King Cnty. v. King Cnty. Water Districts Nos. 20, 45, 49, 90, 111, 119, 125

• Citation: 453 P.3d 681,194 Wash.2d 830
• Decision Date: 05 December 2019
• Docket Number: No. 96360-6,96360-6
• Court: United States State Supreme Court of Washington
• Parties: KING COUNTY, Appellant, v. KING COUNTY WATER DISTRICTS NOS. 20, 45, 49, 90, 111, 119, 125, Cedar River Water and Sewer District, Coal Creek Utility District, Covington Water District, Fall City Water District, Highline Water District, Lakehaven Water and Sewer District, Midway Sewer District, NE Sammamish Sewer and Water District, Sammamish Plateau Water and Sewer District, Skyway Water and Sewer District, Southwest Suburban Sewer District, Valley View Sewer District, Vashon Sewer District, and Woodinville Water District, Respondents, and Ames Lake Water Association, Dockton Water Association, Foothills Water Association, Sallal Water Association, Tanner Electric Cooperative, and Union Hill Water Association, Intervenor-Respondents.

194 Wash.2d 830

453 P.3d 681

KING COUNTY, Appellant,

v.KING COUNTY WATER DISTRICTS NOS. 20, 45, 49, 90, 111, 119, 125, Cedar River Water and Sewer District, Coal Creek Utility District, Covington Water District, Fall City Water District, Highline Water District, Lakehaven Water and Sewer District, Midway Sewer District, NE Sammamish Sewer and Water District, Sammamish Plateau Water and Sewer District, Skyway Water and Sewer District, Southwest Suburban Sewer District, Valley View Sewer District, Vashon Sewer District, and Woodinville Water District, Respondents,andAmes Lake Water Association, Dockton Water Association, Foothills Water Association, Sallal Water Association, Tanner Electric Cooperative, and Union Hill Water Association, Intervenor-Respondents.

No. 96360-6

Supreme Court of Washington.

Filed December 5, 2019

Oral Argument Date: September 17, 2019

Thomas Mackenzie Brown, Donald C. Woodworth, King County Prosecutor’s Office, 516 3rd Avenue, Room W400, Seattle, WA, 98104-2388, David J. Hackett, King County Administration Building, 500 4th Avenue, Suite 900, Seattle, WA, 98104-2316, Matthew J. Segal, Jessica Anne Skelton, Kymberly Kathryn Evanson, Pacifica Law Group LLP, 1191 2nd Avenue, Suite 2000, Seattle, WA, 98101-3404 for Appellant.

Eric Clayton Frimodt, John William Milne, Mark S. Leen, Inslee Best Doezie & Ryder PS, 10900 NE 4th Street, Suite 1500, Bellevue, WA, 98004-8345, Hugh Davidson Spitzer, Attorney at Law, 5604 16th Avenue NE, Seattle, WA, 98105-2521, Philip Albert Talmadge, Talmadge/Fitzpatrick, 2775 Harbor Avenue SW, Third Floor, Suite C, Seattle, WA, 98126-2138, for Respondents.

Richard E. Jonson, Jonson & Jonson PS, 2701 1st Avenue, Suite 350, Seattle, WA, 98121-1173, David Florian Jurca, Helsell Fetterman LLP, 1001 4th Avenue, Suite 4200, Seattle, WA, 98154-1154, for Intervenor-Respondents.

Donna Lee Bamett, Ryan Crawford Thomas, Perkins Coie LLP, 10885 NE 4th Street, Suite 700, Bellevue, WA, 98004-5579, for Amicus Curiae Puget Sound Energy.

William Colwell Severson, William C. Severson PLLC, 1001 4th Avenue, Suite 4400, Seattle, WA, 98154-1192, for Amicus Curiae Rental Housing Association of Washington.

Neil Henry Robblee, Attorney at Law, P.O. Box 1329, Edmonds, WA, 98020-1329, for Amicus Curiae Shawnee Water Association.

Adam Waldon Gravley, Duncan McGehee Greene, Jenna Rose Mandell-Rice, Van Ness Feldman LLP, 719 2nd Avenue, Suite 1150, Seattle, WA, 98104-1700, for Washington Public Utility Districts Associations.

Joel Cartwright Merkel, Merkel Law Office, 1001 4th Avenue, Suite 4050, Seattle, WA, 98154-1000, for Amicus Curiae Washington Rural Electric Cooperative Association.

Jeremy E. Roller, Denise L. Ashbaugh, Arete Law Group, 1218 3rd Avenue, Suite 2100, Seattle, WA, 98101-3094, for Amicus Curiae Washington State Association of Counties.

Adam Waldon Gravley, Duncan McGehee Greene, Jenna Rose Mandell-Rice, Van Ness Feldman LLP, 719 2nd Avenue, Suite 1150, Seattle, WA, 98104-1700, for Amicus Curiae Washington Water Utilities Council.

GORDON McCLOUD, J.

¶1 King County enacted a first-of-its-kind ordinance that requires electric, gas, water, and sewer utilities to pay for the right to use the county’s rights-of-way, a right known as a franchise. King County refers to its planned charge as "franchise compensation," and the amount charged is based on an estimate of the franchise’s value. If the county and utility cannot agree on an amount, the county will bar the utility from using its rights-of-way.

¶2 This case presents a facial challenge to King County’s authority to charge franchise compensation. A secondary issue is whether water-sewer districts, defendants below, or private utilities, intervenors below, may use a county’s rights-of-way without a franchise from the county. This case is decidedly not about whether any particular utility has an individual right, such as an express easement or a right grounded in an existing contract, to use a particular right-of-way without paying the county. Those issues are best resolved elsewhere, on a case-by-case basis. Instead, this case is about whether King County may charge franchise compensation generally, and if so, whether water-sewer districts or private utilities, on the whole, may avoid that charge by using the county’s rights-of-way without a franchise.

¶3 The superior court ruled that King County lacks the authority to charge franchise compensation. We reverse. We hold that generally, King County may charge franchise compensation. We also hold that water-sewer districts and private utilities have no general right to use King County’s rights-of-way without a franchise.

FACTUAL AND PROCEDURAL BACKGROUND

¶4 King County operates and maintains many miles of county roads. Clerk’s Papers (CP) at 1244; see also RCW 36.75.020 (requiring counties to operate and maintain county roads). These roads are located in rights-of-way, which the county has acquired over time and through various means. CP at 1244-45. The rights-of-way and the roads within them are primarily used for transportation. But they also "provide convenient, continuous corridors for the placement of utilities, including sewer, water, telecommunications, power[,] and gas." CP at 1247. Recognizing this, public and private utilities often enter into franchise agreements to use the county’s rights-of-way. CP at 1247-48; see also RCW 36.55.010 (granting counties discretion to enter into these franchise agreements).

¶5 Historically, King County charged a utility seeking to use a county right-of-way only an administrative fee. CP at 1248. This changed in November 2016, when the King County Council passed Ordinance 18403. CP at 1253-70. Under that ordinance and its accompanying public rule, King County now requires electric, gas, water, and sewer utilities to pay "franchise compensation," which the ordinance equates to an annual rent payment, in exchange for the right to use the county’s rights-of-way. CP at 1254-55, 1260, 1264-65, 1272. This compensation requirement applies not only prospectively to future franchises but also retroactively to "existing franchises that include terms that authorize compensation in return for the right to use the right-of-way." CP at 1264.¹ The county estimated that the ordinance would generate approximately $10 million per year. CP at 288. Before the superior court, King County acknowledged that "no other county currently obtains franchise compensation." Report of Proceedings (July 27, 2018) (RP) at 10.

¶6 The amount of franchise compensation due is subject to negotiation. CP at 1265, 1273. The county first determines an estimate by considering the following relevant factors:

the land value of right-of-way within the applicant’s service area; the approximate amount of area within the right-of-way that will be needed to accommodate the applicant’s use; a reasonable rate of return to King County for the applicant’s use of the right-of-way; the business opportunity made available to the applicant; density of households served; a reasonable annual adjustment; and other factors that are reasonably related to the value of the franchise or the cost to King County of negotiating the franchise.

CP at 1265. Pursuant to Ordinance 18403, the Facilities Management Division of King County adopted Rule RPM 9-2, which establishes the methodology used to estimate franchise compensation. CP at 1265, 1272-76; see also CP at 1231-36 (explaining methodology). The county then provides that estimate to the utility, at which time the utility may counteroffer. CP at 1265, 1273. If the county and the utility cannot agree, then the county will not allow the utility to use the right-of-way. CP at 1260, 1273, 1276.

¶7 After a number of water-sewer districts, which are special purpose local governments distinct from the county, made it known that they would sue, King County sought "a declaratory judgment validating its authority to enact Ordinance 18403 and its accompanying public rule." CP at 2-3. Six consumer-owned private utilities subsequently intervened. CP at 79-83.

¶8 The parties filed cross motions for summary judgment. CP at 88-117, 1029-40, 1192-1216. The water-sewer districts and the private utilities argued that they have a right to use the county’s rights-of-way without paying franchise compensation, that the county lacks the authority to charge franchise compensation, and that the charge is really an unlawful tax. CP at 88-117, 1029-40. King County argued that it has broad statutory authority to charge the utilities franchise compensation and that this authority is well supported by a long line of case law. CP at 1192-216; RP at 8. King County also argued that its status as a home rule county means that it has "powers as broad as the state, except where expressly limited"—and that its powers are not expressly limited here. RP at 9.

¶9 King County Superior Court granted the water-sewer districts’ and the private utilities’ motions and denied King County’s. CP at 2282-83. It reasoned that the county lacked authority to charge any utility, public or private, a fee in the nature of "rent" in exchange for a franchise. Specifically, the superior court stated, in its written order, that King County may "charge utilities for the reasonable administrative costs" of regulating its roads and rights-of-way, but that it "lacks authority to impose ‘franchise compensation’ or ‘rent’ " and "lacks the authority to require the utility defendants to pay, or to agree to pay, ‘franchise compensation’ or ‘rent.’ " CP at 2283. The court explained that "[f]ranchises are contracts which must be negotiated and agreed upon by the parties thereto, and King County may not require the utility defendants to enter into a franchise agreement by accepting King County’s franchise terms." Id.; see also CP at 2298 (oral ruling, incorporated by reference) ("The county ... cannot compel its terms unilaterally on the utilities."). The court also stated that "[w]ater-sewer districts have statutory authority under RCW...