325 P.3d 419
Wash. Ct. App.2014Background
- The Wenatchee city tax on the Chelan County Public Utility District No. 1 (PUD) revenue from its water system raises whether a municipality may tax another municipality’s proprietary activity.
- Algona held that a city cannot tax revenues from a solid waste plant when the activity is governmental in nature, signaling a government-immunity context.
- The PUD argues governmental immunity requires explicit statutory authorization to tax other municipalities; Wenatchee argues RCW 35A.82.020 broadly authorizes such taxation for proprietary activities.
- The trial court held the PUD immune from taxation; the city appeals.
- The court ultimately holds that the taxing authority is broad enough under RCW 35A.82.020 to tax the PUD’s proprietary water-supply activity, and that governmental immunity applies only to governmental (not proprietary) activities, remanding for further proceedings on facts related to possible governmental fire-suppression revenues.
- The decision also clarifies the two-layer express-authorization concept: general grant plus express authorization if taxing governmental functions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does RCW 35A.82.020 authorize a city to tax another municipality’s conduct within its borders? | Wenatchee contends the general grant to tax all business activities covers municipal-on-municipal taxation. | PUD argues immunity requires express statutory authorization for taxing another municipality. | Yes; RCW 35A.82.020 broadly authorizes municipal taxation of another municipality's activity. |
| Is the PUD’s water delivery a governmental or proprietary function for immunity purposes? | PUD asserts activity can be governmental, warranting immunity. | Wenatchee contends the activity is proprietary, not immune. | Proprietary; the PUD’s water delivery is not immune from taxation. |
| Do constitutional home-rule provisions (art. XI, art. VII) limit legislative grants of local tax authority to taxation of municipalities? | PUD argues constitutional provisions limit delegation. | Article XI and VII do not constrain the legislature’s broad delegation. | Cannot be read to restrict the legislature’s broad delegation. |
| Does RCW 54.28.070’s explicit framework for taxing electric utilities constrain the broader B&O authority in RCW 35A.82.020? | RCW 54.28.070 imposes explicit taxation rules for districts, implying narrower authority. | RCW 35A.82.020 remains the governing grant; 54.28.070 is distinct in object and purpose. | No; different objects justify not constraining 35A.82.020 by 54.28.070. |
| Is governmental-immunity for taxation an implied bar that requires express authorization to overcome, per Seattle v. State and Algona? | Immunity applies unless express authorization exists. | Immunity is overcome only with two-layer express authorization when taxing governmental activity. | Immunity applies only to governmental activities; proprietary activities are not immune. |
Key Cases Cited
- King County v. City of Algona, 101 Wn.2d 789 (1984) (held governmental activity immune from B&O tax; governing-immunity principle nuanced by express authorization)
- City of Seattle v. State, 59 Wn.2d 150 (1961) (statutory authority to tax governmental activities; no immunity absent explicit text)
- Citizens for Financially Responsible Gov’t v. City of Spokane, 99 Wn.2d 339 (1983) (general rule: municipalities lack inherent power to tax absent grant; express authorit. inferred from text)
- Hillis Homes, Inc. v. Snohomish County, 97 Wn.2d 804 (1982) (requires express grant of authority for certain taxing schemes; context not municipal-on-municipal taxation)
- Russell v. City of Grandview, 39 Wn.2d 551 (1951) (waters and utilities treated as proprietary functions; taxation treated accordingly)