City of Wenatchee v. Chelan County Public Utility District No. 1

Fearing, J.

¶59 (concurring) The issue in this suit is whether a city may tax the revenue received by a public utility district for the sale of domestic water within the city limits. The issue, in turn, is resolved by asking whether the provision of domestic water is a proprietary or governmental function. The author of the lead opinion, as always, provides a thorough analysis and answers correctly that, under the current state of the law, the provision of domestic water is a proprietary function and thus the city of Wenatchee may collect a tax from the Chelan County Public Utility District (PUD). Russell v. City of Grandview, 39 Wn.2d 551, 553 , 236 P.2d 1061 (1951); Pub. Util. Dist. No. 1 of Pend Oreille County v. Town of Newport, 38 Wn.2d 221 , 228 P.2d 766 (1951); City of Moses Lake v. United States, 430 F. Supp. 2d 1164 (E.D. Wash. 2006). I concur in this ruling.

¶60 I write separately because I consider current distinctions between a proprietary function and a governmental function, particularly in the context of domestic water delivery, to be outdated. If I could decide the case without the weight of precedence, I would consider the distribution of drinking water to be a quintessential governmental function that should not be taxed. If the provision of potable water is not a governmental function, then the public utility district should not engage in the supplying of water but should allow a proprietor to offer the service.

¶61 Washington courts have enunciated various tests for determining whether a function is proprietary or govern *352 mental in nature. Sometimes, the tests overlap. Some tests may be inconsistent with other tests. Some tests are more general and others more specific.

¶62 I can identify six tests employed by Washington courts to separate proprietary from governmental functions. First, the principal test in distinguishing the two is whether the act performed is for the common good of all, a governmental function, or whether it is for the special benefit or profit of the corporate entity, a proprietary function. Skagit County Pub. Hosp. Dist. No. 304 v. Skagit County Pub. Hosp. Dist. No. 1, 177 Wn.2d 718, 728-29 , 305 P.3d 1079 (2013); Okeson v. City of Seattle, 150 Wn.2d 540, 550 , 78 P.3d 1279 (2003); Lakoduk v. Cruger, 47 Wn.2d 286, 288-89 , 287 P.2d 338 (1955); Hagerman v. City of Seattle, 189 Wash. 694, 701 , 66 P.2d 1152 (1937). Second, a governmental function is based on a municipal corporation “ ‘[acting as an arm] of the state ... to promote the public welfare generally,’ ” whereas a proprietary function is based on the municipality “ ‘administering] the local and internal affairs of the territory which is incorporated, for the special benefit and advantage of the urban community embracing within the corporation boundaries.’ ” Wash. State Major League Baseball Stadium Pub. Facilities Dist. v. Huber, Hunt & Nichols-Kiewit Constr. Co., 165 Wn.2d 679, 687 , 202 P3d 924 (2009) (quoting 1 Eugene McQuillin, The Law of Municipal Corporations § 2.09, at 158 (3d ed. 1999)). Third, a public entity acts in a proprietary rather than a governmental capacity when it engages in businesslike activities that are normally performed by private enterprise, whereas governmental functions are those generally performed exclusively by governmental entities. Fabre v. Town of Ruston, 180 Wn. App. 150 , 321 P.3d 1208 (2014); Stiefel v. City of Kent, 132 Wn. App. 523, 529 , 132 P.3d 1111 (2006). Fourth, governmental functions involve performing activities for the public health, safety, and welfare. Fabre, 180 Wn. App. 150 . Fifth, the purchase of a commodity furnished for comfort by a municipality involves a propri *353 etary function. Okeson, 150 Wn.2d at 550 ; Twitchell v. City of Spokane, 55 Wash. 86, 89 , 104 P. 150 (1909). Sixth, a proprietary function comprises the municipal corporation providing a service only to those who request it. Okeson, 150 Wn.2d at 550 .

¶63 The six tests collide in the context of the supply of domestic water. Potable water is provided by a municipal corporation not for its own profit. The PUD is not a for-profit organization. The PUD provides water for the common good. Water is essential to human life. Thus, under the first and principal test of a governmental function, the provision of domestic water should be considered a governmental function.

¶64 The second test cuts both ways. The conveyance of drinkable water is for the general welfare. Yet, the service, as provided by an individual municipality, is targeted toward a limited urban community. The third test operates in favor of a governmental function. The public sector supplies about 85 percent of water needs. 2 The fourth test also leans in favor of water supply being a governmental function, since water involves the public health and welfare. The fifth and sixth tests militate in favor of water delivery being a proprietary function.

¶65 The six tests listed above lead to some razor thin, if not silly, distinctions, even outside the context of domestic water. Under Washington decisions, provision of electricity serves a proprietary function of the government. City of Tacoma v. Taxpayers of Tacoma, 108 Wn.2d 679, 694 , 743 *354 P.2d 793 (1987). Nevertheless, providing streetlights is a governmental function. Okeson, 150 Wn.2d at 550 . A municipality’s operation of traffic signals also involves a sovereign or governmental function. Okeson, 150 Wn.2d at 550 . On the one hand, dispensing of medical and psychiatric care constitutes a proprietary function. Petersen v. State, 100 Wn.2d 421 , 671 P.2d 230 (1983). On the other hand, a rural health district furnishing health care services acts in a governmental capacity. Skagit, 177 Wn.2d at 729 . Construction and maintenance of city streets is a proprietary function. Goggin v. City of Seattle, 48 Wn.2d 894, 897 , 297 P.2d 602 (1956). But supervision and control of streets is a governmental function. Goggin, 48 Wn.2d at 897 . Operation of a sewage system is a proprietary function. Hayes v. City of Vancouver, 61 Wash. 536 , 112 P. 498 (1911). The disposal of waste is a governmental function. King County v. City of Algona, 101 Wn.2d 789, 794 , 681 P.2d 1281 (1984); City of Spokane v. Carlson, 73 Wn.2d 76, 81 , 436 P.2d 454 (1968). Finally, as already noted, the provision of domestic water is a proprietary function. Russell, 39 Wn.2d at 553 . Nevertheless, supplying water for fire protection services is a governmental function. Stiefel, 132 Wn. App. at 530 .

¶66 King County, 101 Wn.2d 789 , a tax case like our case, stands for the proposition that operating a solid waste plant is a governmental, not a proprietary, function. I see no relevant distinction between operating a solid waste plant and operating a potable water delivery system. Both fulfill basic human needs for survival, one supplying sanitary drinking water and the other providing sanitary treatment of waste. Although each function can be furnished by a private business, each function is typically provided by a governmental entity. The Algona decision does not inform us how customers paid for the service, but I suspect that King County charged a user fee for disposal of waste, a factor supposedly crossing the line into the territory of a proprietary function. King County also likely provided the service only to those who requested it.

*355 ¶67 “[A]n ever-growing segment of the population get their drinking water from public entities (62% in 1950; 85% [in 2004]).” John D. Leshy, The Federal Role in Managing the Nation’s Groundwater, 11 Hastings W.-Nw. J. Envtl. L. & Pol’y 1, 1 (2004). State or local authorities, delivering the water, function without an aim for profit and instead operate on the ethos of providing an essential service for the common good. Clean and sufficient water supply is paramount to the strength of the nation and local communities. 3 “Clean water and sanitation are crucial to our public health, our quality of life, and our economic prosperity.” Janet C. Neuman, Going with the Flow: A Water Law Journey, 42 Envtl. L. 29 , 34 (2012); see also Lawrence O. Gostin et al., The Law and the Public’s Health: A Study of Infectious Disease Law in the United States, 99 Colum. L. Rev. 59 , 77-78 (1999).

¶68 At least one Washington statute recognizes the provision of domestic water as a governmental service. RCW 36.70A.030(18) defines “urban governmental services” or “urban services” to include

those public services and public facilities . . . historically and typically provided in cities, specifically including storm and sanitary sewer systems, domestic water systems, street cleaning services, fire and police protection services, . . . and public transit services.

(Emphasis added.)

¶69 Other states recognize the importance of the governmental service of domestic water delivery. The provision of potable water is similar in nature to garbage removal, sanitation, and fire protection. Bjornestad v. Hulse, 229 Cal. *356 App. 3d 1568 , 281 Cal. Rptr. 548 (1991). Thus, the California court ruled that a special law, providing that only one designated landowner per parcel in a water district could vote in a district election or be a member of a district’s governing board of directors, was unconstitutional under equal protection clauses of the California and United States Constitutions since a water district performed a governmental function.

¶70 In Washington Township v. Village of Ridgewood, 26 N.J. 578 , 141 A.2d 308 (1958), the New Jersey court noted that to maintain the governmental versus proprietary function as a test with regard to water delivery is specious. That court wrote, and I conclude:

The distinction is illusory; whatever local government is authorized to do constitutes a function of government, and when a municipality acts pursuant to granted authority it acts as government and not as a private entrepreneur .... Surely the supply of water cannot be deemed to be a second-class activity in the scheme of municipal functions.

141 A.2d at 311 .

U.S. Congressional Budget Office, Future Investment in Drinking Water and Wastewater Infrastructure 4 (2002) (“For both drinking water and wastewater, systems owned by the public sector — by local governments or special local or regional government authorities — serve the large majority of households. Although community drinking water systems owned by the private sector account for over half of all such systems, they serve only about 15 percent of households; private wastewater systems that treat household sewage account for roughly 20 percent of the total, but serve few households — perhaps 3 percent.”); Joseph L. Sax et al., Legal Control of Water Resources 14 (4th ed. 2006) (“Most urban and suburban water uses, moreover, depend on municipalities and public utilities for their water. The municipality or utility may in turn get its water from a governmental water agency.”).

Sax et al., supra, at 2 (“Along with air, water is our most crucial natural resource.”); Barton H. Thompson, Jr., Water Law as a Pragmatic Exercise: Professor Joseph Sax’s Water Scholarship, 25 Ecology L.Q. 363 , 381 (1998) (“[W]hen water is transferred, the community loses a natural resource, which it either began with or acquired earlier through governmental or community efforts. Because of water’s inherent importance to an economy, the community also fears that its crucial resources, and thus its options for the future, are reduced.”).