Who Pays When the City's Warrants Go Bad?
A judge says Olympia cannot be forced to cover special improvement warrants with general taxes, leaving the loss to fall on the people holding the paper.
Olympia, March 30.—Special.—A ruling of considerable interest to the taxpayers of Olympia has been rendered by Superior Judge Irwin. The decision was in the case of a corporation against the city of Olympia, the cause of action being the failure of the city to provide for the payment of special improvement warrants drawn on the Fourth Street fund, and a shortage in the amount available for certain warrants.
The demurrer to the complaint was overruled. The court holds that at the time of the improvement the indebtedness of the city had exceeded the 5 per cent limit, and that the city had no right to demand payment in any way different from the manner agreed to in its contract. The remedy was a writ of mandamus to compel the officers of the city to proceed with diligence to provide the special fund.
The case will likely be appealed to the supreme court, and if sustained there the effect of the ruling will be that the city cannot be made liable as a municipal corporation for the payment of the special warrants by general tax. If the special assessment, without fault of the city, should be uncollectible, the hardship must fall upon the holders of the warrants and not upon the city.
“The hardship must then fall upon the holders of the warrants and not upon the city.”
Special assessments and municipal debt are still a third rail in Seattle and every Washington city: who pays when a public improvement goes sour, and whether bondholders or taxpayers absorb the loss. The 1895 ruling drew a hard line between the city's general fund and the warrants it had issued.
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