Gas-station coalition says tax deal with tribes is unfair

ABERDEEN — A statewide coalition of service stations has filed a lawsuit against Gov. Chris Gregoire, the Department of Licensing and the state to challenge fuel-tax-reimbursement agreements with regional American Indian tribes.

The nonprofit Automotive United Trades Organization (AUTO), based in McCleary, filed a lawsuit in Grays Harbor Superior Court earlier this month seeking a court order to halt tax reimbursements to tribal service stations based on an agreement Gregoire signed in 2007.

AUTO Executive Director Tim Hamilton said he and others representing the some 300 service stations in the lawsuit claim the state has improperly paid more than $35 million to tribal service stations, undercutting competition.

"It just guts us," he said.

Hamilton explained the refund agreements pay tribal stations back 75 percent of state taxes collected on fuel at tribal stations, which amounts to about 28 cents a gallon. He contends some of this money allows tribal stations to operate at lower costs, pricing out nontribal stations.

Gregoire approved the agreements in an effort to clarify sovereignty issues between the tribes and state fuel taxes on tribal stations. Previous disagreements had some tribes considering producing their own fuel or filing lawsuits against the state for violating sovereignty rights.

A letter from the state Attorney General's Office defended the agreements as fair and legal contracts.

"Our lawmakers and policymakers had to choose a path forward that they felt would best serve the many interests of the state," the letter stated. "They chose to pursue agreements with the tribes rather than risk protracted and a potentially unending litigation. While some may disagree with the choices and decisions made, these are lawful policy choices that are entrusted to their discretion."

The AUTO lawsuit asks for a "writ of prohibition" to Gregoire and the licensing department to halt any more payments to the tribes out of the Motor Vehicle Fund. It does not seek any monetary damages beyond a potential request for attorney's fees.

"We're not going after the sovereignty of the tribe, and we're not going after the state's right," he said, but they are challenging the legality of redistributing the taxes to tribal stations.

Hamilton argues the reimbursements not only offer an unfair advantage, but they also violate mandatory guidelines for the distribution and spending of tax revenue. He cites the state constitution, saying all fuel taxes must go to highway maintenance. He alleges there's little to no oversight of how tribes spend the refund money.

"We believe that agreement that (Gregoire) cut with them violates the 18th Amendment of the state Constitution," he said.

Hamilton cited a Department of Licensing report that states tribes used some of the money for remodeling a police station, building office space and trail work.

The Attorney General's Office explained in the letter that the agreement allowed for police and transit spending. The agreement allows tribes to decide how the money is spent on those services and minimizes future legal problems over sovereignty.

"By providing the tribes with 75 percent of the tax revenues collected on the fuel sales from the tribally owned and operated stations," the letter stated, "but limiting their use to 'highway-related purposes,' the state provides funding for road and highway projects that might not otherwise be pursued ... "

The Attorney's General Office has acknowledged the lawsuit but has not submitted a response to the complaint. Hamilton said the state has a 20-day period to answer the charges. No hearings have been set.