Peterson v. State
| Decision Date | 16 April 2020 |
| Docket Number | No. 97410-1,97410-1 |
| Citation | 460 P.3d 1080 |
| Court | Washington Supreme Court |
| Parties | Randolph PETERSON, Petitioner, v. STATE of Washington, Department of Revenue, a state agency, Defendant, Port of Benton, a Washington port district, and BNSF Railway Company, Respondents, Jason Mount, James Summey, Peggi Doggett, Jennifer Hartsfield, and Mandi Oukrop, Petitioners. |
Philip Albert Talmadge, Talmadge/Fitzpatrick, 2775 Harbor Ave. Sw, Third Floor Ste. C, Seattle, WA, William Christopher Schroeder, William John Schroeder, Anne Kathleen Schroeder, KSB Litigation, P.S., 510 W. Riverside Ave. Ste. 300, Spokane, WA, for Petitioner.
Rob J. Crichton, Eric Ryan Laliberte, Keller Rohrback L.L.P., 1201 3rd Ave. Ste. 3200, Seattle, WA, David Billetdeaux, Port of Benton, 3250 Port Of Benton Blvd., Richland, WA, Paul J. Lawrence, Gregory J. Wong, Alanna Peterson, Pacifica Law Group LLP, 1191 2nd Ave. Ste. 2000, Seattle, WA, for Respondents.
Andrew Gordon Yates, Timothy David Wackerbarth, Lane Powell PC, Po Box 91302, 1420 5th Ave. Ste. 4200, Seattle, WA, for Other Parties.
¶1 Many delegates to our state constitutional convention were suspicious of corporate influence on government. The constitution those delegates drafted establishes that no municipality may "give any money, or property, or loan its money, or credit to or in aid of any ... corporation, except for the necessary support of the poor and infirm." CONST. art. VIII, § 7.
¶2 More than 70 years ago, two railroad companies helped the United States Atomic Energy Commission build a track to the Hanford Nuclear Reservation in return for the right to use the track without paying rent. After the nuclear reactors at Hanford were decommissioned, the United States transferred nearly 800 acres, including the track at issue, to the Port of Benton (Port), subject to existing agreements and potential reversion to the United States if certain conditions were not met.
¶3 The Port has continued to honor the agreements and operate the railroad. The Port’s decision not to charge rent was challenged by a taxpayer, Randolph Peterson, as an unconstitutional gift of public funds. This challenge was dismissed at summary judgment. On the record before us we do not find a constitutional violation and affirm.
¶4 During the Second World War, the War Department of the United States government used its eminent domain powers to acquire hundreds of square miles near the Columbia River in southeast Washington in order to build the Hanford Nuclear project. Hutchinson v. Port of Benton, 62 Wash.2d 451, 452, 383 P.2d 500 (1963). In 1947, the Atomic Energy Commission and two railroads agreed to build the 5.4 mile railroad spur at issue to provide a second railroad track into the Hanford Nuclear Reservation. This track is now known as the Richland Trackage. BNSF Railway Company and Union Pacific Railroad Company are the successors in interest to the original contracting railroads.
BNSF Ry. Co. v. Tri-City & Olympia R.R. Co., 835 F. Supp. 2d 1056, 1058 (E.D. Wash. 2011). In return for their assistance, the United States government gave the two railroads the right to use the Richland Trackage rent-free. Over the years, the parties modified the agreement in small ways, but throughout, the two railroads had the right to use the Richland Trackage without paying rent, and either the railroads or the United States could terminate the agreement with varying amounts of notice.
¶5 Over the years, some of the land the United States seized during World War II was sold to the Port. Hutchinson, 62 Wash.2d at 452, 383 P.2d 500. In 1998, the United States Department of Energy, the successor to the War Department and the Atomic Energy Commission, concluded that about 800 acres of industrial property, 26 facilities, and 16 miles of railroad track, including the Richland Trackage, near Hanford was surplus property and offered to give it to the Port. At the time, the property was valued at about $5.1 million. The Port and the Department of Energy entered into a detailed indenture1 outlining the conditions of the transfer. The existing agreements with Union Pacific and BNSF railroads were assigned to the Port in the indenture, with some modifications. Under these contracts, either side could cancel the agreement on six months’ notice. Depending on the circumstances, cancellation could trigger the United States’ reversionary interest in the property.2
¶6 Peterson, the plaintiff in this case, is the principal owner of the Tri-City Railroad Company (TRCY). In 2000, the Port leased some of its property, including the Richland Trackage and its interchange with the main line, to TRCY’s predecessor. TRCY operates a railroad, pays a leasehold tax, and maintains a portion of the rails running across the Port’s property. BNSF Ry. Co., 835 F. Supp. 2d at 1060. That same year, the Port directed TRCY to cancel Union Pacific’s right to access the interchange and the leased track. After negotiation, the parties reached an agreement, and Union Pacific continued to use the track and interchange. For some time, TRCY or its predecessors-in-interest charged a per-car fee for access to the Richland Trackage. Id.
¶7 In 2009, BNSF informed TRCY that it would no longer pay for access to the Richland Trackage. Id. In response, TRCY physically blocked BNSF from using the track. Id. Ultimately, a federal court found that BNSF had the right to use the Richland Trackage and enjoined TRCY from preventing access. Id. at 1062-64, 1066.
¶8 In 2016, Peterson, in his capacity as a taxpayer, brought this case against the Port and the Washington State Department of Revenue.3 Peterson alleged that these government agencies were failing to meet their obligations to collect taxes and that allowing the railroads to use the Richland Trackage rent-free violated article VIII, section 7 and article I, section 12 of our state constitution. Most relevantly, Peterson argued that rent-free use of the tracks amounted to an unconstitutional gift of public funds. Later, Peterson submitted an expert declaration that suggested the value of BNSF’s rent-free use of the tracks would be between $2,106,000 and $3,159,000 in 2017. In 2016, the property was valued at roughly $50 million, about $25 million of which appears to have been attributable to the Richland Trackage, its associated land, and its structures. BNSF and Union Pacific Railroad intervened on the Port’s side and five Port district taxpayers intervened on Peterson’s side.
¶9 Peterson and the Port () moved for summary judgment. After the summary judgment hearing, Judge James Dixon concluded that the United States Department of Energy’s 1998 gift transfer of land and improvements to the Port was adequate consideration for BNSF’s rent-free use of the Richland Trackage. The judge granted the Port’s motion, denied Peterson’s, and dismissed Peterson’s claims with prejudice. Peterson initially challenged dismissal on both article VIII, section 7 and article I, section 12 grounds. Br. of Appellants at 2. The Court of Appeals rejected both arguments. Peterson narrowed the issues on review to whether BNSF’s continued rent-free use of the Richland Trackage violates article VIII, section 7.
¶10 This case is here on review of summary judgment. Our review is de novo. Schroeder v. Excelsior Mgmt. Grp., LLC, 177 Wash.2d 94, 104, 297 P.3d 677 (2013) (citing Dreiling v. Jain, 151 Wash.2d 900, 908, 93 P.3d 861 (2004) ). As the challenger, Peterson bears the burden of showing an unconstitutional gift of public funds. King County v. Taxpayers of King County, 133 Wash.2d 584, 597, 949 P.2d 1260 (1997) (quoting Gen. Tel. Co. of Nw. v. City of Bothell, 105 Wash.2d 579, 588, 716 P.2d 879 (1986) ).
¶11 The prohibition on gifts and loans was one of the most hotly debated issues at our state’s constitutional convention. ROBERT F. UTTER & HUGH D. SPITZER, THE WASHINGTON STATE CONSTITUTION 162 (2d ed. 2013). The convention was lobbied heavily, including by some delegates, to allow municipalities to subsidize corporations deemed to be for the public good, especially railroads. Id. Ultimately, the lobby attempt failed, and our constitution prohibits gifts of public funds "except for the necessary support of the poor and infirm," which is not at issue here. CONST . art VIII, § 7.4 By largely prohibiting gifts of public funds, "the framers intended to prevent the harmful ‘effects on the public purse of granting public subsidies to private commercial enterprises, primarily railroads.’ " City of Tacoma v. Taxpayers of Tacoma, 108 Wash.2d 679, 701-02, 743 P.2d 793 (1987) (quoting City of Marysville v. State, 101 Wash.2d 50, 55, 676 P.2d 989 (1984) ). Our founders did not want gifts and loans given to private parties, but "[t]hey were not concerned about the nonspeculative transfer of money from one nonprofit government agency to another." City of Marysville, 101 Wash.2d at 55, 676 P.2d 989.
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BNSF Ry. Co. v. Union Pac. R.R. Co.
...See ECF Nos. 373, 336-1. [21] Peterson v. Dep't of Revenue, 443 P.3d at 823 (Wash. App. 2019), aff'd sub nom. 460 P.3d 1080 (Wash. 2020). [22] Id. [23] See ECF No. 400-1 5-6. [24] ECF No. 400-1 at 6. [25] ECF No. 392 at 3 [26] ECF No. 392-4 at 6. [27] ECF No. 392-8 at 3. [28] ECF No. 392 at......