Court Opinion

ID: 9537009
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:11:14.084994+00
Date Added: 2024-06-11T14:55:44.306924
License: Public Domain

Dore, J.
(concurring) — I concur in the result reached by the majority. For the reasons discussed below, I am compelled to add my own analysis to that proffered by the majority.
I
I agree with the majority that "this court has never found authority for a project in which the participants did not have an ownership interest". Majority, at 785. Unlike the majority, however, I do not find it necessary to examine the present agreement to determine whether the participants retained sufficient control over the project to constitute the "equivalent" of an ownership interest. Majority, at 787. "Ownership" has been defined as the "complete dominion, title, or proprietary right in a thing or claim". Black's Law Dictionary 997 (5th ed. 1979). I believe an ownership interest is an absolute requirement when acquiring or constructing generating facilities.
If the parties had wished to become co-owners of the projects, with the participants sharing in the benefits and *800burdens of ownership, they would have structured the contract according to RCW 54.44, governing joint ownership of nuclear power plants. This is the statutory framework which governs the ownership agreement between Washington Public Power Supply System (WPPSS) and Pacific Power and Light Company (PP&L), which owns 10 percent of project 5. RCW 54.44, however, is not the statutory framework governing the relationship between WPPSS and the 88 participants. That relationship is governed by RCW 43.52. Under that chapter, WPPSS is authorized to construct and operate the projects and can sell electrical output to other utilities.
This court has held that the power to incur indebtedness cannot be inferred or implied from general statutory authority permitting municipalities to enter into contracts. In Edwards v. Renton, 67 Wn.2d 598, 409 P.2d 153, 33 A.L.R.3d 1154 (1965), we made clear the need for express statutory authority for municipalities to enter into financial arrangements. As the present majority notes, other states have provided explicit statutory authority for unconditional guaranties such as the one in the present case. The Legislature of the State of Washington, however, has not provided our state with such statutory authority. Actual ownership is essential.
Under the "equivalent of ownership interest" analysis employed by the majority, project designers could conceivably allow enough democratic control by participants that there would be authority for a project which the participants did not actually own. I would hold that both an ownership interest and active participation in the management of the facilities are mandatory.
II
The dissent fails to address the constitution and statutes *801of this state which specifically limit the amount of indebtedness that a municipality can incur. Article 8, section 6 of the Washington State Constitution provides that a municipality shall not become indebted in an amount in excess of IV2 percent of the value of the taxable property of that municipality without the assent of three-fifths of the voters therein, nor under any circumstances incur indebtedness in excess of 5 percent of the value of the taxable property therein. The power of municipalities to incur indebtedness has been further circumscribed by the Legislature. RCW 39.30.010 and RCW 39.36.020(2), for example, prohibit cities incurring debt exceeding three-fourths of 1 percent of their assessed property value without first obtaining permission from their citizens by a public vote.
By the terms of the Participants' Agreement, each participant committed itself to buy from WPPSS a share of "project capability”. The price was a share of the cost of the project to WPPSS. For 10 participant Washington cities, the share of the anticipated price which each committed itself to pay exceeded the debt allowable by law.6 No public vote approved any of these undertakings.
The public policies behind these debt limitations, are not in doubt. As stated in 56 Am. Jur. 2d Municipal Corporations § 599, at 651 (1971):
The clear and unmistakable purpose of such provisions is effectually to protect persons residing in municipalities or counties from the abuse of their credit and the consequent oppression of burdensome, if not ruinous, taxation.
Accord, 15 E. McQuillin, Municipal Corporations § 41.02 (3d ed. 1970); Gruen v. State Tax Comm'n, 35 Wn.2d 1, 211 P.2d 651 (1949).
I am not persuaded by the trial court's determination *802that, because the obligations of the public utility district participants were payable out of electric utility revenues, they were exempt from constitutional scrutiny under the special fund doctrine. The trial court's rationale ignores the purpose of the special fund doctrine and provides a glaring loophole by which clever draftsmen could escape the constitutional debt restrictions.
The special fund doctrine was last addressed by this court in State ex rel. State Fin. Comm. v. Martin, 62 Wn.2d 645, 661, 384 P.2d 833 (1963):
That the special fund doctrine is a useful and valid tool of government is apparent when one thinks of all of the institutions and devices of government supported by it. But the true test of its application here is not what comes out of the fund, but what goes into it. If the revenues in it derive exclusively from the operation of the device or organ of government financed by the fund, as in the case of a toll bridge, or the operation of the State Liquor Control Board, or from sales or leases of publicly owned lands, any securities issued solely upon the credit of the fund are not debts of the state, but debts of the fund only. But if the state undertakes or agrees to provide any part of the fund from any general tax, be it excise or ad valorem, then securities issued upon the credit of the fund are likewise issued upon the credit of the state and are in truth debts of the state. Hence, we must take care that the employment of peripheral doctrines does not lead us away from the main point of the case. What is a debt of the State of Washington? Any obligation which must in law be paid from any taxes levied generally is, we think, a debt of the state. It matters little whether the tax be ad valorem or an excise.
(Italics mine.) Thus, the special fund doctrine is to be analyzed in terms of the purpose for the constitutional limitation. The employment of "peripheral doctrines," as noted above, should not detract from the primary purpose of concern: does the device employed create the evil the constitutional limitation was designed to avoid? If such is the case, there is "debt" for constitutional analysis purposes.
Traditionally this court has not applied the special fund doctrine mechanically. This point is illustrated by the case *803of Twichell v. Seattle, 106 Wash. 32, 179 P. 127 (1919) where the City of Seattle issued bonds to purchase an already existing street railway system as an addition to the city's railway system. The City had pledged to pay the bonds out of the revenues of the city's entire railway system, not just out of that portion of the system being purchased by the proceeds of the bonds. Rather than applying a mechanical rule, the court focused on the risk to the taxpaying public. As the addition being purchased was already existing and operating in the hands of a private company, it was obvious this was not a speculative venture which might fail to materialize. Thus, the reason for the application of the debt limitation did not exist, and the obligation was not considered to be constitutional debt.
This court reached just the opposite result in State ex rel. State Bldg. Fin. Auth. v. Yelle, 47 Wn.2d 705, 289 P.2d 355 (1955). That case involved the State Building Financing Authority (Authority) which would purchase land, build buildings, then lease the buildings to various state departments and agencies for a rental fee designed to cover the debt service on bonds issued by the Authority to pay for the buildup. The Authority's sole source of income was the rentals for the buildings, and the bonds were payable out of those rental receipts. Applied mechanically, the special fund doctrine would save the scheme from constitutional attack, because the debt was payable solely out of the revenues of the projects being financed. Yet this court looked to the substance of the transaction, rather than to its form. The court held that the special fund doctrine did not apply because some of the rents were paid out of general tax revenues. The court found the taxpaying public was taking the risk:
When we strip the plan down to fundamentals, we find that it is not a leasing arrangement between landlord and tenant, but the installment purchase by the state of certain buildings and facilities with state moneys raised by taxation, far in excess of the constitutional limitation.
47 Wn.2d at 715.
*804The facts of the present case are very similar to the State Building Financing Authority case. Here, WPPSS played the role of a financing conduit for the participants, just as the Authority was a financing conduit for the State. Just as the Authority attempted to issue "revenue" bonds that were, in fact, secured by the Legislature's promise to appropriate funds adequate to pay debt service, so WPPSS has issued "revenue" bonds that are, in fact, secured by the participants' promise to collect funds adequate to pay debt service, notwithstanding the noncompletion of the facilities (plants 4 and 5). This court cannot insulate third party conduit financier schemes from the constitutional safeguard of the debt limitation.
Ill
Section 6(d)
The Participants' Agreement does not specify that the participants must pay for either decommissioning costs or debt service if the plants are not completed and operating. Section 6(d) provides that the participants must make the payments called for under the Agreement whether or not the projects are completed, but doesn't specify what payments are called for. The Agreement provides that the participants have to pay their respective shares of whatever is in the Annual Budget, as defined in section 1(a) of the Agreement. The ultimate issue is whether the Annual Budget includes debt service and decommissioning costs if the projects are terminated before completion and before they go into operation generating electricity.
Debt Service
The bonds in question are "revenue" bonds, not general obligation bonds, and payable solely out of any revenues to be generated by the projects. If the projects for which revenue bonds are sold do not generate revenues, the bonds are not paid. The bonds themselves and the Bond Resolution clearly provide that, except for interest during construction, the bonds are payable solely out of revenues to be earned by WPPSS from the sale of "power and energy" (that is, *805electricity) from the plants. Because the plants are unfinished, there is no electricity to sell, and hence no revenues. There is no obligation to pay revenue bonds where there are no revenues.
It is not difficult to determine why the bonds were issued as revenue bonds rather than general obligation bonds. The statutes governing WPPSS allow it to issue revenue bonds "payable from the revenues of the utility properties operated by it" (RCW 43.52.3411) and expressly prohibit it from issuing general obligation bonds (RCW 43.52.391). The reason that the Legislature allowed WPPSS to issue revenue bonds but not general obligation bonds was to guard against precisely the situation now before this court: the economic, political and legal problem of asking the citizens of Washington and its neighboring states to pay billions of dollars for failed projects which will never produce any revenues. If the bonds were general obligation bonds, the risk of project failure would be on citizens who would have been entitled to vote on whether to undertake the project risks. Because the bonds are labeled as revenue bonds, however, the risk of project failure should be on the investors who bought the bonds knowing the sole source of payment was to be the revenues from the sale of electricity which was expected to be generated.
The Participants' Agreement must be read in light of the statutory framework governing WPPSS and the participants. If the parties had wished to become co-owners of the projects, with the participants sharing in the benefits and burdens of ownership (such as the risk of failure), they would have structured the contract according to RCW 54.44 governing joint ownership of nuclear power plants. That is the statutory framework which governs the ownership agreement between WPPSS and PP&L whereby WPPSS owns 90 percent and PP&L owns 10 percent of project 5. However, RCW 54.44 is not the statutory framework governing the relationship between WPPSS and the 88 participants. That relationship is governed by RCW 43.52, which does not allow WPPSS to put an ownership risk on the *806purchasers of that electric energy.
Decommissioning Costs
As the projects were terminated before completion, decommissioning costs should be excluded from the Annual Budget as "costs of construction," and should be paid out of the construction fund provided, not by participants.
The trial court decided as a matter of law that the Agreement requires the participants to pay WPPSS for decommissioning costs as part of the Annual Budget. That is plainly contrary to the clear language of the Agreement and Resolution.
The Annual Budget excludes "costs of construction as defined in the Bond Resolution". Section 1(a) of the Agreement, at 3 and 4. Section 6.9(J) of the Bond Resolution, at pages 46 and 47, specifically includes as a cost of construction:
The costs of decommissioning any Project terminated prior to the [completion of construction], which costs shall include but shall not be limited to all of the System's accrued costs and liabilities, including cost of Fuel, of such Project and the salvage, discontinuance and disposition thereof. . .
(Italics mine.)
Costs of decommissioning the projects if they are terminated prior to completion are "costs of construction as defined in the Bond Resolution" and, therefore, are excluded from the Annual Budget. Section 6.9(J) of the Bond Resolution, at 46; section 1(a) of the Participants' Agreement, at 3.
The trial court's reasoning ignores the fundamental scheme of the Participants' Agreement and Bond Resolution and is contrary to the plain language of the documents. The Resolution explicitly provides that (1) costs of construction shall be paid from moneys in the construction fund (section 6.9, at 44); (2). the moneys in the construction fund will come from the sale of bonds (section 6.8, at 43), and (3) WPPSS shall sell enough bonds to pay all costs of construction (section 3.2, at 17). WPPSS' chief New York *807bond lawyer, who drafted the documents, testified:
Q. Where does the money come from that gets into the construction fund?
A. Prom bond proceeds.
Q. As you interpret the bond resolution does any money which the participants are to pay to the Supply System ever get into the construction fund?
A. I don't believe so.
Q. Does the bond resolution provide that... all costs of construction are to be paid from monies in the construction fund?
[Objection]
A. Yes.
Clerk's Papers, at 705-06.
When they signed the Participants' Agreement in 1976, the participants agreed to pay for items properly includable in the Annual Budget but not for "costs of construction," which were expressly excluded from the Annual Budget. The exclusion was no accident: the exclusion language was specifically added to earlier drafts of the Agreement to insure that the participants would not have to pay such costs.
The draft of September 24, 1974 shows the following handwritten note made by one of WPPSS' lawyer-draftsmen next to the construction cost exclusion:
make sure annual budget only include [s] costs of ea. project after D. of Co. Op. [Date of Continuous Operation, i.e., completion] or date certain [July 1, 1988].
Clerk's Papers, at 4373. Thus, if there is any doubt about the parties' intent, the extrinsic evidence from the files and testimony of WPPSS' own lawyers who drafted the documents shows that precompletion costs, such as costs of decommissioning uncompleted plants which by definition are "costs of construction," were intended to be excluded from the Annual Budget. They were to be paid from bond proceeds in the construction fund, not by the participants.
The costs of "termination" are mentioned in the second sentence of the definition of "Annual Budget". It provides *808for "costs . . . resulting from the ownership, operation and maintenance of the Projects, repairs, renewals, replacements, and additions thereto and costs of termination thereof as provided in Section 13". (Italics mine.) Participants' Agreement, at 4. It is clear from the context that the sentence refers to completed plants. Only completed plants have operation and maintenance costs, or need repairs, renewals, replacements or additions.
Moreover, if the reference to costs of "termination" was construed to embrace precompletion decommissioning costs, there would be an absolute and unavoidable contradiction between the first sentence (which excludes precom-pletion decommissioning costs as "costs of construction") and the second sentence. If possible, an agreement should be interpreted in a way which will avoid such inherent contradictions.
Thus, all costs of construction as defined in the Bond Resolution, such as costs of decommissioning uncompleted plants, are excluded from the Annual Budget because they are to be paid out of the bond proceeds in the construction fund, not by the participants. Additionally, costs of "termination ... as provided in section 13" are included in the Annual Budget only after a project has been completed and has gone into operation before being terminated. Accordingly, I strongly disagree with the trial court's conclusion that as a matter of law the Agreement unambiguously includes the costs of decommissioning uncompleted plants in the Annual Budget.
Even if decommissioning costs were payable under section 13 of the Agreement, they are not payable until WPPSS renders a final accounting statement. As costs of decommissioning uncompleted plants are to be paid out of the construction fund, not by the participants, the participants can be called upon to pay decommissioning costs only after a plant has been completed and has gone into operation before being terminated. Once a plant is. completed, the costs of decommissioning it would no longer be a "cost of construction" under section 6.9(J) of the Bond Resolu*809tion. Hence the decommissioning costs would not be payable out of the construction fund and would have to be paid by the participants under section 13 of the Participants' Agreement.
Section 13(a)(iii), however, clearly provides that decommissioning costs are payable by the participants only after WPPSS renders a "final accounting statement" at the end of the decommissioning process. The monthly accounting statements required under section 13(a) (ii) are for reporting purposes only. Significantly, the earlier drafts of the Agreement (Clerk's Papers, at 4283, 4321, 4357, 4399, 4452, and 4548) all required monthly payments based on the monthly accounting statements, but the drafts of February 27, 1975 and later deleted the monthly payments and based the payments solely on the final accounting statement. Clerk's Papers, at 4602 and 4768, and Agreement section 13(a)(ii) and (iii). Presumably, the Agreement does not require participants to pay for decommissioning costs until the final accounting statement is rendered because it cannot be known until then whether the ultimate result of decommissioning will be a debit or credit for the participants.
Thus, as discussed above, the section 13 payment provisions do not apply in the present context or precompletion decommissioning. Even if they did apply, the participants would not have to pay for decommissioning costs until WPPSS had rendered a final accounting statement at the end of the decommissioning process.
Conclusion
From reading the record, it is clear that the monumental crisis brought on by WPPSS was created by the simultaneous construction of five nuclear plants, as well as mismanagement. To save itself, WPPSS has asked us to approve a plan to mortgage the futures of ratepayers by requiring huge increases in electricity rates, in exchange for nothing, in violation of our statutes and state constitution. *810This we cannot do.7
I concur in the result of the majority.

 These cities include Richland, Tacoma, Blaine, Centralia, Ellensburg, McCleary, Port Angeles, Steilacoom, and Sumas. The magnitude of the commitments range from almost 7 times the allowable debt in the case of Port Angeles to almost 36 times what the statutes would permit in the case of McCleary.

 Citing RAP 13.7, the writer of the dissenting opinion limits himself to the statutory authority questions presented by the parties. I do not find RAP 13.7 applicable, as it specifically pertains only to issues to be considered by this court upon acceptance of review of a Court of Appeals decision. Even if applicable, however, RAP 13.7 permits this court to limit the issues only at the time of the granting of the motion or petition, not after oral presentation.
I find it impossible to discuss statutory authority without interpreting the Participants' Agreement and Bond Resolution, including section 6(d). The contract interpretation and statutory authority issues are so intertwined it is necessary to address the interpretation issues in determining the authority issues.