Voters on Kaua'i in 2004 resoundingly passed a charter amendment to roll back their rocketing property taxes, but the county government that spends the tax money sued, and a judge agreed that the voters don't have the authority to cut their own taxes.

The issue, which could pave the way for similar taxpayer revolts statewide, goes before the Hawai'i Supreme Court Feb. 15.

The two key legal arguments in opposition to the county are whether the county went to the court in a proper way, and whether the voters actually have the right to make tax policy through the ballot box.

Attorney Robert Thomas, of the Pacific Legal Foundation, said Kaua'i taxpayers followed proper procedure. They went to the Kaua'i County Council for property tax relief, and when they didn't get the help they sought, they collected enough signatures to put their "'Ohana Amendment" on the ballot and let the people decide in the November 2004 general election.

The results were unequivocal. The voters backed the tax measure by 13,061 to 8,354, a 3-2 defeat for county elected officials who before the election recommended voters reject it.

Simply stated, the measure would roll back property taxes on residences to the 1998 level, with future increases in taxes capped at 2 percent a year. If you bought a home after 1998, the starting tax would be based on the sales price, but increases thereafter could still not exceed 2 percent a year.

Princeville resident Walter Lewis, one of the sparkplugs of the amendment, said the matter was about protecting people's homes from overly aggressive taxation in a period when property values were rising fast.

"We looked over how to get the measure we proposed into law" and the charter amendment appeared to be the only way, he said.

The county charter prohibits the use of initiative and referendum measures on tax policy, but is silent on addressing taxation by actually amending the charter itself.

"We were surprised that (the mayor and County Council) were as strongly against it as they turned out to be," he said.

The county argues that when the state transferred real property taxation functions to the counties, it intended for them to be managed by the counties' legislative branches—the county and city councils.

While that language is not entirely clear in the state Constitution, Judge George Masuoka agreed with the county — effectively ruling that the county need not enact the voters' wishes in the 'Ohana Amendment.

The Pacific Legal Foundation took the case to the Hawai'i Supreme Court on behalf of four 'Ohana leaders — Lewis, Monroe Richman, Ming Fang and Gordon Smith.

In trying to overturn the voters' decision, the county took what Thomas said was a unique route — essentially suing itself, with the county attorney as plaintiff and the mayor, finance director and council as defendants, and both sides agreeing that the 'Ohana Amendment was illegal.

Thomas described it as looking like "a collusive sham lawsuit with the same attorneys on both sides."

In fact, the county attorney's office is represented by the Honolulu law firm Goodsill Anderson Quinn and Stifel, and the mayor, finance director and council are represented by a deputy county attorney Rosa Flores.

Thomas said the four leaders of the 'Ohana Amendment movement had to intervene in the lawsuit to voice the other side.

Gary Slovin, identified by the county as the attorney to whom calls should be directed, did not return calls left at his office yesterday afternoon.

Flores issued a written statement: "At this time, it would be improper to make any statements regarding the substance of my clients' position in the 'Ohana charter amendment case. We look forward to presenting it before the Hawai'i Supreme Court next week."

The Kaua'i County Council responded to the voters' statement in the 'Ohana Amendment with their own bill to place a 2 percent cap on residential property taxes.

The problem, said Lewis, is that this measure failed to roll back taxes to before the real estate boom of the last several years.

Reach Jan TenBruggencate at jant@honoluluadvertiser.com.