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IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON
ELLIOTT BAY MARINA, Appellant,

v. CITY OF SEATTLE, a municipal corporation, Respondent. and STATE OF WASHINGTON and KING COUNTY,1 Public Interested Parties ) FILED: October 27. 2014 Spearman, C.J. — Elliott Bay Marina (EBM) appeals the trial court's summary 

### judgmentdismissal of its claims againstthe City ofSeattle (the City). We reject EBM's argumentthat, as applied to EBM, the system rate charge assessed against Citywater customers is an unconstitutional tax and not a regulatory fee under Covell v. City of Seattle, 127 Wn.2d 874, 905 P.2d 324 (1995). We also conclude the doctrine of 

### equitable estoppel precludes EBM's challenge to the fee. We affirm.
FACTS 

### In 1958, KingCounty voters approved the creation ofthe Municipality of 

### MetropolitanSeattle (Metro) to address significantpollution in LakeWashington caused, No. 70453-2-1 DIVISION ONE

UNPUBLISHED OPINION

Neitherthe State ofWashington nor King County is a party to this appeal.No. 70453-3-1/2 

### in part, by the dumping of raw sewage into the lake.2 Pursuantto this mandate, Metro laid out a comprehensive system forthe interception, conveyance and treatment of the 

### region's sewage. InJanuary 1961, the Cityand Metroentered into an "Agreementfor Sewage Disposal" (Agreement). Clerk's Papers (CP) at 134-155. 

### The Agreement contained a number of recitals. Among them was the recognition that the public health, welfare and safety ofthe residents ofthe City and the County 

### "require[d] the elimination of existing sources ofwater pollution and the preservation of the fresh and saltwater resources ofthe area" and that meeting this goal required 

### "certain major sewage disposal works be constructed and operated and thatthe cities and special districts within the metropolitan area dispose of their sewage inaccordance with a comprehensive plan forthe metropolitan area." CP at 134, 248. 

### Under the Agreement, the Cityagreed to deliver to Metro all of the sewage the 

### City collected in its local system, and Metro agreed to treat and dispose of the City's sewage. The Agreement also provided that Metro acquire ownership of portions of the 

### City's existing sewage system, including severaltrunk lines and otherfacilities, while the 

### City retained ownership ofthe majority ofits system andmaintained responsibilityfor providing water to itsresidents. The City also agreed to pay Metro fortreatment services according to a formulabased on the City's residential and commercial customers' water consumption, Metroagreed that itwould notaccept sewage directly fromanyone located within the city ofSeattle without the City's writtenconsent.

2In 1990 the structure ofthe Metro Council was found unconstitutional. See Cunningham v. Municipality ofMetroploitan Seattle. 751 F.Supp 885 (W.D. Wash. 1990) and 751 F.Supp 899 (W.D. Wash 1990). In 1994, King County (County), undertheauthority ofRCW 36.56.010, assumed therights, 

### powers, functions, andobligations ofMetro. Hereinafterwe use"County" and"Metro" interchangeably.No. 70453-3-1/3 The City's water customers, including EBM, pay a single rate to the Citythat

covers the combined costs ofthe City and County sewage services. The charge is based on the measured volume ofwater consumed on the premises, i.e., the 

### "wastewatervolume charge." SMC 21.28.040A.3 The wastewatervolume charge is the 

### sum of two components, the "treatment rate,"4 and the "system rate."5 The treatment rate is the amount paid to the County for treatment services and is the larger ofthe two components. The system rate covers costs associated with operating the City's wastewater utility including, among otherthings, taxes, administrative costs, customer service, meter reading, billing, investments intechnology, training, inspections and enforcement ofthe Side Sewer Code.6jd. SMC 21.28.090B specifically provides as to commercial customers that discharge ofwastewater "to points otherthan the City sewer 

### system shall not be causeforadjustment or reduction of the wastewatercharge or rate." In 1991, EBM negotiated withthe City to open a privately owned, public marina 

### at the base of Magnolia Bluff. As a part of the negotiations, EBM agreed to retrofitthe 

### sewage lines then serving the area, which had been wroughtwith problems.

3SMC 21.28.040A provides in pertinent part: There is hereby imposed upon all premises forwhich Seattle PublicUtilities provides wastewater services and on whichwater is consumed a wastewater volume charge forwastewater services. The wastewatervolume charge shall be calculated inaccordance with this SMC Chapter 21.28 and shall be based on the measured volume ofwater from all sources consumed on the premises
.... 4The treatment rate is "the rate required to pay the wastewater share of'treatmentcost' which is the cost ofwastewatertreatment, interception and disposal services and any associated costs required to meet Drainageand Wastewater Fundfinancial policies," or the amount required to compensate Metro. SMC21.28.040.B.1. 5The system rate is "the raterequired to pay the cost ofcarrying anddischarging all wastewater and anywastewaterfunded-share ofstormwaterintotheCity seweragesystem, as presently maintained and operated and as may be added to, improved and extended." SMC 21.28.040B.2. 6See, SMC ch. 21.16.No. 70453-3-1/4 

### Specifically, EBM agreed to relocate the SouthMagnolia trunk line—a large sewage line owned byMetro, which transports waste to Metro's West Pointtreatmentfacility—away from the base of the Magnolia Bluffand throughEBM's property. EBM also agreed to add approximately thirty feet oflandfill along the base of the Magnolia Bluff. These 

### combined effortswould have the effect ofstabilizing Magnolia Bluff, which was prone to landslides, and protecting the South Magnolia trunk linefrom breakage.7 Also as a part ofthese negotiations, the Citygranted EBM permission to connect itswastewater system directly to the new South Magnolia trunk line. As a result, all of the EBM's wastewater discharges into the Metro trunk line, where it is then transferred 

### directly to Metro's West Point treatmentfacility. None of EBM's wastewaterenters the City's local sewage lines. 

### Although EBMdoes not discharge waste intothe City's sewage lines, ithas 

### utilizedthe City's sewage-related services inotherways. Prior to EBM connecting to the system, the Cityreviewed EBM's sewer plan and facilitated EBM's connection by controlling flows at its pump station. And, as one ofthe City's commercial customers, under SMC 21.28.090A, EBM has purchased and installed submeters to reduce its wastewater charges by deducting the quantities of metered waterthat are delivered to boats and otherwatercraft and do not enterthe sewer system. The City's wastewater customer service representatives worked with EBM to install appropriate submeters and routinely visit EBM's facilities to read the meters. EBM is now served by an array of

7The original South Magnolia trunk line was located at the base of an active "rotational block" landslide on Magnolia Bluff. Priorto remediation by EBM, landslides caused line breakages in 1973, 1974, three times in 1982, and twice in 1983, each time spilling raw sewage into Elliott Bay. The original trunk line was also difficult to maintain due to beach access and tidal restrictions.No. 70453-3-1/5 about a dozen submeters, each ofwhich requires the City's staffto make monthly 

### readings.8 Beginning in 2009, the billingstatementthe City sentto its customers, including EBM, showed a breakdown ofthe wastewater volume charge into is two components, the treatment rate and the system rate. Priorto that, the billing statement showed only 

### the wastewater volume charge. In2012, EBM filed a complaint againstthe City for declaratoryjudgment and injunctive relief. Itclaimed that, as applied to EBM,the 

### system rate is an unconstitutional tax. The Citydenied the allegation. The parties filed cross-motions for summaryjudgment. The trial court granted the City's motion. EBM appeals. DISCUSSION Standard of Review 

### This court reviews summaryjudgmentde novo, engaging inthe same inquiryas the trial court. Hiqhline Sch. Dist. No. 401, King County v. Port ofSeattle, 87 Wn.2d 6, 

### 15, 548 P.2d 1085 (1976). Summaryjudgment is proper only ifthere is no genuine 

### issue as to any material fact and the moving party isentitled to judgment as a matter of law. Bostain v. Food Express, 159 Wn.2d 700, 708,153 P.3d 846 (2007). Facts and 

### reasonable inferences therefrom are viewed mostfavorably to the nonmoving party. Id. 

### Summary judgment is properifreasonable mindscould reach but one conclusion from the evidence presented. Id.

8EBM was required to purchase the submeters and pay a surcharge to theCity fortheinitial review, inspections, and billing initiation.No. 70453-3-1/6 Covell Analysis A city has broad powerto impose a regulatory fee, but imposition of a tax must be authorized by statute and our constitution. Lane v. City of Seattle, 164 Wn.2d 875, 882, 194 P.3d 977 (2008) (citing Okeson v. City of Seattle, 150 Wn.2d 540, 550, 78 P.3d 1279 (2003)). Indetermining whether a charge is an unconstitutional tax or a valid regulatory fee, Washington courts apply the three-parttest setforth in Covell, 127 Wn.2d 874. First, we considerwhetherthe primary purpose ofthe charge is to collect

revenue to finance broad-based public improvements or, instead, a fee to "regulate" the
use of a particular service provided or burden imposed. Arborwood Idaho, L.L.C. v. City of Kennewick, 151 Wn.2d 359, 371, 89 P.3d 217 (2004). Ifthe former, the charge is a tax. Ifthe latter, the charge may be a permissible regulatory tool. Id. Second, we determine whether the money raised is allocated only to the authorized regulatory 

### purpose. Third, we ascertain whether a direct relationship exists between the rate 

### charged and either a service received bythe fee payers or a burden to which they contribute. Covell, 127 Wn. 2d at 879; Lane, 164 Wn.2d at 882; Samis Land Co. v. City of Soap Lake, 143 Wn.2d 798, 806, 23 P.3d 477 (2001). 

### The parties dispute whether, under Covell, the system rate is a tax or a 

### regulatory fee. The dispute hinges on EBM'sassertion that the City and the County maintain two separate and independent sewage systems based on their separate 

### ownership of the sewage system components. Because it is undisputed that EBM connects directly to a sewer line owned and operated by the County, EBM contends 

### that paying the system rate requires itto fund operation of the City'ssewer system, from which itneither benefits nor burdens. Thus, according to EBM, the system rate is a tax.No. 70453-3-1/7 

### The Citydisputes EBM's assertion that the Cityand the County operate separate sewage systems. Itargues that while the Cityand the County own and operate different parts ofthe sewage system, the system itself is an integrated whole in which neither part could function without the other. Thus, according to the City, it is immaterial whether EBM connects to a City line or directly to a County line because ineither case, EBMbenefits from and burdens the system as a whole. Inaddition, the City points to SMC 21.28.090B, which specifically provides that connection to a point otherthan the City sewer line "shall not be cause for adjustment or reduction ofthe wastewater charge

or rate." We think it plain thatthe sewage system operated by the City and the County forms an integrated whole, regardless that separate parts are owned by each entity. As the City notes, neitherthe City nor the County alone can serve the goals stated inthe 1961 Agreement. The Agreement contemplates a single comprehensive system that includes both City and County-owned facilities. Although the County largely owns the wastewatertreatmentfacilities and the largertrunk lines, while the City owns the facilities that gatherthe sewage and wastewater, as the City points out, neither part could function without the other and each partwould be useless without the other. By any measure, the two parts operate as a single entity. 

### When the wastewater system is viewed as a whole, it is evidentthat EBM's claim 

### thatthe system rate is a tax fails. EBM argues the system rate is a tax because itdoes not pass Covell's "primary purpose" test. Itargues the primary purpose ofthe system rate is to raise revenue to finance the City's sewer system and that itdoes nothing toNo. 70453-3-1/8 regulate users not directly connected to City-owned pipes. The argument is without
merit. Whether a charge raises revenue is not dispositive ofwhether it is a tax or a fee because both taxes and fees raise revenue. Storedahl Properties. LLC v. Clark County. 143 Wn. App. 489, 501, 178 P.3d 377 (2008). The fundamental consideration is the purpose for which the money is raised. While a tax raises revenue for the general public welfare, a fee raises money to pay for or regulate a service that those who pay will 

### enjoy, or a burden that those who pay have created, jd. Here, because the sewage system is an integrated, comprehensive system, itdoes not matterwhether EBM connects to a City or County owned line. Ineither case, EBM burdens the system as a whole. Inaddition, EBMdoes not dispute that itbenefits from a number ofother 

### services the Cityprovides, such as, water service, meter reading, billing and customer service, all ofwhich have associated administrative costs. The system rate also serves to regulate these uses ofthe system. 

### The second Covell factor requires that regulatory fees be "used to regulate the 

### entity oractivity being assessed." (Emphasis added). Covell, 127 Wn.2d at 886; Samis, 143 Wn.2d at 810. EBM argues that because it is not connected to a Cityowned sewer 

### line, the system rate componentof the wastewatervolume charge does not serve to 

### regulate the disposal of the sewage itcreates. We disagree. As explained above, because EBM discharges sewage into a single, integrated sewage system and utilizes services provided bythe City, the waste watervolume charge, including the system rate, serves to regulate this activity.No. 70453-3-1/9 

### The third Covellfactor asks whether a direct relationship exists between the rate charged and either a service received by the fee payers or a burden to which they 

### contribute. Covell. 127 Wn.2d at 879. Acharge may be deemed a regulatory fee even though the charge is not individualized according to the benefit accruing to each fee payer or the burden produced by the fee payer. Id. "[A]s long as a direct relationship is 

### present, 'only a practical basis forthe rates is required, not mathematical precision.'" Samis Land Co.. 143 Wn.2d at 811 (quoting Teter v. Clark County. 104 Wn.2d 227, 238, 704 P.2d 477 (1985)). Here, there is a direct relationship between the benefit received and burden created by EBM. Nothing more is required. It is undisputed that EBM contributes wastewaterto the sewage system. In addition, EBM has availed itself ofseveral services ancillary to sewage and wastewater disposal, which are provided by 

### the City to its customers and are funded bythe system rate.9 Forexample, the City's employees reviewed EBM's sewer plan prior to its remediation ofthe South Magnolia trunk line and facilitated EBM's connection to the South Magnolia trunk line by controlling flows at the pump station. EBM also worked with the City's customer service representatives to install submeters, which are routinely visited by the City's field employees. EBM also benefits from the City's billing service. EBM minimizes its use ofthe available services from the City. EBM maintains that this use ofservices does not constitute a benefit or burden because EBM was required to pay a surcharge to the City for initial review, inspection, and billing initiation. 

### Italso points out thatthe authority to install submeters is based on the original 1961

9The City did not brief this argument, but the record supports it and the Cityraised the issue at oral argument. In itsbriefing and at oral argument, EBM disputes the proposition that its use of the City's services detailed in this section constitutes a "benefit" within the meaning of Covell.No. 70453-3-1/10 

### Agreement and SMC 21.28.090.A.1,10and that EBM was required to purchase the submeters. But, the source of authority to install submeters and the fact that their cost
was passed along to EBM does not diminish the fact that EBM solicited City employees to facilitate the installation and service ofthose submeters. Furthermore, the extent to which EBM makes use ofthese available services is immaterial. It is not necessary that the fee be adjusted according to each payer's individualized circumstance. Hillis Homes

v. PUD, 105 Wn.2d 288, 301, 714 P.2d 1163 (1986). "Although the charges were not individualized according to the benefits accruing to each specific customer, this was not required." (Footnote omitted). EBM relies primarily on Samis Land Co., 143 Wn.2d 798. Inthat case, the City of Soap Lake enacted an ordinance that imposed a flat-rate $60 annual "standby" charge
on any "'vacant, unimproved land which shall abut a line providing water service or
sewer service but have no connection thereto.'" jd. at 802. Samis owned such a piece of 

### land and for years paid the annual charge. But in 1996, it filed suit seeking, among other 

### things, a refund ofthe charges paid, alleging thatthe charge was an unconstitutional property tax. 

### The Supreme Court agreed, concluding the charge failed the Covell test. As to 

### the first factor, Soap Lake conceded the "'standby charge makes no attemptto regulate

10 SMC 21.28.090 provides in relevant part: A. It is the intent of this section to charge commercial customers for waterthat should enterthe sewer system. Wastewatercharges shall be based on the metered water delivered to the premises except as noted below: 1. Water metered exclusively for fire service, sprinkling, irrigation or delivery ofwaterto ships shall not be subjectto any wastewatercharge or rate.

10No. 70453-3-1/11 

### the use ofwateror sewer services'" and that the "'primarypurpose of the ... standby charge is to generate revenues.'" ]a\ at 807-08. As to the second factor, Soap Lake initially admitted that "'[t]hemoney collected through the standby charge is not allocated exclusively to a regulatory purpose.'" ]d at 810. Although Soap Lake later tried to retract 

### that admission, the court found "the onlyentities being assessed the charge inquestion
are properties subjectto no identifiable utility-related 'regulatory activity.'" ]d. As to the 

### third factor, the court noted that "the properties at issue here by definition have no relationship to the City's water service" and because "the lands at issue are uninhabited properties that generate no sewage ofany kind [they]... do not otherwise burden the 

### City's seweror water systems." Id. at 813. Inaddition, Soap Lake conceded that "'[liabilityfor the standby charge does not arise from [Samis'] use of a city service.'" ]d. EBM argues it is similarly situated to the property owner in Samis because it is unconnected to a sewer line owned by the City,just as Samis was unconnected to Soap Lake's water system. But the similarity ends there and as we have explained, inthe context ofthis case, that similarity is immaterial. In Samis itwas virtually undisputed that, not only was Samis unconnected to the water system, the contested charge was unrelated to any activity in which the property ownerwas engaged. Here, it is undisputed that EBM burdens the sewer system. The issue is whether there are two separate systems or a single, comprehensive system. Because we conclude the latter, itdoes not matterthat EBM directly connects to a County owned sewer line. Moreover, EBM does not contend that itdoes not utilize services supported by the system rate, it only disputes the amount and extent ofthat use. But as we have stated, the City is not required to individualize the fee charged according to the level of use or the specific

11No. 70453-3-1/12 

### benefits accruing to a particular payer. Hillis Homes. 105 Wn.2d at 301. We conclude the system rate is a permissible regulatory fee. Equitable Estoppel 

### The Cityalso argues that EBM should be equitably estopped from claiming it should pay a reduced rate based on the fact that itconnects to a County owned sewer line. The elements ofequitable estoppel are: 1) an admission, statement or act 

### inconsistentwith a claim afterwards asserted; 2) action by another inreasonable 

### reliance upon that act, statement or admission; and 3) injury to the relying party from allowing the first party to contradict or repudiate the prior act, statement or admission. Lvbbert v. Grant County. 141 Wn.2d 29, 35, 1 P.3d 1124 (2000). The proponent must prove each element by clear, cogent and convincing evidence, id., citing Berschauer/Phillips Const. Co. v. Seattle Sch. Dist. No. 1. 124Wn.2d 816, 831, 881 P.2d 986 (1994). The City contends the undisputed evidence satisfies its burden of proofas to each element. The City points out that SMC 21.28.090B was in effectwhen itauthorized EBM to connect to the County owned line. That ordinance, which is still in effect, provided that "[d]irect discharge ofwastewater...to points otherthan the City sewer system shall not be cause for adjustment or reduction ofthe wastewater charge or rate." The City claims that when EBM sought and was granted permission to connectto a County-owned line, EBMwas aware ofthe ordinance, but made no claim that itwas entitled to any adjustment or reduction based on its discharge into otherthan a City owned line. The City contends it relied on EBM's failure to make such a claim when it granted permission to connectto the County-owned line and, but for EBM's silence, it

12No. 70453-3-1/13 

### would not have so agreed. Lastly, the Cityclaims that itwill suffer a loss ofrevenue if the reduction is allowed. 

### EBMdoes not contestthe City's assertions. Instead, EBM argues that equitable estoppel fails as a defense to its lawsuit for two reasons. First, EBMpoints out that because this action was broughtto recover illegaltaxes it is treated as action under an 

### impliedcontract. Robinson v. Seattle. 119 Wn.2d 34, 83-84, 830 P.2d 318 (1992) (suits seeking tax refunds arise upon an impliedcontract because they "'are actions arising out of implied liabilities to repay money unlawfully received . . . .'" (quoting Hart v. Clark Cy,, 52 Wn. App. 113, 115-16, 758 P.2d 515 (1988)). Thus, EBMargues equitable estoppel is not available as a defense because the implied contract at issue is an illegal
one. Vedderv. Spellman. 78 Wn.2d 834, 837, 480 P.2d 207 (1971). EBM also argues that even ifequitable estoppel were available as a defense, the City cannot establish 

### that EBMmade an inconsistent admission, statement, or act because "payment under protest" is not required for a refund ofan illegal tax. Carrillo v. City ofOcean Shores. 122 Wn. App. 592, 610-12, 94 P.3d 961 (2004). EBM's first argument fails because the implied contract theory upon which it relies requires some liability on the part ofthe City "to repay money unlawfully received." Robinson, 119 Wn.2d at 84. The uncontested evidence is to the contrary. It would have been lawful for the City to refuse permission for EBM to connect with the County-owned line. Inthat event, it seems apparent that EBM would have been required to connect to
a City-owned line and lawfully required to pay the full amount ofthe wastewater volume charge, including the system rate. Instead, the City permitted EBM to connectto the County owned line based on the understanding that EBM would not seek a reduction or

13No. 70453-3-1/14 

### adjustment inthe full amount of the wastewatervolume charge. Because the City could have lawfully sought the full amount in the firstinstance, there is nothing unlawfulabout receiving itpursuant to its implied contractwith EBM. EBM's second argument, that the City cannot prove an inconsistent admission statement or act, also fails. EBM's reliance on Carrillo is misplaced. In Carrillo, the City 

### ofOcean Shores enacted two ordinances which imposed a charge for undeveloped lots that were unconnected to the City's water or sewer lines. Because the lots were unconnected, the Carrillo court concluded that the charges served no regulatory purpose and were infact an unconstitutional tax. id. at 608. The City argued thatthe unlawful tax money paid by the property owners was non-refundable based on, among other reasons, the doctrine ofequitable estoppel. The Carrillo court rejected the argument. Itheld that payment under protest of a tax is not required for a refund of an illegal tax, unless required by statute, id. at 611. Because the ordinances in question did not require payment to be made under protest to preserve objection, "the owners' payment ofthe charge was not inconsistentwith their current claim that the charge itself is invalid." Therefore the City was unable to prove one ofthe elements ofequitable estoppel. Carrillo is of no help to EBM because, unlike the plaintiffthere, EBM did not simply pay an alleged illegal tax without protest. Rather EBM sought and obtained permission from the City to do something which itwas not otherwise entitled to do: connect directly to a County-owned sewer line. EBM does not dispute thatthe City's evidence establishes each element of equitable estoppel by clear, cogent and convincing evidence; we are likewise satisfied that itdoes. EBM was aware of and did not contest the ordinance that precluded a

14No. 70453-3-1/15 

### reduction or adjustment inthe wastewatervolume charge. The current action for a reduction is inconsistent with EBM's silence at the time the request was made and 

### granted.11 The Cityreasonably relied on EBM's silence because it would not have otherwise granted EBM's request. And allowing EBM to proceed withthe action at this juncture would cause the City financial injury. We conclude that underthe Covell test, the system rate component ofthe 

### wastewatervolume charge is a permissible regulatory fee and that, inany event, EBM is equitably estopped from challenging the fee. Affirmed. 

# V)f^f^^C5,

WE CONCUR: 

# yowk,^

11 Estoppel may ariseundercertain circumstances from silenceorinaction as well as from words or actions. Board ofRegents v. Seattle, 108 Wn.2d 545, 741 P.2d 11 (1987). Silence is an inconsistent 

### actfor purposes ofestoppel, when there isknowledge ofthefacts andwhen honesty andfairdealing demand thattheparty asserting aright speak.Jd at553-54, citing Huffv. Northern Pac.Rv. Co., 38 Wn.2d 103, 114-15, 228 P.2d 121 (1951) and 28Am. Jur. 2d Estoppel and Waiver$ 53. 15