Arborwood Idaho v. City of Kennewick

• Decision Date: 06 May 2004
• Docket Number: No. 73197-7.,73197-7.
• Court: Washington Supreme Court
• Parties: ARBORWOOD IDAHO, L.L.C., a foreign limited liability company, Petitioner, v. CITY OF KENNEWICK, a municipal corporation, Respondent.

89 P.3d 217

151 Wash.2d 359

ARBORWOOD IDAHO, L.L.C., a foreign limited liability company, Petitioner, v. CITY OF KENNEWICK, a municipal corporation, Respondent.

No. 73197-7.

Supreme Court of Washington, En Banc.

Argued October 30, 2003.

Decided May 6, 2004.

Daryl Duane Jonson, Terri L. Tomich-Salinas, Cowan Walker PS, Richland, for Petitioner.

John Stephen Ziobro, Kennewick, for Respondent.

Charles Dana Zimmerman, Wenatchee, for Amicus Curiae Association of Washington Cities and Washington State Association of Municipal Attorneys.

Cameron Gordon Comfort, Atty Generals Ofc/Revenue Division, Maureen A. Hart, Olympia, for Amicus Curiae Attorney General.

William Colwell Severson, Seattle, for Amicus Curiae Rental Housing Association of Puget Sound.

MADSEN, J.

Arborwood Idaho, L.L.C. (Arborwood) challenges a City of Kennewick ordinance that imposes a monthly ambulance service charge on each household, business, and industry within Kennewick. The trial court granted summary judgment in favor of Kennewick, holding that the charge is a valid regulatory fee. Arborwood appealed and the Court of Appeals affirmed. We hold that Kennewick's charge exceeds the taxing authority granted to cities and towns under RCW 35.21.768 and that the charge is not justified as a regulatory fee, benefit charge, or a charge for direct services. Accordingly, we reverse the Court of Appeals.

FACTS

RCW 35.21.766 authorizes a city or town to establish a system of ambulance service to be operated as a public utility of the city or town.¹ RCW 35.21.768 authorizes a city or town to levy and collect excise tax or to impose an additional tax for the act or privilege of engaging in the ambulance business or both.² Additionally, RCW 35.21.768 authorizes the levy and collection of the excise tax from all persons, businesses, and industries who are served and billed for the ambulance service.

Kennewick established an emergency medical and ambulance service for the residents of Kennewick. Kennewick Municipal Code (KMC) 9.36.010. It is operated as a public utility of Kennewick. Id. To cover the cost of providing this service, Kennewick levies and collects a monthly ambulance charge on each household, business, and industry within Kennewick served by the emergency medical and ambulance services. Former KMC 9.36.050 (1989). During the time relevant to this review the ambulance charge was $2.60 per month for each industry, business, and individual residential unit within Kennewick. Kennewick's ordinance provides that if an industry, business, or household fails to pay the ambulance charge, all the utility service will be cut off until the charge is paid in full. Former KMC 9.36.050(3).

Where one utility account covers multiple units, the person whose name appears on the utility account must pay the ambulance charge although the charge is, in fact, based on occupancy. Since 1989, Kennewick has determined occupancy for multiunit accounts each month through a cross-reference of Kennewick's water/sewer utility records with the records from the Benton County Public Utility District (PUD). Because the PUD has individual electronic meters or accounts for each unit whereas one utility account with Kennewick can serve multiple units, vacant or inactive accounts with the PUD are subtracted from the total number of units on the water utility account so that the ambulance charge is based on occupied units.

In 2000, Kennewick collected $733,000 from the ambulance charge as compared with a cost of $1,400,000 for providing the service. All the revenues from the ambulance charge are used for the operation, maintenance and capital needs of the emergency medical and ambulance service. The moneys collected from the ambulance charge may also be used to pay the cost of providing ambulance services to Kennewick residents who are uninsured or underinsured, because Kennewick residents have to pay $125 for nonemergency ambulance transport although they are not required to pay any fee for emergency ambulance services.³ Until May 2000, after this suit commenced, former KMC 9.36.050 described the ambulance charge as an "excise tax." Former KMC 9.36.050(a).⁴ Kennewick has since amended the ordinance to change the "excise tax" to a "utility charge."⁵Id.

In September 1992, Arborwood purchased an apartment complex consisting of 33 buildings containing a total of 188 apartment units. There are four separate meters for water and sewer, and Kennewick bills these utilities through four separate accounts, one for each meter. PUD provides and bills electricity. Accordingly, pursuant to former KMC 9.36.050(a), Kennewick billed and collected the ambulance charge from Arborwood for each occupied apartment unit in the complex at the rate of $2.60 per month per unit. Between January 1, 1999 and June 20, 2001, there were 27 ambulance calls made to Arborwood's apartment complex.

On February 12, 1999, Arborwood protested the ambulance charge, asserting that the ambulance charge must be imposed directly on the tenants rather than on Arborwood, the owner. Kennewick's finance manager rejected Arborwood's claims. Arborwood brought the matter to Kennewick's support services director, who upheld the finance manager's decision. Arborwood filed an appeal to the Kennewick appeals commission. The appeals commission affirmed the support service director's decision on April 26, 1999. Arborwood sought further review in the Benton County Superior Court by filing a notice of appeal, a petition for a writ of review, and complaint for declaratory judgment.

The parties filed cross motions for summary judgment and the trial court granted summary judgment in favor of Kennewick. In its memorandum opinion of July 11, 2001, the court determined that the ambulance charge was a valid regulatory fee. The court did not address the issue of whether the ambulance fee was an excise tax authorized under RCW 35.21.768.

Arborwood appealed. The Court of Appeals affirmed, characterizing the ambulance charge as a regulatory fee. Arborwood Idaho, L.L.C. v. City of Kennewick, 113 Wash. App. 875, 889, 55 P.3d 1170 (2002). The court also held that the ambulance charge was neither an unconstitutional property tax nor an excise tax authorized by RCW 35.21.768. Id. at 885, 55 P.3d 1170.

ANALYSIS

Initially, Arborwood claims that we should not review the Court of Appeals holding that the ambulance charge is not an excise tax because Kennewick did not seek review of that holding. Under RAP 13.7(b), we will generally review only the questions raised in the petition for review and the answer, unless we order otherwise when granting the motion or petition. Here, the issue raised in the petition for review is whether the ambulance charge levied upon Arborwood under former KMC 9.36.050 is a tax or a fee. In granting the petition for review, we ordered the parties to file special briefs on whether the ambulance charge is an excise tax. Accordingly, the issue of whether Kennewick's ambulance charge is authorized under RCW 35.21.768 is properly before this court.

Article VII, section 9 and article XI, section 12 of the Washington State Constitution permit the legislature to grant municipal authorities the power to levy and collect taxes for local purposes. CONST. art. VII, § 9; art. XI, § 12; King County v. City of Algona, 101 Wash.2d 789, 791, 681 P.2d 1281 (1984). However, these constitutional provisions are not self-executing. Algona, 101 Wash.2d at 791, 681 P.2d 1281; Carkonen v. Williams, 76 Wash.2d 617, 627, 458 P.2d 280 (1969). Accordingly, municipalities must have express authority, either constitutional or legislative, to levy taxes. Algona, 101 Wash.2d at 791, 681 P.2d 1281; Citizens for Financially Responsible Gov't v. City of Spokane, 99 Wash.2d 339, 342, 662 P.2d 845 (1983). It is also important to note that the police powers granted to local governments by article XI, section 11 of the Washington State Constitution do not include the power to tax. CONST. art. XI, § 11; Covell v. City of Seattle, 127 Wash.2d 874, 879, 905 P.2d 324 (1995); Margola Assocs. v. City of Seattle, 121 Wash.2d 625, 634, 854 P.2d 23 (1993); Hillis Homes, Inc. v. Snohomish County, 97 Wash.2d 804, 809, 650 P.2d 193 (1982) (Hillis Homes I).

Here, RCW 35.21.768 provides the explicit statutory authority permitting Kennewick to impose an ambulance charge on households, businesses, and industries in Kennewick.⁶ Thus, it is necessary to examine whether Kennewick's ambulance charge is authorized by that statute.

Arborwood claims that RCW 35.21.768 allows Kennewick to impose the ambulance charge only on those entities actually using the ambulance service. Because Kennewick's ordinance imposes the charge on every household, business, and industry within Kennewick, regardless of actual service, Arborwood contends that Kennewick exceeds its statutory authority.

Kennewick claims, however, that limiting the imposition of the ambulance charge to those who actually use the ambulance service impermissibly adds language to the statute and distorts its natural meaning. Essentially, Kennewick's position is that RCW 35.21.768 authorizes the city to impose an ambulance charge for the availability of ambulance services.

The court's fundamental objective in construing a statute is to ascertain and carry out the legislature's intent. If the statute's meaning is plain on its face, then the court must give effect to that plain meaning as an expression of legislative intent. Dep't of Ecology v. Campbell & Gwinn, L.L.C., 146 Wash.2d 1, 9-10, 43 P.3d 4 (2002); State v. J.M., 144 Wash.2d 472, 480, 28 P.3d 720 (2001). A tax statute must be construed as a whole to ascertain the intent of the legislature. Group Health Coop. of Puget Sound, Inc. v. Dep't of Revenue, 106 Wash.2d 391, 401, 722 P.2d 787 (1986). If a tax statute is ambiguous, the statute must be construed against the taxing authority. Id.

Here, RCW 35.21.768 does not expressly state that only actual users of...