Department of Ecology v. State Finance Committee, No. 57437-5

• Court: United States State Supreme Court of Washington
• Writing for the Court: UTTER; GUY; DORE; BRACHTENBACH and DURHAM, JJ., and CALLOW
• Citation: 804 P.2d 1241,116 Wn.2d 246
• Parties: The DEPARTMENT OF ECOLOGY, Petitioner, v. STATE FINANCE COMMITTEE, Respondent. En Banc
• Docket Number: No. 57437-5
• Decision Date: 17 January 1991

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116 Wn.2d 246 804 P.2d 1241 The DEPARTMENT OF ECOLOGY, Petitioner,
v.
STATE FINANCE COMMITTEE, Respondent. No. 57437-5. Supreme Court of Washington, En Banc. Jan. 17, 1991.
As Changed Jan. 24, 1991.

[804 P.2d 1242]

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Preston, Thorgrimson, Shidler, Gates & Ellis, Fredric C. Tausend, Elizabeth Thomas, Aaron Keyt, Seattle, for petitioner.

Kenneth O. Eikenberry, Atty. Gen., David E. Walsh, Deputy, Olympia, for respondent.

UTTER, Justice.

The Department of Ecology (hereinafter DOE) directly petitions this court for a writ of mandamus. The writ would direct the State Finance Committee (hereinafter Committee) to approve the form of the master lease and trust agreement proposed by DOE for construction and lease of its new headquarters. The specific question raised by this petition is whether the lease-purchase agreement developed by DOE and authorized by the Legislature in RCW 39.94 violates the debt limitation provision of article 8, section 1 of the Washington constitution. The lease expressly provides that DOE's obligation is subject to termination without penalty if sufficient funds are not

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appropriated by the Legislature or if the Executive orders DOE to cut its budget. For this reason we hold that DOE's financing scheme does not constitute debt within the meaning of the constitution. We therefore grant DOE's requested relief.

DOE currently houses its headquarters staff in 18 separate locations throughout Thurston County. In the 1989 capital budget, the Legislature authorized DOE to pursue a project to develop a consolidated headquarters building. Laws of 1989, 1st Ex. Sess., ch. 12, § 903(3). In 1990, the Legislature further authorized DOE to enter into a financing contract for the acquisition, design, and construction of the headquarters building. Laws of 1990, ch. 299, § 501(1). The financing contract must meet the requirements of RCW 39.94, which provides, in relevant part:

The state may enter into financing contracts for the use and acquisition for public purposes of real and personal property. Payments under financing contracts shall be made by the state from currently appropriated funds or funds not constituting "general state revenues" as defined in Article VIII, section 1 of the state Constitution. The term of any financing contract shall not exceed thirty years or the remaining useful life of the property, whichever is shorter.

RCW 39.94.030(1). Pursuant to the enabling legislation, DOE developed a comprehensive plan for the headquarters project. ¹

Pursuant to the plan, the State, through the Department of General Administration, entered into a purchase option agreement with the owners of a 45-acre parcel located on the campus of St. Martin's College. The option must be exercised, if at all, on or before January 31, 1991. A bank, acting as trustee, will finance the site purchase and construction costs by issuing and selling Certificates of Participation (hereinafter COPs). The trustee will hold the site in trust for the State.

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The trustee will sublease the site to the contractor. Construction costs will be paid from the proceeds of the sale of the COPs. The COPs will give investors the right to receive a proportionate share of whatever payments DOE makes under the master lease. Under the master lease, the contractor will lease the site and the headquarters building to DOE for a term of 20 years. The contractor will then assign its interests in the ground lease and the master lease to the trustee. DOE will make its lease payments to the trustee. The trustee will make interest payments to the COP holders. If DOE makes all the required lease payments, it will receive full title to the headquarters building in 20 years.

Under the terms of the master lease, DOE can terminate its payment obligations at any time if the Legislature fails to appropriate funding for the lease payments, or if an Executive Order imposes budget cutbacks on DOE. If DOE terminates its lease, then it must vacate the headquarters building. The trustee then may take possession of the building and relet it for the [804 P.2d 1243] benefit of the COP holders. Any payments received by the trustee on reletting of the building will be used to pay the COP holders. This is the COP holders' only remedy against the State. ² The actual COPs will include a paragraph warning the holders of the limited nature of the State's obligation. ³ The offering prospectus prepared by the underwriter of the COPs will

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also highlight the fact that DOE's payments will end if the Legislature fails to appropriate sufficient funds, or the Executive orders a cutback. Regardless of whether DOE makes all of its lease payments, at the end of the ground lease (30 years) title to the building and other improvements on the site will pass to the State.

As required by RCW 39.94.040(1), DOE submitted its financing agreement to the Committee ⁴ for its approval. That statute requires the Committee to approve the form of all financing contracts. The Committee has refused to approve the master lease and trust agreements. DOE petitions for a writ of mandamus to require the Committee to approve the form of the agreements.

I

Article 4, section 4 of the state constitution gives this court original jurisdiction in mandamus as to all state officers. That jurisdiction is, however, nonexclusive and discretionary. Holt v. Morris, 84 Wash.2d 841, 845-46, 529 P.2d 1081 (1974). Therefore, the first question we must address is whether it is appropriate for us to exercise our jurisdiction.

Whether this court will exercise its jurisdiction depends on the nature of the interests involved. Tacoma v. O'Brien, 85 Wash.2d 266, 268, 534 P.2d 114 (1975). Where, as here, the issues involve the constitutionality of a statute and matters relating to the expenditure of public funds, it is appropriate for us to exercise our original jurisdiction. O'Brien, 85 Wash.2d at 268, 534 P.2d 114.

The next question we address is whether a writ of mandamus is the appropriate remedy in this case. A writ of mandamus will not issue where the act to be performed is a discretionary act. Peterson v. Department of Ecology, 92

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Wash.2d 306, 314, 596 P.2d 285 (1979). The writ is only appropriate where a state officer fails to perform "an act which the law especially enjoins as a duty resulting from an office". RCW 7.16.160. DOE contends that the Committee, in failing to approve the form of the lease agreement, failed to perform an act required by RCW 39.94.040(1). That statute, in pertinent part, provides:

Except as provided in RCW 28B.10.022, the state finance committee shall approve the form of all financing contracts ...

(Italics ours). ⁵ The use of the word "shall" in a statute generally imposes a mandatory duty. Spokane Cy. ex rel. Sullivan v. Glover, 2 Wash.2d 162, 169, 97 P.2d 628 (1940). While there are circumstances where "shall" is interpreted as not imposing a mandatory duty, ⁶ counsel for the [804 P.2d 1244] Committee admits that the duty to approve the form of the agreement is mandatory. Therefore all the parties agree that a writ of mandamus is the appropriate remedy. We turn then to the question of whether a writ will issue in this case.

II

The Committee's sole reason for refusing to approve the form of DOE's financing contract is that the Committee believes the scheme violates the debt limitation provision of article 8, section 1 of the state constitution. Article 8, section 1(b) provides:

The aggregate debt contracted by the state shall not exceed that amount for which payments of principal and interest in any fiscal year would require the state to expend more than nine percent of the arithmetic mean of its general state revenues for the three immediately preceding fiscal years as certified by the treasurer.

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Whether the legislatively authorized DOE financing plan violates that debt limitation ⁷ provision depends upon whether the plan constitutes "debt" within the meaning of article 8.

As a preliminary matter, we note that the Legislature's clear intent is that this financing plan does not amount to debt within the meaning of article 8. RCW 39.94.030(4) states:

Financing contracts ... entered into under the limitations set forth in this chapter shall not constitute a debt or the contracting of indebtedness under ... any ... law limiting debt of the state. It is the intent of the legislature that such contracts also shall not constitute a debt or the contracting of indebtedness under Article VIII, section 1 of the state Constitution.... It is the intent of the legislature that [certificates of participation] also shall not constitute a debt or the contracting of indebtedness under Article VIII, section 1 of the state Constitution if payment of the certificates is conditioned upon payment by the state under the financing contract ...

In questioning the validity of the DOE financing plan, the Committee is really challenging the constitutionality of RCW 39.94's declaration that the plan is not debt. That statute was duly enacted by the Legislature pursuant to its constitutional authority to enact any law not expressly or inferentially prohibited by the state or federal constitutions. See Union High Sch. Dist. 1 v. Taxpayers of Union High Sch. Dist. 1, 26 Wash.2d 1, 7, 172 P.2d 591 (1946). As such, the statute is presumed to be constitutional, and the challenging party has the burden of establishing beyond a reasonable doubt that the statute is unconstitutional. Sator v. Department of Rev., 89 Wash.2d 338, 346, 572 P.2d 1094 (1977). The Committee, in essence, argues that the debt limitation provision of article 8 prohibits the Legislature from enacting RCW 39.94. In so doing the Committee asks us to ignore the clear legislative intent and the specific

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determination by the Legislature that such financing contracts do not constitute debt. The Committee asks us to declare RCW 39.94 unconstitutional. This we cannot...