Okeson v. City of Seattle
| Citation | 150 Wn.2d 540,78 P.3d 1279,150 Wash.2d 540 |
| Decision Date | 13 November 2003 |
| Docket Number | No. 73228-1., No. 73227-2 |
| Court | United States State Supreme Court of Washington |
| Parties | Rud OKESON, Doris Burns, Walter L. Williams, and Arthur T. Lane, individually and on behalf of the class of all persons similarly situated, Appellants, v. CITY OF SEATTLE, Respondent. The City of Seattle, a first-class charter city; The City of Burien, a noncharter code city; The City of Lake Forest Park, a noncharter code city; The City of Sea-Tac, a noncharter code city, Respondents, v. Brian Sonntag, State Auditor; The State of Washington; The City of Shoreline, a noncharter code city; and The City of Tukwila, a noncharter code city, Respondents, Rud Okeson, City Light Department Rate Payer, Appellant Intervenor. |
Helsell Fetterman Martin Todd & Kokanson, David Jurca, Jennifer Divine, Seattle, for appellants.
Seattle City Attorney, William Patton, Asst., Rebecca Cochran Earnest, Asst., Seattle, Christine Gregoire, Atty. Gen., Brian Buchholz, Asst., James Pharris, Asst., Olympia, Michael R. Kenyon, Kenyon Desend PLLC, Issaquah, Ian Sievers, Shoreline, Kenyon Dornay Marshall PLLC, Robert Noe, Issaqua, for respondents.
In 1999, the city of Seattle (hereinafter Seattle) passed Ordinance 119747, transferring the responsibility to pay for streetlights from Seattle's general budget to Seattle City Light (hereinafter City Light) customers in Seattle. After questions were raised as to the legality of the ordinance, Seattle brought a declaratory action to validate the ordinance. The trial court initially ruled against Seattle; however, after the legislature amended the statute regarding municipally owned utilities, the trial court reversed its earlier decision and entered a summary judgment order upholding the ordinance. Appellants sought review with this court claiming that the ordinance imposes a tax in violation of the Washington Constitution. We agree and reverse the trial court.
In 1905, Seattle created City Light as a separate department of Seattle's government. City Light supplies electricity not only to Seattle but to several suburban cities under franchise agreements and ordinances passed by each city. City Light's revenues and expenses are managed by the Light Fund, a special fund used solely for the operation and maintenance of the City Light utility. The Light Fund is maintained separately from Seattle's general funds that are used for Seattle's other purposes.
Prior to 1999, City Light treated Seattle, and the other suburban cities it served, as customers and billed them for electricity consumed for general city purposes, including street lighting. In order to move costs from itself to City Light customers in Seattle, Seattle passed Ordinance 119747 in November 1999. Under the ordinance, costs of Seattle streetlights would be borne by all City Light ratepayers in Seattle through an increase in their light rates.1 Except for streetlights, Seattle otherwise continued to pay for its electricity usage.
In January 2000, the Seattle Rate Advisory Committee (hereinafter Committee), a group appointed by the mayor and city council, sent a letter to Seattle challenging the council's adoption of Ordinance 119747. The Committee then notified the state auditor. After conferring with City Light, the state auditor sought advice from the state attorney general and received an informal memorandum concluding that city street lighting is a public governmental function, the costs of which must be borne by Seattle's general fund, unless the law specifically provides otherwise. Noting that there was no statute calling for payment from another fund, the informal memorandum concluded that the costs of streetlights should be paid out of the general fund, and that shifting streetlight costs to customers violated RCW 43.09.210, the local government accounting statute.2
The state auditor's office and Seattle had several discussions and a meeting in May 2000 regarding the legality of the ordinance, but were unable to reach agreement. In a formal opinion dated January 17, 2001, the attorney general found that "[i]n the absence of express statutory authority, the maintenance and operation of street lights are not a lawful charge against the customers of a city water, sewer, electric, or transportation utility." 2001 Op. Att'y Gen. No. 1, at 1. The formal opinion also noted that the purpose of the charge is to raise revenue because the fees do not regulate street lighting, and the costs for providing it would otherwise come from other city funds. Id. at 5.
Based upon the attorney general's opinion, the state auditor issued a draft audit finding in February 2001, concluding that electric ratepayers in Seattle and the franchise cities were unlawfully subsidizing the general funds of these cities. The state auditor also began to address this streetlight cost interpretation with other cities that had a billing practice similar to the one created by Seattle's ordinance.
Seattle, along with most of City Light's franchise cities, then filed a declaratory action, Seattle v. Sonntag, against the state auditor, the State of Washington, and others, seeking to validate its cost-shifting ordinances and franchise agreements. The State counterclaimed, praying instead that the cost-shifting scheme should be held invalid on numerous grounds, including that it was an unlawful tax and a violation of the local government accounting statute.
Both parties moved for summary judgment on only two issues: (1) Whether cities had authority to shift the costs for maintaining city streetlights to electric utility ratepayers, and (2) whether such charges are taxes that can be imposed only pursuant to express taxing authority, as opposed to electric rates, fees, or other such charges. Rud Okeson, a member of the Committee, filed a motion to intervene in Seattle v. Sonntag to raise several issues not addressed by the parties, including the purported local government accounting statute violations, but the intervention motion was denied.
King County Superior Court Judge Palmer Robinson denied Seattle's motion for summary judgment and granted the defendant State's summary judgment motion, holding that: (1) Seattle and the other plaintiff cities lacked authority to conduct the general governmental function of street lighting as an integral part of their separate and distinct proprietary functions of operating a municipal electric utility, and (2) the cities' imposition on electric utility customers of a rate or other charge for the maintenance and operation of streetlights was an unauthorized tax. Plaintiffs appealed and Okeson sought discretionary review of the denial of his intervention motion.
Thereafter, Okeson and three other class representatives filed a separate class action, Okeson v. Seattle, on behalf of City Light ratepayers seeking declaratory and injunctive relief and refunds of the charges imposed under Ordinance 119747. King County Superior Court Judge Joan DuBuque presided over that action.
While the cases were pending, the legislature in the 2002 legislative session amended RCW 35.92.050, the statute governing a municipality's authority to run an electric utility. Prior to 2002, RCW 35.92.050 discussed electric utilities, but did not specifically mention streetlights so it was unclear whether RCW 35.92.050 allowed a city to incorporate streetlights within an electric utility's general rates. The attorney general could find no cases in the entire country, let alone Washington, dealing with this issue. 2001 Op. Att'y Gen. No. 1, at 2. In practice, however, several other cities that owned their own electric utilities billed ratepayers for the cost of street lighting and this practice had gone unchallenged with cities passing earlier audits by the state auditor. Clerk's Papers (CP) 50, 122.
In 2002, the legislature clarified the ambiguity by inserting a phrase into RCW 35.92.050:
A city or town may also construct, ... maintain and operate ... facilities for the purpose of furnishing the city or town and its inhabitants ... with ... electricity, and other means of power and facilities for lighting, including streetlights as an integral utility service incorporated within general rates, ... with full authority to regulate and control the use, distribution, and price thereof.
The legislature stated that the "purpose of this act is to affirm the authority of cities and towns to operate fire hydrants and streetlights as part of their rate-based water and electric utilities, respectively." Id. § 1. The legislature also stated that "it has been the intent of the legislature that cities and towns, just as water and sewer districts, have the right to operate and maintain streetlights in the same manner as fire hydrants, that is, as a normal part of the electric utility and a normal part of that utility's general rate structure." Id.
Because of the amendment to RCW 35.92.050, Seattle brought a postjudgment motion in the trial court, arguing that Judge Robinson's grounds for invalidating the rate ordinance (lack of authority and illegal tax) were nullified by the new law. The Seattle v. Sonntag postjudgment motions were assigned to Judge DuBuque, who was already presiding over the related class action in Okeson v. Seattle.
In Seattle v. Sonntag, Judge DuBuque granted Seattle's motion to vacate Judge Robinson's original summary judgment order invalidating the 1999 rate ordinance. Judge DuBuque also granted summary judgment to Seattle because of the 2002 legislation. The State, removing itself as an active litigant, argued that the Seattle v. Sonntag appeal should be dismissed because the amendment to RCW 35.92.050 rendered the controversy moot. The State went on to note that it did not concede that the amendment had retroactive effect or that it was sufficient to authorize cities to impose taxes on utility customers. Judge DuBuque then allowed...
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