MUNICIPALITY OF METROPOLITAN SEATTLE, ET AL, Petitioners, v. ROBERT S. O‘BRIEN, as Treasurer of State, Respondent.
No. 43981
En Banc.
January 9, 1976
86 Wn.2d 339
The judgment is affirmed.
FINLEY, HUNTER, HAMILTON, WRIGHT, UTTER, BRACHTENBACH, and HOROWITZ, JJ., and RYAN, J. Pro Tem., concur.
James R. Ellis, David L. Beller, Preston, Thorgrimson, Ellis, Holman & Fletcher, Robert R. Hamilton, and Richard F. Wrenn, for petitioners.
Gordon L. Walgren and James K. Sells on behalf of City of Bremerton, Allen J. Hendricks on behalf of City of Everett, J. Gaylord Riach on behalf of City of Lynnwood, William F. Hennessey on behalf of City of Mountlake Terrace, Ernest L. Meyer on behalf of City of Olympia, Jerry F. King on behalf of City of Vancouver, and Fred H. Andrews on behalf of City of Yakima, amici curiae.
BRACHTENBACH, J.- This is an original petition in the Supreme Court seeking a writ of mandamus to require the respondent State Treasurer to remit to petitioners certain tax proceeds to be used for public transportation purposes. The writ shall issue.
The petitioners are the Municipality of Metropolitan Seattle (hereinafter referred to as Metro), the Cities of Spokane and Tacoma. Also joining as petitioners are the holders of bonds issued by Metro. Counsel for numerous other
The fundamental question is whether the Treasurer must remit to petitioners and others certain motor vehicle excise tax funds (described in more detail later) without a specific legislative appropriation. Four issues are involved in the resolution of this matter.
- Are the subject funds governed by
Const. art. 8, § 4 (amendment 11) ,2 i.e., are they state taxes payable only upon appropriation? - Does the 1975 appropriation act which diverted most of the subject funds to another purpose violate
Const. art 2, § 37 ,3 as to the subject funds? - Does the 1975 appropriation act violate
Const. art. 2, § 19 ,4 as to the subject funds? - Does the failure of the State to remit the subject funds to Metro constitute an unconstitutional impairment of the contract between Metro and its bondholders?
Some factual background and rather detailed and complex legislative history are necessary to a consideration and resolution of the precise issues confronting the court. We start with the fact that a decade ago the legislature ac
We further find and declare that the maintenance and operation of an adequate public transportation system is an absolute necessity and is essential to the economic, industrial and cultural growth, development and prosperity of a municipality and of the state . . . .
Laws of 1965, 1st Ex. Sess., ch. 111, § 1, p. 2049, at 2050. (
The 1965 act authorized municipalities to appropriate their general funds and to levy and collect local business and occupation taxes and certain other excise taxes, commonly referred to as “household taxes,” for municipally operated public transportation systems.
The funds generated from the 1965 taxing authority apparently, however, did not provide sufficient revenues for this “absolute necessity.” To meet the growing need for adequately financed public transportation systems, the 1969 legislature enacted the taxing, collecting and remitting scheme which controls our decision. Subsequently, in 1971, 1973, 1974 and 1975, the legislature made substantial policy changes in its approach to the financing of public transportation,5 but the basic framework of the 1969 act
Before examining the 1969 act, it is essential to set out the general scheme of the state motor vehicle excise tax, for it is a portion of that tax which is involved here. For a number of years the State has levied an annual excise tax on the fair market value of motor vehicles. Each owner of an automobile pays an excise tax equal to 2 percent of the fair market value of his vehicle to license the vehicle.
Speaking generally and summarily, the 1969 act authorized the municipalities to use a portion of this state motor vehicle excise tax solely for the operation and development of public transportation systems. This is not an additional motor vehicle excise tax, but rather is a portion of revenues generated and contained within the statutory 2 percent. To qualify, however, for a share of this tax, the municipality must apply at least an equal dollar amount from its general fund or from revenues generated by local taxing measures.
Now let us examine the structure, scheme and substance of the taxing authority, levy power, collection procedures, remission process and purposes of the 1969 law. These are the words of the legislature:
[A]ny municipality is authorized to levy and collect a special excise tax not exceeding one percent on the fair
market value of every motor vehicle owned by a resident of such municipality . . . .
(Italics ours.)
When remitting license fee receipts . . . . the county auditor shall at the same time remit the special excise taxes collected for the municipality and, subject to the provisions of subsection (2) of
RCW 82.44.150 , the sum so collected and paid over on behalf of the municipality shall be credited against the amount of the tax the auditor would otherwise be required to collect and pay over to the director of motor vehicles . . . .
(Italics ours.)
Distribution of the special excise taxes paid into the general fund on behalf of any municipality shall be made to such municipality as provided in
RCW 82.44.150
(Italics ours.)
All taxes levied and collected under
RCW 35.58.273 shall be credited to a special fund in the treasury of the municipality imposing such tax. Such taxes shall be levied and used solely for the purpose of paying all or any part of the cost of acquiring, constructing, equipping or operating a publicly owned mass transportation system, or contracting for the services thereof, or to pay or secure the payment of all or part of the principal of or interest on any general obligation bonds or revenue bonds issued for public transportation capital purposes
The amount required to remit to a municipality the proceeds of the tax authorized under
RCW 35.58.273 shall be remitted to the municipality levying such tax.
(Italics ours.)
Under these statutes the legislature has directed the municipalities to make a series of local decisions con
[I]t is indisputable that, in establishing such a system [the retirement system for state and municipal employees], the legislature could elect to create a fund for that purpose either (1) by making such fund a state fund to be placed and kept in the state treasury, under the control of the state treasurer and the state auditor, and disbursable only in pursuance of an appropriation as provided by Art. VIII, § 4, of the constitution, or (2) by making the fund, in whole or in part, a special one, of a proprietary nature and designed to meet certain specific objectives, which fund is to be placed in the custody of the state treasurer acting ex officio as a member of the retirement system rather than in his constitutional capacity, and which is to be expended as directed by the legislature without a specific appropriation.
The court distinguished those cases which respondent relies upon in defending this action. We find those distinctions applicable here.
In Yelle, the court acknowledged that the legislature did not expressly declare that the fund involved was not a state fund or that it had to be segregated and set apart. The same is true here. However, the Yelle court examined the act before it in its entirety and found a legislative intent not to create a state fund. With that guideline we return to the 1969 act. We repeat that it is the municipality which is authorized to levy and collect the special excise tax.
Respondent also contends that these funds cannot be special proprietary funds because they are paid into the general fund.
We conclude that the statutory sections in issue do not contemplate the payment of the funds into the state treasury as state funds, rather, the funds should be considered local funds to be held by the State Treasurer in a custodial capacity; hence, no appropriation is required under
Since we hold that under the present statutory scheme these funds must be remitted to the qualifying municipalities, which holding is dispositive, we ordinarily would not reach the petitioners’ contention that the title of chapter 2,
The purposes of this constitutional mandate are threefold: (1) to protect and enlighten the members of the legislature against provisions in bills of which the titles give no intimation; (2) to apprise the people, through such publication of legislative proceedings as is usually made, concerning the subjects of legislation that are being considered; and (3) to prevent hodge-podge or log-rolling legislation. We have declared that when laws are enacted in violation of this constitutional mandate, the courts will not hesitate to declare them void.
The title to the 1975 act declares it to be:
AN ACT Relating to appropriations; amending section 193, chapter 269, Laws of 1975 1st ex. sess. (uncodified); making appropriations; and declaring an emergency.
Section 1 of the act appropriates $65 million for special levy relief to school districts from the general fund, including revenues in the general fund collected from the motor vehicle excise tax imposed pursuant to
It is petitioners’ contention that the title of the act in no manner indicates that the act will radically alter the system of financing public mass transit by preventing the municipalities from receiving the proceeds of locally levied motor vehicle excise taxes. Respondent contends that a holding for petitioners requires the court to invalidate that special levy relief appropriation in its entirety. Such is not the case and we deem it necessary to dispel the spectre of uncertainty raised by respondent‘s position.
Assuming, arguendo, that the title does offend
The rule is that, if a portion of a statute is found to be invalid, the entire statute will not be struck down unless the invalid portion is unseverable and it cannot be reasonably believed that the legislature would have passed the one without the other, or unless the elimination of the invalid part would render the remainder of the act incapable of accomplishing the legislative purpose.
The purpose of the 1975 act was to provide a measure of special levy relief to school districts. It was an appropriation from the general fund, only a portion of which came from the motor vehicle excise tax. We cannot find that the legislature would not have made the same appropriation even if this limited resource was not available to them.6 Elimination of the invalid portion of the act would still leave the remainder of the act capable of accomplishing the legislative purpose of providing special levy relief to school districts.
We need not reach petitioners’ theory that the 1975 act amends existing law in contravention of
Finally, we address the impairment of contract question posed by the holders of Metro bonds. By a stipulated agreed statement of facts, the following facts are controlling. Metro in 1973 issued general obligation bonds in the amount of $14.9 million. Shortly thereafter those bonds were refunded with general obligation refunding bonds, bearing interest at a substantially lower interest rate. These bonds represent the local funding required to begin a capital acquisition and improvement program for the tran
Metro‘s bonds were sold on the basis of representations contained in an Official Statement offering the bonds. The bondholders relied on that Official Statement in negotiations leading to the sale of the bonds. In the Official Statement, Metro pledged that it would levy the 1 percent motor vehicle excise tax and the 0.3 percent retail sales tax7 as authorized by the legislature. The bonds had a last maturity date of June 1, 1981, which coincides with the termination of Metro‘s authority to levy the motor vehicle excise tax.
Revenues from the two sources substantially exceed the requirements for debt service on the bonds. This excess coverage was an important reason for a favorable rating received from municipal bond rating services. The excess coverage was also an important factor in the decision of the bondholders to purchase the bonds. The bonds could not have been sold at the same price and interest rate if the coverage had been significantly less than represented.
The 1969 act contemplated the issuance of bonds based upon a pledge of the motor vehicle excise tax. Further, it provided that so long as such pledge was in effect “[T]he legislature shall not withdraw from the municipality the authority to levy and collect the tax.” (Italics ours.),
The respondent concedes that the legislature is bound to not withdraw the taxing authority or divert the proceeds to some other purpose. However, he contends that failure to appropriate those proceeds does not prevent them from continuing to serve as security for the bonds. The security for the bonds is unimpaired, respondent argues, because the state will remain indebted to Metro for the amounts
The answer to respondent‘s argument is simple. This is not what was promised to the bondholders. Metro pledged to levy and collect the motor vehicle excise tax until all the outstanding bonds had been retired. These anticipated tax revenues would exceed the debt service requirements on the bonds, thereby allowing Metro to carry out its proposed capital improvement program without suffering operating deficits. These matters were important factors in establishing the bond ratings, favorable sales terms and indeed the purchase by the bondholders. It is stipulated that a failure to remit the full 1 percent local motor vehicle excise tax will place Metro in operating financial difficulty and prevent Metro from completing its comprehensive plan.
In short, respondent asks the bondholders to accept an account receivable and an assumption that the state will appropriate funds to cover debt service in lieu of a financially sound operating transit system with the ability to complete its comprehensive plan.
The agreed statement of facts incorporates various exhibits, including affidavits from three municipal bond experts. These affidavits contain statements such as these: “The legislature, by withdrawing the 1 percent motor vehicle excise tax from Metro, has in effect substantially altered the security of the Metro transit bonds.” “The reduction in the security of Metro transit bonds will unquestionably result in a reduction of the value of the bonds.” “[A]ssuming that Metro receives only so much of the 1 percent motor vehicle excise tax as the legislature appropriates each year, and cannot continue with its planned capital improvement program, the value of the bonds would be significantly diminished.” The experts conclude that the bonds will be reduced in value from $30 to $60 per thousand dollars par value, a significant reduction as to a $14.9 million issue. One expert concluded that if the bond rating services reduce the favorable ratings (A and AA) established at the
These undisputed facts bring the attempted legislative diversion of these funds within
One of the tests that a contract has been impaired is, that its value has by legislation been diminished. It is not, by the Constitution, to be impaired at all. This is not a question of degree or manner or cause, but of encroaching in any respect on its obligation, dispensing with any part of its force.
That principle governs this case. Inasmuch as it is stipulated that the value of the bonds will be diminished by a failure of the State Treasurer to remit the proceeds of the local motor vehicle excise tax, the failure to remit the proceeds of that tax constitutes an unconstitutional impairment of the contract between Metro and its bondholders.
A writ of mandamus shall issue requiring the respondent State Treasurer to remit to the qualifying, appropriate municipalities the funds to which they are entitled under existing statutes as held in this opinion.
STAFFORD, C.J., FINLEY, HAMILTON, and UTTER, JJ., and HENRY, J. Pro Tem., concur.
WRIGHT, J. (concurring) - I concur with the result
As to the need for an appropriation before paying money out of the state treasury, I find it my duty to respectfully disagree with the majority. The language of
No moneys shall ever be paid out of the treasury of this state, or any of its funds, or any of the funds under its management, except in pursuance of an appropriation by law; nor unless such payment be made within one calendar month after the end of the next ensuing fiscal biennium, and every such law making a new appropriation, or continuing or reviving an appropriation, shall distinctly specify the sum appropriated, and the object to which it is to be applied, and it shall not be sufficient for such law to refer to any other law to fix such sum.
(Italics mine.)
When the language of a constitutional provision is plain on its face, no construction is necessary or permissible. State ex rel. Evans v. Brotherhood of Friends, 41 Wn.2d 133, 247 P.2d 787 (1952); State ex rel. O‘Connell v. Slavin, 75 Wn.2d 554, 452 P.2d 943 (1969); State ex rel. Swan v. Jones, 47 Wn.2d 718; 289 P.2d 982 (1955); United States v. Sprague, 282 U.S. 716, 75 L. Ed. 640, 51 S. Ct. 220, 71 A.L.R. 1381 (1931).
In this connection, it is also well to keep in mind
In this connection even the majority concedes: “Argua-bly the literal language of the constitution would require a
The constitutional provision being plain, it is likewise plain that an appropriation is required to disburse money from the state treasury, “or any of its funds, or any of the funds under its management.” Any cases to the contrary are directly contrary to the constitution and should be forthwith overruled.
I would grant the writ, but only on the basis of the constitutional prohibition against impairment of the obligation of contracts.
ROSELLINI, J. (dissenting in part) - I cannot agree with the majority that the taxes levied and collected by the municipalities and paid into the state treasury, pursuant to statute, constitute a special “proprietary” fund not subject to the power of appropriation. The municipalities are creatures of the legislature, and their power to levy this tax was derived therefrom. The power of the legislature over political subdivisions is plenary unless restrained by provisions of the constitution. State ex rel. Barlow v. Kinnear, 70 Wn.2d 482, 423 P.2d 937 (1967). Thus the legislature, which conferred the power to levy, collect and use this tax, may take away that power so long as constitutional provisions are not violated.
The taxes collected are not private funds, as were the retirement payments held in trust by the State in the case of State ex rel. State Employees’ Retirement Bd. v. Yelle, 31 Wn.2d 87, 195 P.2d 646 (1948), relied upon by the majority. These taxes are public property, and they are moneys in the state treasury, and therefore subject to the provisions of
In the case of State ex rel. Toll Bridge Authority v. Yelle, 61 Wn.2d 28, 377 P.2d 466 (1962), the legislature had created a special fund, into which the proceeds of an excise tax on motor vehicle fuels were to be paid. These funds were to be used for the payment and servicing of bonds issued to finance the building of a toll bridge. The legislative act in that case served a purpose very similar to that which was served in this case by the legislation which was designed to facilitate the acquisition and operation of public transportation systems. It was there contended that the act in question violated
This court held that the statute in question did not appropriate moneys beyond the biennium but rather dedicated the fund to a specific use, the payment of its contractual obligation to those who should purchase bonds. It was agreed by counsel that each succeeding legislature would be required to enact the necessary appropriation measure, if the bonds were to be serviced.
If the legislation in that case was subject to the provisions of
We are not here called upon to decide whether, in failing to appropriate the funds which it had previously dedicated, the legislature breached a contractual commitment to the bondholders, and I will voice no opinion upon that subject.
Upon the question whether the legislature validly appropriated the funds in question for other uses, I am in agreement with the contention of the petitioners that the appropriations act, to the extent that it altered the use to which the fund was dedicated in
No act shall ever be revised or amended by mere reference to its title, but the act revised or the section amended shall be set forth at full length.
State ex rel. Toll Bridge Authority v. Yelle, 54 Wn.2d 545, 342 P.2d 588 (1959); State ex rel. Trenholm v. Yelle, 174 Wash. 547, 25 P.2d 569 (1933). To that extent the act was of no effect.
If the attempted appropriation was invalid under
I agree with the majority that, insofar as Laws of 1975, 2d Ex. Sess., chs. 2 and 7, appropriated to another use funds of a municipality which had sold bonds to purchasers who relied upon the statutory dedication of the tax proceeds, it impaired the security and therefore the obligation of the contracts entered into between the municipality and the bondholders. The statutory provisions whereby these taxes were to be levied, collected, held and used for the payment of the bond obligations as well as the operation of the transportation systems, was a vital part of the contract and one which the legislature could not constitutionally abrogate by diverting the funds to another purpose. While it is true that the legislature appropriated an amount sufficient
I am not willing to join the majority in its implication that every act of the legislature which indirectly, as well as directly, affects the value of a contract, violates the contract‘s clause. There may be many kinds of legislation which incidentally affect the value of private contracts but which are enacted for a legitimate public purpose within the police power and are not invalid, because of their effect upon contracts. Examples which immediately come to mind are zoning laws and laws enacted for the protection of the environment.
Also, I do not subscribe to the notion, conceivably implied in Ruano v. Spellman, 81 Wn.2d 820, 505 P.2d 447 (1973), and the majority opinion in this case, that a governmental body may not call in its bonds and pay them off according to their terms and thereafter abandon the project for the financing of which they were issued. As the United States Supreme Court indicated in the Quincy case, the State‘s obligation continues only so long as there are bonds outstanding. That question is not before the court in this case, of course, since none of the municipalities seeks to abandon its public transportation system; but I think the court should make it clear that it does not intend to foreclose the question.
A conclusion that the legislature‘s attempt to appropriate the funds in question to another purpose was unconstitutional does not answer the question: Can the legislature be compelled to appropriate them to the purpose to which they were dedicated? If there is authority for the proposition that the court can order the legislature to appropriate money, the petitioners have not cited it, and I should be very much surprised if such authority can be found. The petitioners, I must conclude, however reluctantly, have failed to sustain their burden of showing that the court should order the funds to be paid over to the municipalities.
HUNTER, J., concurs with ROSELLINI, J.