Source: http://courts.mrsc.org/appellate/096wnapp/096wnapp0944.htm
Timestamp: 2019-04-19 01:17:53+00:00

Document:
DAVID NOLTE, ET AL., Respondents, v. THE CITY OF OLYMPIA, Appellant, BUILDING INDUSTRY ASSOCIATION OF WASHINGTON, Respondent/Intervenor.
 Municipal Corporations - Development Fees - Statutory Authority - Property Outside Municipal Boundaries. RCW 82.02.050 - .090 do not authorize a city to impose impact fees on projects outside its borders. Only an entity with development approval authority, or an entity with authority to approve or disapprove a change in the use of land on which the project will be built, has authority to impose impact fees.
 Municipal Corporations - Development Fees - Statutory Authority - Condition of Subdivision Approval - Limitation. RCW 58.17.110, which authorizes a municipality to impose impact fees as a condition of subdivision approval, does not authorize impact fees other than those permitted by RCW 82.02.050.090.
 Municipal Corporations - Development Fees - Statutory Prohibition - Exceptions - "Voluntary Agreements" - Scope - Property Outside Municipal Boundaries. The voluntary agreement provision of RCW 82.02.020 does not authorize a municipality to impose impact fees on developments outside its borders.
be estopped were allowed to contradict his earlier admission, statement, or act.
 Estoppel - Elements - Representation of Law - In General. Equitable estoppel does not apply when the representations allegedly relied upon are matters of law, rather than of fact.
 Administrative Law - Judicial Review - Exhaustion of Administrative Remedies - Futile Effort - Effect. A party is not required to exhaust administrative remedies if doing so would be futile.
 Contracts - Validity - Partial Invalidity - Essential Part of Consideration - What Constitutes. If the unenforceable portion of a contract is an essential part of the consideration given to support the contract, the remaining portions of the contract are also unenforceable. The unenforceable portion is an essential part of the consideration given if the parties would not have formed the contract without it.
 Utility Services - Sewers - Service Outside Municipal Boundaries - Necessity - Public Duty. A city that is the exclusive provider of water and sewer service to an urban growth area outside its boundaries owes a public duty to serve all the land within the urban growth area, subject to any reasonable conditions allowed by law.
Nature of Action: Developer's declaratory judgment action challenging a city's authority to impose impact fees on a project located in an urban growth area outside the city's boundaries.
Superior Court: The Superior Court for Thurston County, No. 97-2-01234-9, Gary Tabor, J., on September 4, 1998, entered a judgment declaring that the city did not have authority to impose the fees and that a utility extension agreement between the city and the developer was enforceable without its impact fee provisions.
declaring that the utility extension agreement remained enforceable, which is reversed.
Mark O. Erickson, City Attorney; and Elizabeth Thomas, Stephen Alan Smith, and Robert Bertelson Mitchell, Jr., of Preston Gates & Ellis, for appellant.
Mark Stephen Davidson of Williams, Kastner & Gibbs, P.L.L.C., for respondents.
Stephen Harold G. Overstreet, for respondent/intervenor.
MORGAN, J. - The City of Olympia appeals a trial court ruling that it imposed impact fees without the necessary statutory authority. We affirm with one modification.
The City of Olympia (the City) is located in Thurston County (the County). Immediately outside the City's borders, but within the County, is an "urban growth area" (UGA) defined pursuant to the Growth Management Act,(RCW 36.70)A.
Before 1994, the County and City agreed that they would plan jointly for the UGA. The City's utilities would serve the UGA, and the City's development standards would apply in the UGA.
«1» Opening Br. of Appellant at 9.
«2» Opening Br. of Appellant at 10; see also Opening Br. of Appellant at 9. According to the City, impact fees were to pay about half the cost of parks and twenty percent of the cost of roads.
«3» Olympia Municipal Code (OMC) 13.08.180; OMC 13.04.240. Clerk's Papers at 64.
Every city or town may permit connections with any of its sewers, either directly or indirectly, from property beyond its limits, upon such terms, conditions and payments as may be prescribed by ordinance, which may be required by the city or town to be evidenced by a written agreement between the city or town and the owner of the property to be served by the connecting sewer.
A city or town may enter into a firm contract with any outside municipality, community, corporation, or person, for furnishing them with water without regard to whether said water shall be considered as surplus or not and regardless of the source from which such water is obtained, which contract may fix the terms upon which the outside distribution systems will be installed and the rates at which and the manner in which payment shall be made for the water supplied or for the service rendered.
«5» Clerk's Papers at 65-66.
In 1994, David Nolte«8» owned 24 acres of land in the UGA. He wanted to subdivide it and construct a 117-unit planned residential development called Chambers Creek Crossing. Hence, he applied to Thurston County for approval of a proposed plat.
26. It is the intent of the applicant to use City of Olympia domestic water and sanitary sewers to serve this project. The City of Olympia has a "Utility Extension Agreement" that must be signed by the developer in order to receive the city utilities. . . .
«8» The respondents include David Nolte, D.N. Woodside Development Company, Inc., Jeff Edwards, and Win. Edwards Construction Co., Inc. For convenience, we refer to them collectively as "Nolte." The Building Industry Association of Washington (BIAW) intervened on Nolte's behalf in the trial court, and it has also filed a brief on appeal.
«9» Clerk's Papers at 30.
«10» Clerk's Papers at 24-25.
«11» Clerk's Papers at 648.
A county or city shall only approve a development agreement by ordinance or resolution after a public hearing. The county or city legislative body or a planning commission, hearing examiner, or other body designated by the legislative body to conduct the public hearing may conduct the hearing. . . .
February 18, 1997, the City Council approved Nolte's application for service.
On June 3, 1997, Nolte filed a declaratory judgment action. He alleged that the City was the sole and exclusive provider of utility service to properties in the UGA, but that it would not provide such service unless the property owner paid impact fees. He further alleged that the City could not lawfully impose impact fees without statutory authority; that in his case the City did not have authority under(RCW 82.02); and that "there is no other statutory authority for the City to impose such impact fees."«14» He prayed for an order requiring the City to supply sewer and water service without charging impact fees.
«13» Clerk's Papers at 84.
«14» Clerk's Papers at 15.
The parties raise four basic issues. (1) Were impact fees properly imposed? (2) Is Nolte estopped from claiming that impact fees were improperly imposed? (3) Is Nolte prevented from claiming that impact fees were improperly imposed because he failed to exhaust his administrative remedies? (4) If the UEA's impact-fee provisions are stricken, must the City honor the remainder of that agreement?
«15» Clerk's Papers at 93.
«16» Clerk's Papers at 696.
«17» On January 28, 1999, Nolte filed a motion to strike Thurston County Resolution No. 10683, which the City attached as appendix A to its reply brief. We grant the motion because the Resolution is not in the record on appeal.
«18» See San Telmo Assocs. v. Seattle, 108 Wn.2d 20, 23, 735 P.2d 673 (1987); Hillis Homes, Inc. v. Snohomish County, 97 Wn.2d 804, 809, 650 P.2d 193 (1982); Ivy Club Investors Ltd. Partnership v. Kennewick, 40 Wn. App. 524, 528, 699 P.2d 782, review denied, 104 Wn.2d 1006 (1985).
the City imposed impact fees on Nolte, and, if the City did, on whether the City had statutory authority to do so.
«19» Opening Br. of Appellant at 17-18.
«20» OMC 13.08.180; 13.04.240. The record does not show that the County even had an impact-fee ordinance. Consistent with this omission, the City describes the comprehensive plan as "[r]ecognizing that the City would collect impact fees" from landowners in the UGA, and as "contemplating] little County investment" in the UGA Opening Br. of Appellant at 10 (emphasis added).
«21» OMC chapters 15.04 and 15.06.
«22» Opening Br. of Appellant at 10; see also Opening Br. of Appellant at 9.
«23» Opening Br. of Appellant at 23; see also Opening Br. of Appellant at 11.
«24» Opening Br. of Appellant at 11.
«25» Opening Br. of Appellant at 18 (emphasis added).
The next question is whether the City had statutory authority to impose impact fees. RCW 36.70B.170 authorizes a city to "enter into a development agreement for real property outside its boundaries as part of a proposed annexation or a service agreement." It also provides that a development agreement may include "[t]he amount and payment of impact fees imposed or agreed to in accordance with any applicable provisions of state law,"«27» and that a development agreement "may obligate a party to fund or provide services, infrastructure, or other facilities."«28» Its effects are restricted, however, by RCW 36.70B.210, which states that "[n]othing in RCW 36.70B.170 . . . is intended to authorize local governments to impose impact fees, . . . except as expressly authorized by other applicable provisions of state law."
«26» Opening Br. of Appellant at 11 (emphasis added); Opening Br. of Appellant at 18 (emphasis added).
«29» Opening Br. of Appellant at 22 (emphasis added).
approval" as "written authorization" to commence "development activity,"«32» and "development activity" as including any change "in the use of land."«33» Necessarily then, an impact fee must be imposed by an entity with development-approval authority, or, in alternate terms, by an entity with authority to approve or disapprove a change in the use of the land on which the project will be built. Because a city lacks statutory authority to approve a change in the use of land beyond its borders--that authority generally rests with the municipality in which the land is located, which here is the County--RCW 82.02.050 - .090 does not authorize a city to impose impact fees on land outside its borders.
(1) The city, town, or county legislative body shall inquire into the public use and interest proposed to be served by the establishment of the subdivision and dedication. It shall determine: (a) If appropriate provisions are made for . . . streets or roads, . . . parks and recreation . . . .
(2) A proposed subdivision and dedication shall not be approved unless the city, town, or county legislative body makes written findings that: (a) Appropriate provisions are made for . . . streets or roads, . . ., parks and recreation . . . . [I]mpact fees imposed under RCW 82.02.050 through 82.02.090 may be required as a condition of subdivision approval.
This statute does not authorize impact fees other than those imposed under RCW 82.02.050 - .090, and thus it does not authorize the fees imposed here.
county, city, town, or other municipal corporation shall impose any tax, fee, or charge, either direct or indirect, on the construction or reconstruction of residential buildings, commercial buildings, industrial buildings, or on any other building or building space or appurtenance thereto, or on the development, subdivision, classification, or reclassification of land.
By its plain terms, this statute governs the city in all of its roles. It restricts the city to imposing impact fees under RCW 82.02.050 - .090, and thus it does not authorize the fees imposed here.
Based on the foregoing, we conclude that the City lacked statutory authority to impose impact fees on Nolte's project. Nothing we have said means that the County (i.e., the entity with development-approval authority) could not have imposed such fees; that the City could not have imposed such fees if Nolte's project had been within its borders; or that the City could or could not have formed a voluntary agreement under RCW 82.02.020.
«34» Opening Br. of Appellant at 37.
«35» Opening Br. of Appellant at 39.
Here, the City claims that Nolte promised to pay impact fees; that the City relied on his promise by not taking certain actions it might otherwise have taken; that he later breached ("repudiated") his promise; and that the City has been injured by the resultant "funding gap."«40» Assuming all of this is true, it amounts to a claim for breach of contract, which has not been made. It does not amount to a claim for equitable estoppel.
«36» See Department of Ecology v. Theodoratus, 135 Wn.2d 582 599, 957 P.2d 1241 (1998), Chemical Bank v. WPPSS, 102 Wn.2d 874, 905, 691 P.2d 524 (1984), cert. denied, 471 U.S. 1065 and 471 U.S. 1075 (1985).
«37» Theodoratus, 135 Wn.2d at 599, see also Chemical Bank 102 Wn.2d at 905, Concerned Land Owners of Union Hill v. King County, 64 Wn. App. 768, 778, 827 P.2d 1017, review denied, 119 Wn.2d 1008 (1992).
«38» See E. ALLAN FARNSWORTH, CONTRACTS § 2.19 (1990).
«39» Suppose, for example, that X offers to sell a product to Y for a certain price Y accepts Thereafter, X breaches (i.e., "repudiates"). Y was relying on receiving the product, and suffers injury when it does not arrive. Y clearly has a claim for breach of contract But does he also have a claim for equitable estoppel? The elements of equitable estoppel are (1) "an admission, statement, or act [by the party to be estopped] which was inconsistent with his later claim, (2) that the other party relied thereon, and (3) that the other party would suffer injury if the party to be estopped were allowed to contradict or repudiate his earlier admission, statement, or act." Henderson Homes v. Bothell, 124 Wn.2d 240, 248-49, 877 P.2d 176 (1994), see also Robinson v. Seattle 119 Wn.2d 34, 82, 830 P.2d 318, cert. denied, 506 U.S. 1028 (1992). Each of these elements is met by the facts supposed above X's offer was an act inconsistent with his later breach; Y relied, and Y will suffer injury if X is allowed to repudiate his offer. Under the law, however, Y's claim is for breach of contract, not equitable estoppel, because equitable estoppel must be founded on a representation of fact.
«40» Opening Br. of Appellant at 39-40.
his later attack on impact fees. The hearing examiner was not considering whether Nolte should pay the City's impact fees; the examiner was only considering whether Nolte should be required to connect to City water and sewer. Nolte had no duty to speak on an issue not being considered, and his silence was not inconsistent with his later claim that the City's impact fees were invalid. We conclude that the doctrine of equitable estoppel has no place in this case.
 The City claims that Nolte is prevented from claiming that impact fees were improperly imposed, because he failed to exhaust his administrative remedies. A party must exhaust his or her administrative remedies«41» unless doing so would be futile.«42» Nolte had no remedy before the hearing examiner, because the latter did not consider the impact fees required by the City's sewer and water ordinances; he considered only whether Nolte should be required to hook up to City sewer and water. Nolte had no remedy before the City, or his remedy was futile, because the City was bound by, and surely would have adhered to, its ordinances. We conclude that Nolte did not fail to exhaust any meaningful administrative remedy.
«41» See Dioxin/Organochlorine Ctr. v. Department of Ecology, 119 Wn.2d 761, 776, 837 P.2d 1007 (1992); Ventures NW Ltd. Partnership v. State, 81 Wn. App. 353, 368, 914 P.2d 1180 (1996).
«42» See Dioxin/Organochlorine, 119 Wn.2d at 776, Ventures NW 81 Wn. App. at 368.
«43» Opening Br. of Appellant at 43.
The City and Nolte are addressing different concepts. The City claims that it is relieved of any contractual duty under the UEA, once the UEA's impact-fee provisions are stricken. Rather than relying on the existence of a contractual duty, Nolte claims the existence of a public duty to serve everyone in the UGA.
 The City's claim is correct. When part of an agreement is illegal and thus unenforceable, but part is legal and enforceable, a court may enforce the legal part "only where the unenforceable portion is not an 'essential part' of the consideration given to support the contract."«45» Whether the unenforceable portion is "an essential part of the consideration given" depends on whether the parties would have formed the agreement without it.«46» The only reasonable view of this record is that the City would not have formed the UEA without impact-fee provisions. It was bound to follow its ordinance, it wanted to follow its ordinance, and its ordinance required impact fees. Nolte may not enforce the UEA once the impact-fee provisions are stricken.
«44» Br. of Resp't at 41-42 (citations omitted).
«45» Yakima County Fire Protection Dist. No. 12 v. Yakima, 122 Wn.2d 371, 396, 858 P.2d 245 (1993).
«47» Yakima County, 122 Wn.2d at 381-82.
need not perform the contractual provisions of the UEA, but that it must perform any public duty in the manner provided by law.
Affirmed, except that the City shall not be required to perform the remaining portions of the UEA.
HOUGHTON and HUNT, JJ., concur.

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