City of Tacoma v. Taxpayers of City of Tacoma

• Decision Date: 27 August 1987
• Docket Number: No. 51817-3,51817-3
• Citation: 743 P.2d 793,108 Wn.2d 679
• Parties: The CITY OF TACOMA, a municipal corporation and city of the first class of the State of Washington, Respondent and Cross-Appellant, v. The TAXPAYERS OF the CITY OF TACOMA, Respondent, The City of Seattle, a municipal corporation, Respondent and Cross-Appellant, Washington Natural Gas Company, a Washington corporation, Appellant.
• Court: Washington Supreme Court

Page 679

108 Wn.2d 679

743 P.2d 793

The CITY OF TACOMA, a municipal corporation and city of the first class of the State of Washington, Respondent and Cross-Appellant, v. The TAXPAYERS OF the CITY OF TACOMA, Respondent The City of Seattle, a municipal corporation, Respondent and Cross-Appellant Washington Natural Gas Company, a Washington corporation, Appellant.

No. 51817-3.

Supreme Court of Washington En Banc.

Aug. 27, 1987.

Reconsideration Denied Nov. 6, 1987.

Robert J. Backstein, Tacoma City Atty., William J. Barker, Chief Asst., Tacoma, for City of Tacoma.

Johnson, Lane & Crawford, Joanne Henry, Tacoma, Cartano, Botzer, Larson & Birkholz, J. Jeffrey Dudley, Thomas C. Armitage, Seattle, for respondent.

Douglas N. Jewett, Seattle City Atty., William H. Patton, Asst., Roberts & Shefelman, Joni H. Ostergaard, Seattle, for City of Seattle.

UTTER, Justice.

The City of Tacoma appeals a trial court's declaratory judgment invalidating Tacoma's electrical energy conservation ordinance. The ordinance authorizes Tacoma's municipally owned utility company, Tacoma City Light, to issue electric revenue bonds and use other funds to invest in energy conservation measures installed in privately owned, electrically heated, residential and commercial structures located within the utility's service area. Although the trial court found Tacoma's conservation program authorized by RCW 35.92.050, the court invalidated the program as a gift of public funds prohibited by Const. art. 8, § 7. Accordingly, the trial court declared the conservation ordinance void and of no force and effect. While we agree that RCW 35.92.050 authorizes the conservation program, we conclude that the trial court erred in characterizing the program as an unconstitutional gift. Consequently, we reverse and reinstate the conservation ordinance.

I

On May 17, 1984, the City of Tacoma, as plaintiff, filed a declaratory judgment action to determine the constitutional and statutory validity of its conservation ordinance (Ordinance 23165). In addition to filing the action, Tacoma obtained orders appointing both a representative and an attorney for the taxpayers of the City of Tacoma (Tacoma Taxpayers). In June, the court entered orders permitting Public Utility District 2 of Grant County to intervene as a party plaintiff and the City of Seattle to intervene as a plaintiff-intervenor. In December, the court issued an order permitting Washington Natural Gas Company (WNG) to intervene as a defendant-intervenor, but the court restricted WNG's intervention to the issues raised by the pleadings of the existing parties.

The record compiled during a 3-week trial reveals that Tacoma and Seattle each own and operate an electrical utility, which serves residential and commercial customers both within and without city limits. At the present time, however, both cities are unable to meet present electricity demands, much less future load growth, and must purchase a portion of the electricity they require from the Bonneville Power Administration (BPA). Both cities have made legislative policy determinations to own or control the electric generating resources used to supply the needs of their electrical utility and its ratepayers, thereby reducing their reliance on purchased power.

For the last half century, hydroelectric projects, which utilize energy from falling waters, have been the prevailing method of producing electricity in the Pacific Northwest. Because of environmental concerns, Indian treaty rights, and the near exhaustion of available sites, significant hydroelectric resources are not available for development to meet future electrical load growth. Consequently, Tacoma and Seattle must look to other resources to meet their anticipated growth. Possible electrical energy resources include thermal generating plants, cogeneration, and conservation. As to conservation, its importance as a source of electricity came into full focus with Congressional enactment of the Pacific Northwest Electric Power Planning and Conservation Act (Northwest Power Act). Pub.L. No. 96-501, 94 Stat. 2697 (1980) (codified at 16 U.S.C. § 839). Both the Pacific Northwest Electric Power and Conservation Planning Council (Regional Council) and the BPA consider conservation a resource of electrical energy equivalent to a generating plant. Finding of fact 22, Clerk's Papers, at 319-20. Various legislative enactments also consider conservation an energy resource. Finding of fact 23, Clerk's Papers, at 320. ¹

Tacoma and Seattle have adopted conservation programs as a consequence of legislative determinations that these programs will result in their utilities' acquisition of electricity by conservation. Section 4 of Tacoma's ordinance characterizes its conservation program as the "purchase [of] electrical energy produced as a result of the implementation of the plan and system of energy conservation adopted [by the ordinance]." Exhibit 8. The Tacoma ordinance requires participating ratepayers to (1) submit to an energy audit; (2) have installed only city-approved conservation measures by a city-approved contractor; and (3) before payment is received, have the installed measures inspected by Tacoma. The measure of payment is the cost of the conservation measures or an amount equal to 29.2 cents times the estimated first year's kilowatt hour savings, whichever is less. Ratepayers participating in the program are under no obligation to repay the funds received. To finance the conservation program, the ordinance authorizes Tacoma to issue electric revenue bonds in the principal amount of $5,000,000 and to use other City Light funds. The cities employ different methods for determining the cost effectiveness of conservation measures. Tacoma measures cost effectiveness against the present and projected costs of electricity purchased from BPA. Seattle's measuring standard is the present and projected costs of electricity purchased from a new regional thermal generating plant. Finding of fact 18, Clerk's Papers, at 319.

At the conclusion of a 3-week trial, the trial court found the purchase of conservation equivalent to the purchase of electricity or of a generating facility, and thus authorized by the municipal utility statute, RCW 35.92.050. Although the exact amount of energy saved was uncertain, the trial court found that studies indicated a range of 3,500 to 5,000 kilowatt hours per residence. However, the court concluded that the amount of savings beyond the first year could not be predicted and that Tacoma had failed to show that the consideration it received was measurable and lasting. Consequently, even though Tacoma lacked donative intent, the trial court held that the lack of adequate consideration made the payments to ratepayers an unconstitutional gift of public funds.

WNG appealed to Division Two of the Court of Appeals, challenging the trial court's holding that Tacoma had statutory authority to enact a conservation program pursuant to RCW 35.92.050. Tacoma and Seattle cross-appealed directly to this court, challenging the trial court's holding that the Tacoma ordinance constituted an unconstitutional gift. This court assumed jurisdiction on July 18, 1986. Direct review is appropriate pursuant to RAP 4.2(a)(2) because the trial court held the Tacoma ordinance unconstitutional and pursuant to RAP 4.2(a)(4) because this case involves a fundamental issue of broad public import.

II

At oral argument it became apparent that WNG did not have standing to bring its appeal. Only an "aggrieved party" may seek review of a trial court decision. RAP 3.1. At trial, the court rejected WNG's statutory authority challenge to Tacoma's conservation program, but did agree with WNG's contention that the program constituted an unconstitutional gift. On appeal, WNG asks this court to affirm the declaration of invalidity, but on statutory authority grounds, rather than as an unconstitutional gift. Because WNG merely objects to the reasoning by which the trial court invalidated the ordinance, WNG cannot be considered "aggrieved", and therefore does not have standing to appeal. In re Estate of Lyman, 7 Wash.App. 945, 953-54, 503 P.2d 1127 (1972), aff'd, 82 Wash.2d 693, 512 P.2d 1093 (1973). However, because Tacoma and Seattle brought a cross appeal, we regard WNG as a respondent along with Tacoma Taxpayers.

Although considered a respondent, rather than an appellant, WNG may nevertheless assign error to trial court findings, Burt v. Heikkala, 44 Wash.2d 52, 54, 265 P.2d 280 (1954), and may offer additional reasons in support of the judgment, even if the trial court rejected such reasoning. Peterson v. Hagan, 56 Wash.2d 48, 351 P.2d 127 (1960). We have therefore considered WNG's contention, unsupported by co-respondent Tacoma Taxpayers, that the trial court erred in finding the conservation program within Tacoma's statutory authority. Thus, the parties raise two issues: (1) whether the municipal utility enabling statute, RCW 35.92.050, authorizes the purchase of cost effective conservation measures from ratepayers; and if the statutory authority exists (2) whether article 8, section 7 of the Washington Constitution prohibits such purchases as gifts of public funds. We hold that Tacoma's conservation program is both statutorily authorized and constitutionally permissible.

III

As "creatures of statute," municipal corporations possess only those powers conferred on them by the constitution, statutes, and their charters. 2 E. McQuillin, Municipal Corporations § 10.09 (3d rev. ed. 1979). Tacoma's authority to enact its conservation program must derive from either an express grant or by necessary or fair implication from such a grant. See Spokane v. J-R Distribs., Inc., 90 Wash.2d 722, 585 P.2d 784 (1978). The trial court held that RCW 35.92.050 authorizes municipally-owned utilities such as Tacoma City Light and Seattle City Light to purchase the electricity saved by cost-effective conservation...