A King County Superior Court judge ordered the city of Seattle to refund a tax paid by some property owners in downtown Seattle after challenging the Local Improvement District (LID) used to fund the construction of a waterfront park.

The LID, a tax on nearby property owners for waterfront improvement and pays for what the city calls “special benefits” of having increased access and value now that the Alaska Way viaduct has been torn down. The tax was intended to raise $160 million for the park’s construction.

Homeowners worried about pricey Seattle waterfront LID

The ruling said only the plaintiff’s payments should be reimbursed, which would be approximately $16 million of the total $160 million the special assessment is expected to collect. Should the ruling stand, it’s expected other property owners will sue to get their assessments reimbursed.

In a ruling issued March 8, the judge found that the assessment method used by the city was “fundamentally flawed” and “arbitrary and capricious” and ordered a full refund of the tax.

The judge argued that the appraisers included in their evaluation of local property values the effects of the unfinished waterfront revitalization project, which violates the standard that the speculative value is “beyond the knowledge of reasonable certainty.” The COVID-19 pandemic disrupted these assessments, and the city did not properly adjust its valuations, the documents also stated.

The judge also found that the appraiser’s study itself contained several issues, including not meeting standards set by the Uniform Standards of Professional Appraisal Practice (USPAP) and did not properly measure the increase in property values.

“The Court finds that the LID assessment process as conducted by the city was fundamentally flawed. The process was infected from its inception by a rush to judgment by city staff who were apparently anxious to begin collecting revenue based on assessments of a LID improvements far in advance of the completion dates,” the documents read.

Much of the money already paid to the tax has been ordered by the judge to be refunded, and the property value assessments have been annulled.

The city said in a statement to KIRO Newsradio that they would be “reviewing the court’s written decision and evaluating the city’s options for appeal.”