Title: Western Generation Agency v. Dept. of Rev.
Citation: N/A
Docket Number: S44164
State: Oregon
Issuer: Oregon Supreme Court
Date: July 16, 1998

Filed:  July 16, 1998

IN THE SUPREME COURT OF THE STATE OF OREGON

WESTERN GENERATION AGENCY,

	Respondent,

	v.

DEPARTMENT OF REVENUE,
State of Oregon,

	Appellant.

(OTC 3860; SC S44164)

	On appeal from the Oregon Tax Court.*

	Carl N. Byers, Judge.

	Argued and submitted May 4, 1998.

	Robert W. Muir, Assistant Attorney General, Salem, argued
the cause for appellant.  Joseph A. Laronge, Assistant Attorney
General, and Hardy Myers, Attorney General, filed the briefs.

	Thomas M. Grim, Portland, argued the cause and filed the
brief for respondent.  With him on the brief were James E.
Benedict, Susan T. Felstiner, and Cable Huston Benedict Haagensen
&amp; Lloyd, LLP, Portland.

	Before Carson, Chief Justice, and Gillette, Van Hoomissen,
Durham, and Leeson, Justices.**

	GILLETTE, J.

	The judgment of the Tax Court is reversed.  The case is
remanded to the Tax Court for further proceedings.

	*14 OTR 141 (1997).

    **Kulongoski, J., did not participate in the consideration or
decision of this case.

		GILLETTE, J.

		This is a direct appeal from a decision of the Tax
Court.  The issue presented is whether property that is jointly
controlled by a people's utility district and a municipal utility
through an intergovernmental entity that was created pursuant to
ORS chapter 190 is taxable.  The Oregon Tax Court ruled that the
property is not subject to taxation.  The Department of Revenue
(DOR) appeals from that ruling.  We conclude that, because the
property is controlled by a people's utility district, it is
taxable under ORS 261.050, at least to the extent of that
control.  We reverse the decision of the Tax Court and remand the
case to that court for further proceedings.(1)

		The property at issue in this case is an electricity
generating facility (facility) owned by an intergovernmental
entity, Western Generation Agency (WGA), that was created by an
agreement between the Clatskanie People's Utility District (CPUD)
and the City of Eugene Water and Electric Board (EWEB) pursuant
to ORS 190.010(5).(2)  The CPUD is a people's utility district
created under the provisions of ORS chapter 261.  EWEB is a
municipal utility created under the Eugene City Charter. 
Pursuant to the intergovernmental agreement between CPUD and
EWEB, WGA issued bonds for the purpose of constructing and
operating an electrical generation facility located in Wauna,
Oregon.  According to that intergovernmental agreement, WGA was
created "for the purpose of constructing, owning and operating
the Project and such other electrical generation and transmission
facilities as the parties agree to."  

		The principal office of WGA is located at CPUD's
offices.  WGA is governed by a board of directors "appointed by,
responsible to and acting on behalf of" both the people's utility
district and the municipal corporation.  The board of directors
consists of six members, three appointed by CPUD and three
appointed by EWEB.  Board members "serve at the pleasure of"
their appointing governing bodies.  In the event of a vacancy on
the board, the original appointing governing body may appoint the
successor of its choice.  WGA has no employees of its own.  

		The facility is situated on land that is owned by the
James River Paper Company (James River) and leased to WGA.  James
River owns and operates a pulp and paper manufacturing facility
next to the property.  James River developed the site and
constructed the facility for WGA, and will supply the fuel and
thermal energy (steam) to the facility.  James River also will
operate the facility and provide maintenance services for it. 
WGA has agreed to sell 100 percent of the power that it generates
either to the Bonneville Power Administration or to EWEB.  

		DOR assessed the facility as taxable for the tax year
1994-95 pursuant to its authority under ORS 308.515.  ORS
308.515(1) requires DOR annually to assess property used or held
"by any company" for the purpose of selling electricity for
consumption by other persons.  "Company" is defined in ORS
308.505(2) to include a people's utility district.  WGA
challenged the assessment, asserting that it is a public or
municipal corporation whose property is completely exempt from
taxation under ORS 307.090(1).(3)  Alternatively, WGA argued that
at least the portion of the property funded by EWEB is exempt
under ORS 307.090(1), because EWEB itself is exempt as an agency
of the city.  

		The DOR rejected both of WGA's arguments.  It issued an
opinion and order in which it determined that the facility was
subject to taxation under ORS 308.515.  WGA then filed a
complaint with the Tax Court requesting relief from that opinion
and order.  The parties filed cross-motions for summary judgment. 
The Tax Court granted WGA's motion and denied DOR's motion,
holding that the property is exempt from taxation under ORS
307.090(1). 

		The Tax Court stated that its holding is based on the
principle that property owned by a state or local government unit
is presumed not to be taxable, while private property is presumed
to be taxable.  The Tax Court concluded that any doubts must be
resolved in favor of an exemption for a publicly owned entity: 
"WGA is a municipal quasi-corporation whose property is exempt
from taxation unless the legislature expressly manifests an
intent to subject it to tax.  The legislature has not expressed
such an intent, as it has with [people's utility districts] and
joint cooperative agencies."  Therefore, that court reasoned, the
property is not subject to tax.  

		DOR's primary argument on appeal is that the facility
is taxable under ORS 261.050, which provides:

		"All property * * * owned, used, operated or
controlled by any people's utility district, in or for
the production, transmission, distribution, or
furnishing of electric power or energy or electric
service for or to the public shall be assessed and
taxed in the same manner * * * as [is] provided by law
in respect to assessment and taxation of similar
property owned, used, operated or controlled by private
corporations or individuals for the purpose of
furnishing electric power or energy or electric service
to the public."

(Emphasis added.)  Under that statute, property is taxable if it
is either "owned, used, operated or controlled" by a people's
utility district.(4)  DOR asserts that, if any one of those four
conditions is present, the relevant property is taxable.  In this
case, DOR argues, the property at issue is "controlled" by a
people's utility district, CPUD, and therefore it is, at least to
some extent, taxable.  For the reasons that follow, we agree.  

		In construing a statute, this court's task is to
discern the intent of the legislature.  ORS 174.020; PGE v.
Bureau of Labor and Industries, 317 Or 606, 610, 859 P2d 1143
(1993).  At the first stage of our analysis, we look at the text
and context of the provision as the best evidence of the
legislature's intent.  PGE, 317 Or at 610-11.  In construing the
text and context, we consider rules of construction that bear
directly on how to read the text.  Id. at 611.  One such rule is
that "words of common usage typically should be given their
plain, natural, and ordinary meaning."  Ibid.  If the
legislature's intent is clear after this analysis, further
inquiry is unnecessary.  Ibid. 		

		As noted, ORS 261.050 provides that property that is
"controlled by any people's utility district" for the production
of electricity "shall be assessed and taxed in the same manner
and for the same purposes" provided by law for the taxation of
similar property held by private entities.  The term "control" is
not defined either in ORS 261.050 or elsewhere in ORS chapter
261.  In ordinary usage, however, "control" means:

	"1 a:  the act or fact of controlling * * *:  power or
authority to guide or manage:  directing or restraining
domination."   

Webster's Third New Int'l Dictionary, 496 (unabridged ed 1993).
Thus, we can state from the statute's text (which context does
not alter) that a people's utility district "controls" property
if it has the power or authority to guide, manage or direct it,
or even if it can "restrain" another entity's "domination" of
that property. 

		  In this case, it is clear that, at the very least,
CPUD has the power to restrain EWEB from exercising control over
the facility in any manner that CPUD deems objectionable.  Three
of WGA's six board members are appointed by CPUD and serve at
CPUD's pleasure.  Although they may not have the power
affirmatively to ensure that CPUD's policy initiatives are
carried out, they can block any action by EWEB that CPUD
disagrees with.  CPUD, therefore, has the level of control
necessary to enable it to protect and promote its interests.  For
that reason, we hold that the WGA's electrical cogeneration
facility is "controlled" by a people's utility district, CPUD,
and is taxable under ORS 261.050.(5)  

		It follows that the Tax Court's conclusion that WGA
meets the statutory definition of a municipal corporation and
that it possesses typical governmental characteristics is not
dispositive.  ORS 307.090(1) only renders the property of
government entities immune from taxation "except as provided by
law."  Even assuming that WGA is a municipal corporation whose
property otherwise would be immune from taxation, ORS 261.050 is
a law providing for the taxation of WGA's property.(6)  The tax
immunity conferred by ORS 307.090(1) is unavailable to it.  

		Finally, we reject WGA's argument that taxation of WGA
property would defeat the legislative intent behind ORS 190.010,
which authorizes the creation of intergovernmental corporate
entities like WGA.  WGA asserts that the legislature intended to
promote economy and efficiency in local government by reducing
financing costs for public projects, and that taxation of WGA
effectively would increase the cost of financing the project. 
Yet, exemption from property tax for property owned by
intergovernmental entities is not inherent in the legislative
policy of economy and efficiency.  Nothing in ORS 190.010
indicates that the legislature intended by that statute to exempt
all property owned by intergovernmental entities, regardless of
the tax status of the forming parties.  Indeed, it is apparent
that taxation of property controlled by a people's utility
district is not necessarily inconsistent with that legislative
policy.  For example, it would be absurd to conclude that
property controlled by two people's utility districts would be
exempt from taxation, if they simply created an intergovernmental
entity and then transferred the property to it, although the same
property would have been taxable, had it remained the separate
property of each district. 

		The Tax Court erred in granting summary judgment to
WGA.  In light of its conclusion that WGA is a municipal quasi-corporation immune from taxation under ORS 307.090(1), the Tax
Court did not reach the question whether the WGA property should
be taxed in full or whether its tax liability should be limited
based on the extent of CPUD's control over that property.  We
remand the case to the Tax Court for a determination whether to
apportion WGA's tax liability based on CPUD's proportional
interest in the property and, if such apportionment is
appropriate, the extent of that proportional interest. 

		The judgment of the Tax Court is reversed.  The case is
remanded to the Tax Court for further proceedings.

1. 	When Western Generation Agency (WGA) commenced this
action in 1995, ORS 305.445 provided for de novo review of Tax
Court decisions.  That statute was amended in 1997 to provide, in
part, that this court's "review of either a decision or order of
the tax court judge shall be limited to errors or questions of
law or lack of substantial evidence in the record to support the
tax court's decision or order."  Because the material facts are
not in dispute, we need not decide whether the present or
previous version of ORS 305.445 applies in this case. 

2. 	ORS 190.010(5) provides:

		"A unit of local government may enter into a
written agreement with any other unit or units of local
government for the performance of any or all functions
and activities that a party to the agreement, its
officers or agencies, have authority to perform.  The
agreement may provide for the performance of a function
or activity:

		"(5)  By an intergovernmental entity created by
the agreement and governed by a board or commission
appointed by, responsible to and acting on behalf of
the units of local government that are parties to the
agreement * * *."

3. 	  ORS 307.090(1) provides:

		"Except as provided by law, all property of the
state and all public or corporate property used or
intended for corporate purposes of the several
counties, cities, towns, school districts, irrigation
districts, drainage districts, ports, water districts,
housing authorities and all other public or municipal
corporations in this state, is exempt from taxation."

4. 	WGA objects to the court's consideration of DOR's
argument based on ORS 261.050, on the ground that the issue of
the applicability of that statute was not preserved for review. 
For purposes of preserving error, the court has stated that it is
essential that a party raise an issue at trial, but it is less
important to identify a source of law for the claimed position or
to make a particular argument in support of it.  State v. Hitz,
307 Or 183, 188, 766 P2d 373 (1988).  In this case, in broad
terms, the legal issue presented by DOR is whether WGA's property
is taxable.  When viewed in that light, ORS 261.050 merely is a
source of law for DOR's position.  Moreover, even if we consider
the applicability of ORS 261.050 as a separate and distinct
issue, that issue was raised adequately below inasmuch as CPUD's
use and control of WGA's property clearly was set forth as a
basis for taxation of that property in DOR's answer to WGA's
complaint.  Finally, given that the ORS 261.050 argument purely
is a legal one and, therefore, that a Tax Court ruling on it
would, in any event, have been reviewed in this court for an
error of law, our consideration of the issue at this stage is not
inconsistent with the purposes of fairness and efficiency upon
which the preservation requirement is based.  

5. 	WGA argues that the word "control" in ORS 261.050 does
not mean joint control with another entity such as EWEB, but
instead means direct control.  That argument is not well taken. 
The wording of the statute is not restricted, either by text or
context, in the way that WGA suggests.  Instead, its wording
accommodates either the affirmative power to act or the negative
power to prevent action.  

6. 	WGA argues that that result violates due process,
because it effectively imposes a tax on CPUD.  It does not.  The
property is subject to tax under ORS 261.050.  As required by ORS
308.115(2), that property properly was assessed and taxed in the
name of the legal property owner, WGA.