Opinion ID: 2543124
Heading Depth: 1
Heading Rank: 4

Heading: Validity of Bond Contract

Text: ś 38 The intervenors assert that the bond contract is invalid, first challenging the formation of Sound Transit and then the terms of the bond contract. We find no merit to any of these claims. ś 39 Turning first to the intervenors' formation challenges, intervenors argue that Sound Transit was improperly formed because the residents in King, Pierce, and Snohomish counties did not ratify the formation of Sound Transit. As discussed above, when the voters approved taxes to implement the first phase of Sound Transit's transit system in 1996, the voters acted in full compliance with the law in effect at that time. ś 40 Nevertheless, the intervenors claim the voters were not entitled to rely on RCW 81.112.030(8), part of the enabling statute effective in 1996, because they allege that prior amendments to the statute were improper. First, the intervenors claim that the legislature's amendments in 1993 to RCW 81.112.030, which in part removed the requirement that voters ratify the formation of Sound Transit, violated Washington Constitution article II, section 19 because the amendment was part of an appropriations bill. [11] Thus, the intervenors argue that the ratification requirement remained in force. ś 41 Intervenors fail to recognize that the legislature's 1994 amendment to RCW 81.112.030 superseded the 1993 Act. [W]here a governing body takes an otherwise proper action later invalidated for procedural reasons only, that body may retrace its steps and remedy the defects by reenactment with the proper formalities. Henry v. Town of Oakville, 30 Wash.App. 240, 246-47, 633 P.2d 892 (1981). In Henry itself, the Court of Appeals allowed a town to reenact and ratify an ordinance, originally passed without proper notice under the open meetings laws, authorizing a bond issue. See also Eugster v. City of Spokane, 110 Wash.App. 212, 39 P.3d 380 (2002) (holding that a procedural challenge to the validity of a city ordinance was moot since the ordinance had subsequently been properly enacted). ś 42 Although our courts have not had occasion to apply this principle to claims arising out of article II, section 19 of the constitution, other jurisdictions have applied it in this constitutional context. In Mispagel v. Missouri Highway Transportation Commission, 785 S.W.2d 279 (Mo.1990), a Missouri statute was challenged on the ground that the bill dealt with more than one subject. The Missouri Supreme Court rejected this challenge, holding that since the reenacting bill was not subject to the alleged infirmity asserted against the 1985 bill, [a]ny defect in the enactment, therefore, has been cured. Id. at 281. In Nichols v. Tullahoma Open Door, Inc., 640 S.W.2d 13 (Tenn. App.1982), the Tennessee Court of Appeals ruled moot a challenge to a Tennessee statute on the basis that the subsequent reenactment and recodification of the statute cured any constitutional defect. In Honchell v. State, 257 So.2d 889 (Fla.1971), the Florida Supreme Court rejected a claim that a statute defining criminal activity was invalid because its original enactment violated double subject provisions in the Florida Constitution because the statute in question had been reenacted. And in another case, the Florida Supreme Court held that any defect in the title of the original act creating a Turnpike Authority had been cured by the adoption of the revised statutes, including the act. Spangler v. Fla. State Turnpike Auth., 106 So.2d 421 (Fla.1958). ś 43 We conclude that even if the 1993 amendments to RCW 81.112.030(8) were not properly included in the 1993 transportation appropriations bill, in 1994 the legislature reenacted the statute in a bill, which the intervenors do not challenge as violating Washington Constitution article II, section 19. And, the 1994 amendments, like the 1993 amendments, removed any reference to a requirement that the public vote on ratification of the formation of a regional transit authority. The 1994 amendments, therefore, ratified and cured any defect in the 1993 enactment. ś 44 Next, the intervenors claim that the 1994 Act was ineffective, violating Washington Constitution article II, section 37 because it did not reprint the full text of RCW 81.112.030, the statute in effect in 1992. [12] Instead, the 1994 act reprinted the full text of RCW 81.112.030, the amended section that was effective in 1993. The intervenors' point is not well-taken. Washington Constitution article II, section 37 requires the legislature to set forth the full length of the relevant act or section to be amended. Since the 1994 legislature was entitled to assume that the 1993 Act was constitutional, the legislature properly complied with article II, section 37 by setting forth the relevant section effective at the time of the legislature's action. See, e.g., State v. Heckel, 143 Wash.2d 824, 832, 24 P.3d 404 (2001). Accordingly, we find no constitutional infirmity with the enabling statute. ś 45 Next, the intervenors maintain that the legislature had no authority enact RCW 81.112.030(2), authorizing the elected officials of a class of counties to decide whether to establish a regional transit authority, a municipal corporation. The intervenors rely on Washington Constitution article XI, section 10 as authority for their contention that a public vote is constitutionally mandated. [13] The intervenors misconstrue this constitutional provision. Under the plain language of this provision, only cities and towns require a vote by the electorate to organize or incorporate. WASH. CONST. art. XI, § 10 ( Cities and towns heretofore organized, or incorporated may become organized under such general laws whenever a majority of the electors voting at a general election, shall so determine (emphasis added)). It is well-settled that other municipal corporations, such as Sound Transit, do not. See, e.g., Rood v. Water Dist. No. 24 of King County, 183 Wash. 258, 262, 48 P.2d 584 (1935) (There is no restriction in our constitution on the power of the legislature to create municipalities, other than the requirement that it shall be done by general, and not by special, law.); WASH. CONST. art. II, § 28(6) ([t]he legislature is prohibited from enacting any private or special laws in the following cases: For granting corporate powers or privileges (emphasis added)). ś 46 The intervenors repeatedly claim that the legislature cannot do indirectly that which it is prohibited from doing directly. While that principle is undoubtedly true, it has no relevance in this context. Nothing in the constitution prohibits the legislature from authorizing the formation of a municipal corporation by local legislative bodies. Indeed, the statutes under challenge here are closely analogous to those upheld in CLEAN v. State, 130 Wash.2d 782, 928 P.2d 1054 (1996) and in Brower v. State, 137 Wash.2d 44, 969 P.2d 42 (1998). In sum, intervenors offer no authority for the contention that RCW 81.112.030, in effect when the voters approved of the taxes, was unconstitutional because it did not require the voters to ratify the formation of Sound Transit. [14] ś 47 The intervenors' reliance on Washington Constitution article I, section 19 is equally unavailing. [15] This section requires merely that, for matters subject to election, elections must be free and equal. State v. Wilson, 137 Wash. 125, 132, 241 P. 970 (1925) (The provision does not mean that voters may go to the polls at any time and vote on any question they see fit, but only at the stated times provided by the statutes relating to elections.). Moreover, Washington Constitution article I, section 19 does not apply to appointed bodies such as the Sound Transit Board. See, e.g., Granite Falls Library Capital Facility Area v. Taxpayers of Granite Falls Library Capital Facility Area, 134 Wash.2d 825, 840, 953 P.2d 1150 (1998). ś 48 Next, the intervenors contend that the delegation of taxing authority to Sound Transit was unconstitutional because its board members are appointed. As mentioned above, Sound Transit's board members consist of elected officials in the three counties plus the secretary of transportation or his or her designee. RCW 81.112.040(1). The intervenors' argument lacks merit. ś 49 Initially, we observe that intervenors do not even mention our lengthy discussion in Larson, 156 Wash.2d at 756-64, 131 P.3d 892, regarding Washington Constitution article XI, section 12 and article VII, section 9, which expressly provide that the legislature may delegate local taxing authority to municipalities. [16] It is equally well-settled that it is constitutionally permissible for the legislature to delegate taxing authority to municipal corporations with appointed board members provided certain standards or guidelines are provided and procedural safeguards exist. Larson, 156 Wash.2d at 761-62, 131 P.3d 892; King County Water Dist. No. 54 v. King County Boundary Review Bd., 87 Wash.2d 536, 545, 554 P.2d 1060 (1976); Barry & Barry, Inc. v. Dep't of Motor Vehicles, 81 Wash.2d 155, 159, 500 P.2d 540 (1972). Under the two-part test, the legislature first must provide standards or guidelines which define in general terms what it to be done and identify the entity which is to accomplish it. Larson, 156 Wash.2d at 761-64, 131 P.3d 892. Second, procedural safeguards must exist to control arbitrary administrative action and any administrative abuse of discretionary power. Id. ś 50 In this case, the two-part test is satisfied. The legislature has provided the necessary guidelines defining in general terms what is to be done and has properly identified the entity which is to accomplish it. In RCW 81.112.030, the legislature authorized two or more contiguous counties each having a population of more than 400,000 persons or more to establish a regional transit authority. Such authority is to develop and operate a high capacity transportation system as defined in chapter 81.104 RCW. Id. The regional transit authority is responsible for planning, construction, operations, and funding of transit system within its area. See, e.g., RCW 81.104.070(2). The regional transit authority is authorized, after receiving voter approval, to levy taxes and issue bonds to finance the transit system. See, e.g., RCW 81.104.140, 81.112.030, .130. The taxes authorized, after voter approval, are limited in scope and clearly defined. See, e.g., former RCW 81.104.160(1) (1998) (regional transit authorities may submit an authorized proposition to the voters, and if approved, may levy and collect an excise tax, at a rate approved by the voters, but not exceeding 80 one-hundredths of one percent on the value of every motor vehicle owned by a resident of the taxing district, solely for the purpose of providing high capacity transportation service) and RCW 81.104.170 (regional transit authorities may submit an authorizing proposition to the voters and, if approved by a majority of persons voting, fix and impose a sales tax, solely for the purpose of providing high capacity transportation service; the maximum rate of such tax shall be approved by the voters and shall not exceed one percent of the sales price (in the case of a sales tax) or value of the article used (in the case of a use tax)). Thus, the legislature has defined in general terms what is to be done and the entity that is to accomplish it. ś 51 Second, sufficient procedural safeguards exist to control arbitrary administrative action and administrative abuse of discretionary power. The taxes imposed by Sound Transit have been clearly set forth and approved by the voters. Moreover, Sound Transit contacts with the Department of Licensing to collect the tax as provided by RCW 81.104.190. Additionally, although the members on the board are appointed, all but one of the board members are elected officials, providing the taxpayers a vote. Finally, as illustrated by Larson, the courts provide any aggrieved person with standing to challenge any discriminatory, arbitrary, or unreasonable rates. Thus, we find sufficient standards, guidelines, and procedural safeguards and find no constitutional infirmity. ś 52 Turning to the intervenors' challenge to the validity of the bonds, the intervenors contend that the Sound Transit bonds were invalid because Sound Transit exceeded its statutory authority under RCW 81.104.180. RCW 81.104.180 provides in relevant part: [R]egional transit authorities are authorized to pledge revenues from the employer tax authorized by RCW 81.104.150, the special motor vehicle excise tax authorized by RCW 81.104.160, and the sales and use tax authorized by RCW 81.107.170, to retire bonds issued solely for the purpose of providing high capacity transportation service. ś 53 The intervenors claim that Sound Transit was authorized to pledge the MVET revenue stream only in an amount required to service the debt (payment of principle and interest payments on the debt) and could not pledge the entire revenue stream and covenant to levy and collect the tax as authorized by statute and approved by the voters in the Sound Transit district. This argument is without merit. In O'Brien, 86 Wash.2d at 350-51, 544 P.2d 729, the municipal corporation pledged tax revenues from MVET and sales tax as security for Metro's bond obligations and promised to collect those taxes as authorized by state until all the outstanding bonds had been retired. As mentioned above, the excess coverage provided the statutorily authorized pledge was an important reason for a favorable rating received from municipal bond rating services and was also an important factor in the decision of the bondholders to purchase the bonds. Id. at 350, 544 P.2d 729. Sound Transit's pledge of the MVET revenues is equivalent to that in O'Brien and in no way exceeds its statutory authority. [17] ś 54 We hold that the formation of Sound Transit was constitutional and that the Sound Transit bonds are valid contractual obligations.