Public Utility Dist. No. 1 of Snohomish County v. Taxpayers and Ratepayers of Snohomish County

• Decision Date: 07 January 1971
• Docket Number: No. 41579,41579
• Citation: 78 Wn.2d 724,479 P.2d 61
• Court: Washington Supreme Court
• Parties: PUBLIC UTILITY DISTRICT NO. 1 OF SNOHOMISH COUNTY, Respondent, v. TAXPAYERS AND RATEPAYERS OF SNOHOMISH COUNTY, Appellants. The CITY OF SEATTLE, Respondent, v. TAXPAYERS OF the CITY OF SEATTLE, Appellants. The CITY OF TACOMA, Respondent, v. TAXPAYERS OF the CITY OF TACOMA, Appellants. PUBLIC UTILITY DISTRICT NO. 1 OF GRAYS HARBOR COUNTY, Respondent, v. TAXPAYERS OF GRAYS HARBOR COUNTY, Appellants.

Page 724

78 Wn.2d 724

479 P.2d 61

PUBLIC UTILITY DISTRICT NO. 1 OF SNOHOMISH COUNTY, Respondent, v. TAXPAYERS AND RATEPAYERS OF SNOHOMISH COUNTY, Appellants.

The CITY OF SEATTLE, Respondent, v. TAXPAYERS OF the CITY OF SEATTLE, Appellants.

The CITY OF TACOMA, Respondent, v. TAXPAYERS OF the CITY OF TACOMA, Appellants.

PUBLIC UTILITY DISTRICT NO. 1 OF GRAYS HARBOR COUNTY, Respondent, v. TAXPAYERS OF GRAYS HARBOR COUNTY, Appellants.

No. 41579.

Supreme Court of Washington, En Banc.

Jan. 7, 1971.

Anderson, Hunter, Carlson & Dewell, Thomas R. Collins, James P. Hunter, Everett, for appellants.

Williams & Novack, Parker Williams, Edward D. Hansen, Everett, A. L. Newbould, Corp. Counsel, Arthur Lane, Seattle, Marshall McCormick, City Atty., Paul J. Nolan, Asst. City Atty., Tacoma, Parker & Johnson, Omar S. Parker, Hoquiam, Slade Gorton, Atty. Gen., Robert Hauth, Asst. Atty. Gen., Olympia, for respondents.

SHARP, Associate Justice.

Appellants prosecute this appeal from a summary judgment upholding the right of respondent municipal corporations to participate with four privately-owned power companies in the construction, operation and financing of a coal-powered electric generating plant near Centralia.

The agreement ¹ approved by the trial court was negotiated under the authority of RCW 54.44 declaring the public policy of permitting public and regulated private power agencies to participate together in the development of nuclear and other thermal power facilities. The project agreement provides that the municipal corporations are to own 28 per cent of the project and the privately-owned corporations are to own the remaining 72 per cent. The agreement further provides that one of the private companies will construct and operate the facility, as agent of the respective parties, but that the annual operating budget must be approved by 75 per cent of the ownership. Subsequent capital expenditures are to require unanimous ownership approval. Until the year 1982 all power allocated to respondents will be purchased by two agencies of the federal government and revenues derived therefrom will be shared according to ownership interests in the plant. After 1981 each owner will be able to draw out its proportionate share of power generated by the facility.

The most serious challenge to respondents' participation in the project is based upon article 8, section 7 of the state constitution. ² In asserting this challenge, appellants recognize that the agreement in question conforms to the detailed requirements of RCW 54.44 and therefore the challenge is addressed to the constitutionality of the statute itself. The genesis of this provision of our constitution is pertinent to the point in issue.

During the nineteenth century, state and local governments sought to obtain railroad linkage by the extension of public credit and loans for the development of railroad facilities. Typically, the planning of the facilities and the construction was left to the private companies involved. No public control was placed on the use of the public funds, nor were the railroads themselves subject to governmental regulation and control. In many instances this proved to be an improvident practice since, for example, many railroad lines were subsequently abandoned as unprofitable, leaving the local governments without recourse to recover their investments. For a review of this chapter in our nation's history, see Pinsky, State Constitutional Limitations on Public Industrial Financing: An Historical and Economic Approach, 111 U.Pa.L.Rev. 265 (1963); State Constitutional Provisions Prohibiting the Loaning of Credit to Private Enterprise--A Suggested Analysis, 41 U.Colo.L.Rev. 135 (1969). The result was the inclusion in many state constitutions of prohibitions similar to our article 8, section 7. Such prohibitions, however, did not preclude all financial agreements between public and private entities. Only those in which the public agency either (1) gives or lends its money or credit to, or in aid of, a private entity; or (2) directly or indirectly becomes the owner of stocks or bonds of the private entity, were prohibited. Appellant argues that the statute is unconstitutional in both respects.

The joint agreement before us, negotiated in strict conformity with the statute, does not constitute a loan of public money or credit to a private interest. In return for their investments, repondents receive ownership interests commensurate to the size of their investments. Rands v. Clarke County, 79 Wash. 152, 139 P. 1090 (1914). These ownership interests are amply protected by the terms and conditions of the agreement. But appellants argue that the financial participation of these public corporations in the project is 'in aid of' private corporations, for its enables the private owners to obtain additional financing, otherwise unavailable. However, even if the private owners are 'aided' by the respondents' participation, the issue is whether the aid comes in the form of gifts or loans of money or credit. We agree with the the trial court's conclusion that the statute itself negates any such constitutionally prohibited gift or loan.

In carrying out the powers granted in this act, each such city or public utility district shall be severally liable only for its own acts and not jointly or severally liable for the acts, omissions or obligations of others. No money or property supplied by any such city or public utility district for the planning, financing, acquisition, construction, operation or maintenance of any common facility shall be credited or otherwise applied to the account of any other participant therein, nor shall the undivided share of any city or public utility district in any common facility be charged, directly or indirectly, with any debt or obligation of any other participant or be subject to any lien as a result thereof.

RCW 54.44.030.

Respondents are purchasing an ownership interest, and not only is their liability limited to their own acts, but their investment is restricted to an indebtedness proportionate to their individual participation. There is no gift or loan of money or credit before us.

It is next urged that the statute and the joint-ownership agreement authorized thereunder violate that part of Const. art. 8, § 7, which provides that no municipal corporation shall 'become directly or indirectly the owner of any stock in or bonds of any association, company or corporation.' Appellants claim that the agreement constitutes the indirect ownership of stock in a private corporation by a municipal corporation, and the public agency's interest and right of control are essentially the same as a corporate shareholder. But this assertion overlooks the provisions of the agreement itself and the resulting relationship of the parties thereto. The agreement details the terms and conditions governing the construction, ownership, operation and maintenance of the project. Major management decisions are made by all participants, with the public participants having veto power. Furthermore, and significantly, the private participants themselves, are subject to regulation by the Washington Utilities and Transportation Commission. Far from being shareholders, subject to the overriding control of a shareholder majority, the parties hereto are tenants in common with clearly defined and enforceable rights to their respective project interests.

The appellants, nonetheless, contend that this provision not only prohibits ownership of stock in corporations but also any type of joint ownership between public and private corporations. We cannot agree. The state constitution is not a grant, but a limit, on the legislature's lawmaking power. State ex rel. Todd v. Yelle, 7 Wash.2d 443, 110 P.2d 162 (1941); Hoppe v. State, 78 Wash.Dec.2d 153, 469 P.2d 909 (1970). The court is therefore reluctant to find a restriction on the legislature's power unless some limitation is found in the wording of the constitution itself. Article 8, section 7 does not expressly prohibit public municipalities from entering into joint-ownership agreements with private enterprise. The constitutions of several other states have expressly done so. Arizona Const. art. 9, § 7, A.R.S. Colorado Const. art. 11, § 2; Delaware Const. art. 8, § 8, Del.C.Ann. Expressio unius est exclusio alterius. (The express mention of one thing implies the exclusion of the other.)

Finding no restriction in the language employed, can it be said that this constitutional enactment fairly implies a prohibition against such joint ownership agreements. Stated another way: Is this agreement the type of business relationship to which the stock-ownership prohibition was directed?

The prohibitions of the article 8, section 7 were originally directed at the public financing of private industries whose development bore little relationship to the public interest. Since the adoption of Const. art. 8, § 7, the nature of municipal functions has changed drastically. New means for financing public works have been required for municipal corporations to fulfill their responsibilities. See 2 Antieau, Municipal Corporation Law, § 15 A.05, p. 4565 (1969).

In the present case, the public participants gain the direct benefit of a power source to meet their undisputed future needs. Public need, as a primary purpose behind joint projects must, of course, be recognized. See Whelan v. New Jersey Power & Light Co., 45 N.J. 237, 212 A.2d 136 (1965); Miles v. City of Eugene, 252 Or. 528, 451 P.2d 59 (1969). We find the joint agreement to own and construct the project is in conformance with RCW 54.44, and does not violate Const. art. 8, § 7 of the constitution.

Appellants argue also that under State ex rel. PUD No. 1 of Skagit County v. Wylie, 28 Wash.2d 113, 182 P.2d 706 (1947), respondents' participation in arbitrary and capricious, since they seek to satisfy only future power and not present power needs. Appellants do not...