. It’s about an income tax,” Selby said Oct. 10 during a debate hosted by the Olympia Rotary Club. “How come so many people in King County are interested in a scholarship program for Olympia students?”

Selby’s question was directed to state Rep. Sam Hunt, D-Olympia, who participated in the debate as a supporter of Initiative 1. Hunt is a former educator who has publicly advocated for an income tax as well as overall tax reform in the state.

In response to Selby, Hunt acknowledged that some people may not like the King County connections to the initiative. He also reiterated his position on making education more accessible and affordable.

“I think we can set something in motion to provide quality higher education, and that’s why I’m supporting this,” said Hunt, who defended the initiative as an opportunity to improve quality of life and draw people to the community. “We want Olympia to be a leader. We want to be out front.”

Jim Haley, president of Thurston First Bank, participated in the debate as an opponent of Initiative 1. He called the proposal “an invitation to a long court case at the city of Olympia’s expense” and said city resources would be better spent on more pressing issues such as downtown safety and serving the mentally ill population.

Haley also said the initiative creates a tax collection bureaucracy and sets an expectation for the city to fund scholarships with no guaranteed funding.

“Tax reform and funding for higher education are very important issues, and they should be addressed, but this is not the way to do it,” Haley said. “The state Legislature, not the city of Olympia, can solve these issues. This is an illegal, expensive and impossible proposal that needs to be voted down.”

The only other notable opposition has come from the Freedom Foundation, a conservative think tank in Olympia that has vowed to take legal action if the initiative passes in November. The foundation has been soliciting donations to help fight Initiative 1, but those donations were sought before the measure was allowed on the ballot by an appellate court order.

Ballots in the mail

The Thurston County voters pamphlets for the November election were originally printed without Initiative 1. Olympia voters will receive a separate pamphlet included with the election ballots that will be mailed to homes Oct. 19.