Opinion Information Sheet
| Docket Number: | 64492-1 |
| Title of Case: | In Re Limited Tax General Obligation Bonds Of The City Of Edmonds |
| File Date: | 07/05/2011 |
| Appeal from Snohomish Superior Court | |
| Docket No: | 08-2-00023-9 |
| Judgment or order under review | |
| Date filed: | 10/22/2009 |
| Judge signing: | Honorable Larry E Mckeeman |
| Authored by | Ann Schindler |
| Concurring: | C. Kenneth Grosse |
| Anne Ellington |
Counsel for Appellant(s) | |
| Steven James Peiffle | |
| Attorney at Law | |
| Po Box 188 | |
| Arlington, WA, 98223-0188 | |
Counsel for Respondent(s) | |
| William Howard Patton | |
| Foster Pepper PLLC | |
| 1111 3rd Ave Ste 3400 | |
| Seattle, WA, 98101-3299 | |
| Hugh Davidson Spitzer | |
| Foster Pepper PLLC | |
| 1111 3rd Ave Ste 3400 | |
| Seattle, WA, 98101-3299 | |
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE
In the Matter of the Limited) No. 64492-1-I
Tax General Obligation Bonds )
of the City of Edmonds, )
)
Rowena Rohrbach, Public )
Representative, ) PUBLISHED OPINION
)
Appellant, )
)
v. )
)
City of Edmonds, )
)
Respondent. ) FILED: July 5, 2011
Schindler, J. ? The City of Edmonds (City) authorized the issuance of $4.2
million in taxpayer bonds to extend and complete its fiber optic network in order to
convert to a wireless water meter system, as well as provide broadband access to
police, fire, and other public institutions. Because the issuance of the bonds is
primarily for a public purpose, the City has the authority to allow private individuals and
nongovernmental organizations to use the current excess capacity of its high-speed
broadband network. We hold that the City?s decision to issue the taxpayer bonds does
not violate article VII, section 1 of the Washington State Constitution and is not an
unconstitutional gift of funds or lending of credit in violation of article VIII, section 7.
FACTS
No. 64492-1-I/2
The facts are not in dispute. In November 2004, the Edmonds City Council
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No. 64492-1-I/3
formed a Citizens Technology Advisory Committee (CTAC). The ?Edmonds CTAC
Charter? defines the objective of the committee as follows:
Within the framework of this charter, the CTAC seeks to advance the
City?s interests by identifying and recommending viable technologies that
will:
? Stimulate economic activity within the City and help attract the
types of businesses that will add to the City?s economic vitality and
stabilize the operating revenues of City Government.
? Allow City services to be offered in a way that optimizes the
efficiency of the City Worker while improving the quality of service
delivered to Edmonds Citizens.
? Improve Public Safety functions by enabling seamless inter-
jurisdictional communication and enabling more efficient
deployment of Public Safety resources.
? Help stabilize / recover Utility Tax and Franchise fee revenue.
In March 2005, the CTAC issued a ?Municipal WiFi Issue Paper? analyzing the need to
create a City-owned high-speed broadband network.
In June 2005, the Washington State Department of Transportation (WSDOT)
requested expedited approval of permits and use of City-owned right-of-way to install
36 strands of fiber optic cable to link the Edmonds Ferry Terminal to the existing
WSDOT fiber optic cable that runs along Interstate 5. The fiber optic link to the
Edmonds Ferry Terminal was part of an infrastructure security initiative funded by the
Department of Homeland Security.
In exchange for the City?s agreement to expedite approval and the use of its right-
of-way, WSDOT gave the City access to 24 of the 36 strands of fiber optic cable.
WSDOT also agreed to allow the City to determine placement and installation of the
fiber optic cable. The City requested installation and termination of the 24 strands at
the Public Works Administration Building. The Public Works building is located near
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No. 64492-1-I/4
the Public Safety Building in downtown Edmonds.
In late 2005, the City joined a consortium that owns and operates a 256-strand
fiber optic cable that runs underground ?from downtown Seattle to the King/Snohomish
County Line along the centerline of Hwy 99.? The consortium includes the city of
Seattle, King County, and the University of Washington. As a member of the
consortium, the City was able to use six unallocated strands of fiber optic cable.
In December 2006, the City completed construction of a link connecting the 24
fiber strands at the Public Works Administration Building to the six strands located at
the county line under Highway 99, providing:
[A] direct link to the regional internet connection hub at the Westin
building in downtown Seattle and the fibers it had previously acquired
from WSDOT running from the ferry terminal to the City?s Public Works
Administration building off 212th Street in Edmonds.
Completion of this link allowed the City to provide broadband internet service to other
public institutions in the City, such as the Edmonds School District, Stevens Hospital,
and Edmonds Community College, as well as other broadband users. By using its own
broadband fiber optic network, the City obtained significant cost savings and
performance improvements.
The overall transmission capacity, or bandwidth, of a fiber optic network is
defined by the smallest segment. Each strand of the City?s fiber optic network
simultaneously transmits and receives up to 10 Giga (billion) bits per second (Gbps), or
10,000 Mega (million) bits per second (Mbps). Using the smallest segment of the City?s
current fiber optic network, the six-strand link from the City to downtown Seattle, the
current capacity is 60 Gbps. The bandwidth of the segment connecting the Edmonds
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No. 64492-1-I/5
Ferry Terminal to the Public Works Administration Building is 240 Gbps. It is
anticipated that in the near future, it may be possible to expand the bandwidth of each
strand to 100 Gbps.
On April 16, 2008, fiber optic network consultant Rick Jenness issued the
?Edmonds Fiber Network? report addressing the City?s use of the fiber optic network as
well as use by ?other governmental, educational and not-for profit institutions.? The
?Introduction? to the Report states that the City had been working for several years to
establish a fiber optic network ?to reduce municipal telecommunications costs while
increasing telecommunications functionality.? In addition, the Introduction also states
that the City had ?examined two other uses for this network: providing high speed
broadband access to other local governmental and not-for-profit entities, and
expanding the network to provide . . . services for residents and businesses.?
The Report recommends the City move ahead with ?the development of the
Edmond?s Fiber Network (EFN) for internal and intergovernmental uses.? The Report
points out that future excess capacity would allow the City to offer access to the
network to residents and businesses. However, based on estimates of the cost to
provide a connection to each home, the Report recommends against expanding the
network to provide service to all residential and commercial users.
The Report recommends proceeding with a proposed project to extend the fiber
network geographically in order to replace the water meters throughout the City with a
wireless system. According to the Report, utility savings would offset the costs of
replacing the water meters. The Report describes the proposed wireless water meter
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No. 64492-1-I/6
reading project as follows:
By extending the EFN northward to the Seaview area, and southward
towards Esperance area, the City can provide a wireless communications
infrastructure capable of remotely reading every water meter in the City
without the need for employees of the Water Department to drive to each
location and manually capture the meter value. Currently 37% of the
City?s meters are over 20 years old, and a full 66% are over ten years old.
As meters get older, their accuracy degrades causing lost revenue to the
City.
To read meters centrally, several radio reception points are needed to be
located in various parts of the City. These reception points would be
connected to the central office via an expansion of the City?s fiber optic
backbone. The base cost of meter replacement (necessary in any event)
is estimated at just under $2.0 million. Moving to smart meters adds just
over $2.0 million.
The Report sets forth the following costs for the project:
Item Base Meter Smart Total Cost
Replacement Meter Costs
Replacement Water $1,776,299 $1,776,299
Meters
Meter Radios 1,254,875 1,254,875
Base Station 180,700 180,700
Tower and Base 50,000 50,000
Fiber Extensions 100,000 100,000
Switching Equipment 75,000 75,000
WiFi Communications 300,000 300,000
Sales Tax 135,887 149,984 285,857
Grand Total $1,912,186 $2,110,559 $4,022,731
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No. 64492-1-I/7
The City conducted a study of the wireless meter reading project analyzing the
costs and benefits. The study estimates that the cost savings from a wireless water
meter system are significant and that the costs incurred in converting to a wireless
system would be offset in eight years.
In July 2008, the City issued the ?Edmonds Broadband Initiative Confidential
Executive Summary.? The City recommended extending ?the existing WSDOT
backbone to connect other public sector partners who require high volume internet
capacity,? and creating ?a fiber optic ring that would connect the 5 major zones of the
City? to allow ?[e]lectronic [m]eter reading?1 and access by police officers, fire fighters,
fire marshals, inspectors, and public works employees ?while working in the field.?
According to the Executive Summary, ?[b]ecause of the large capacity of the fiber optic
technology,? consideration should also be given to leasing ?some of this excess
capacity to commercial and residential users within the City thus accelerating the
payback time of the investment.?
On December 16, the City Council adopted ?Ordinance No. 3721.? Ordinance
No. 3721 authorizes issuing $4.2 million in general tax obligation bonds to install 24
strands of cable to connect the City?s existing fiber optic network backbone to radio
towers in order to ?construct a wireless water meter system and extend and improve the
City's fiber optic network both to support that system and for other municipal and public
purposes.? Ordinance No. 3721 states that completion of the network will allow the City
to convert ?all of the City?s water meters over to wireless meters that are read from
1 (Boldface omitted.)
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No. 64492-1-I/8
centralized receivers connected to the fiber backbone? and provide ?police, fire and
other City employees? in the field with ?wireless broadband connectivity.? Ordinance
No. 3721 also states that installation of 24 strands is ?the most economical size to
install due to its increased durability, wide availability and commodity like pricing.?
Installing 24 strands results in significant current excess capacity of approximately
239,980 Mbps, or 99.9916 percent in available capacity.
Ordinance No. 3721, Section 1 sets forth the City Council?s findings:
1.1 The City desires to construct, own and operate a wireless
water meter system to replace its existing water meter system.
1.2 The City currently owns and operates a high capacity
telecommunications fiber optic network that serves the City?s utility
operations, public safety operations and other City services, and desires
to extend and improve that system in order to support the new wireless
water meter system and to enhance other utility operations, public safety
operations, and other public services.
1.3 The extension and improvement of the City?s existing fiber
optic network creates excess capacity that may be used to provide access
to ultra high capacity internet and other telecommunications services;
capacity for accommodating expanding technologies and demand;
intergovernmental coordination and services (including educational and
health institutions); and more and faster service to members of the public
who are in need of those services.
1.4 The City is in need of financing a wireless water meter
system and the extension and improvement of the City?s fiber optic
network (the ?Project,? as defined in Section 3, below), the estimated total
cost of which is more than $4,200,000, and the City does not have
available sufficient funds to pay the cost.
1.5 To pay costs of the Project, the City Council finds it
necessary and advisable that the City issue and sell its limited tax general
obligation bonds in the principal amount of not to exceed $4,200,000 (the
?Bonds?).
Based on the findings, the ordinance authorizes issuance of the bonds,
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No. 64492-1-I/9
describing the public purpose, as well as the intent to contract for use of the excess
capacity with private individuals and entities. Ordinance No. 3721, Section 3 provides:
The City shall borrow money on the credit of the City and issue negotiable
limited tax general obligation bonds evidencing that indebtedness as
described in Section 4, for general City purposes to provide part of the
funds with which to design and construct a wireless water meter system
and extend and improve the City?s fiber optic network both to support that
system and for other municipal and public purposes (the ?Project?) (a) to
enable timely, efficient and cost-effect [sic] water meter reading; (b) for
use by City departments in order to enhance other utility operations,
public safety operations, and other City services, (c) for use by other
governmental, educational and health institutions pursuant to interlocal
agreements and other contractual arrangements, and (d) to the extent
capacity is available, for use under contract by private persons and
entities that need access to high capacity internet and other high capacity
telecommunications services, and to pay the costs of issuance and sale of
the bonds (the ?costs of issuance?). The general indebtedness to be
incurred shall be within the limit of up to 1½ % of the value of the taxable
property within the City permitted for general municipal purposes without
a vote of the qualified voters therein.
On December 23, the City filed a declaratory judgment action to determine the
validity of Ordinance No. 3721 and the decision to issue taxpayer bonds to expand the
fiber optic network. The complaint describes the history of the current fiber optic
network and states that the purpose of the bonds is to extend and improve the fiber
optic network in order to provide funding to design and construct a wireless water meter
system and use the network for other governmental purposes. The complaint
describes the anticipated use of the network for ?public safety and public works
operations,? as well as providing ?high capacity bandwidth communication to numerous
other government entities.? Paragraph 22 of the complaint identifies a ?fourth use? as
the ability ?to provide high bandwidth communication to individuals and non-
government organizations that need access to high capacity internet connections.?
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No. 64492-1-I/10
The trial court designated Rowena Rohrbach as the taxpayer representative for
the declaratory judgment action, and appointed counsel to represent Rohrbach and the
taxpayers. Rohrbach?s answer admits all allegations in the complaint except paragraph
22. As to paragraph 22, the answer asserts that as a matter of law, the City is not
authorized to ?create public bonded indebtedness in part for the purpose of providing
high band-width communications facilities for private use,? and state law does not
authorize the City to provided telecommunication services.
The City filed a motion for summary judgment. The City argued that as a matter
of law, it has the authority to issue tax obligation bonds to extend the fiber optic network
for public purposes, as well as allow the public to use the currently existing excess
capacity. In support, the City submitted a number of declarations from a number of
business owners interested in using the City?s network, including Dewar, Meeks &
Ekrem, CPA and Europe Through the Back Door. In opposition, Rohrbach argued that
the City was not authorized to issue taxpayer obligation bonds for a project that also
benefits individuals and businesses, and the City has no authority to provide
telecommunications services.
The trial court granted the City?s motion for summary judgment. The court ruled
that the City was authorized to issue taxpayer bonds, and to the extent available, the
City had the authority to allow businesses and private individuals to use the current
excess capacity of its fiber optic network. The court?s order states, in pertinent part:
1. The City of Edmonds? Motion for Summary Judgment is
GRANTED.
2. The use of excess capacity on the City of Edmonds? high
speed fiber optic communication system by private individuals and non-
governmental businesses and organizations that need access to ultra
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No. 64492-1-I/11
high bandwidth communication is DECLARED to be a lawful public
purpose of the City of Edmonds under its general ?home rule? powers as a
code city organized under Title 35A RCW and under the express statutory
authority to engage in economic development programs under RCW
35.21.703.
3. The bonds authorized by Edmonds Ordinance No. 3721 are
DECLARED valid in all respects, including the use of the bonds for
enhancement of the City?s high speed fiber optic communication system
a. to enable timely, efficient and cost-effective water meter
reading;
b. for use by City departments in order to enhance other utility
operations, public safety operations, and other City services;
c. for use by other governmental, educational and health
institutions pursuant to interlocal agreements and other
contractual arrangements;
d. to the extent capacity is available, for use under contract by
private persons and entities that need access to high
capacity internet and other high capacity
telecommunications services; and
e. to pay the costs of issuance and sale of the bonds.
Rohrbach appeals.
ANALYSIS
Rohrbach contends that the City does not have the statutory authority to issue
taxpayer obligation bonds to expand the fiber optic network for both a public purpose
and the stated intent to allow private individuals and businesses to use the available
current excess capacity.
The City filed this declaratory judgment action under RCW 7.25 to determine the
validity of Ordinance No. 3721 and the issuance of taxpayer obligation bonds. RCW
7.25.010 provides, in pertinent part:
Whenever the legislative or governing body of . . . any county, city, school
district, other municipal corporation, taxing district, or any agency,
instrumentality, or public corporation thereof shall desire to issue bonds of
any kind and shall have passed an ordinance or resolution authorizing the
same, the validity of such proposed bond issue may be tested and
determined in the manner provided in this chapter.
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No. 64492-1-I/12
In King County v. Taxpayers of King County, 133 Wn.2d 584, 594-95, 949 P.2d
1260 (1997), the Washington State Supreme Court adopted a three-part test to use in
determining the validity of the issuance of taxpayer bonds in a declaratory judgment
action under RCW 7.25.010:
1. Is there legislative or constitutional authority delegated to
the municipality to issue the bonds for the particular purpose?
2. Was the statute authorizing the bond issue constitutionally
enacted? If not constitutionally enacted or if unconstitutional for any other
reason, the issue is void and recitals are of no effect.
3. Is the purpose for which the bonds are issued, a public and
corporate purpose, as distinguished from a private purpose?
The City has the burden of establishing the validity of the ordinance authorizing
issuance of the bonds under RCW 7.25.010. King County, 133 Wn.2d at 595.
Legislative And Constitutional Authority To Issue Taxpayer Bonds
Citing to RCW 35A.40.080, Rohrbach claims the City does not have the express
authority to issue taxpayer bonds as authorized by Ordinance No. 3721. We disagree.
Article XI, section 11 of the Washington State Constitution gives code cities the
authority to ?make and enforce within [their] limits all such local police, sanitary and
other regulations as are not in conflict with general laws.?
The City of Edmonds was incorporated under the Optional Municipal Code,
chapter 35A RCW. Optional Municipal Code cities are vested with broad legislative
powers limited only by the restriction that an enactment cannot contravene the
constitution or directly conflict with a statute. RCW 35A.11.020; Heinsma v. City of
Vancouver, 144 Wn.2d 556, 560, 29 P.3d 709 (2001); Winkenwerder v. City of Yakima,
52 Wn.2d 617, 622, 328 P.2d 873 (1958).
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No. 64492-1-I/13
As a code city, the City of Edmonds is authorized to incur debt or borrow
money for ?strictly municipal purposes? without a vote of the taxpayers for ?the
amount of indebtedness authorized by chapter 39.36 RCW.? RCW 35.37.040;
see also RCW 39.36.020(4) (requiring strictly municipal purpose for
indebtedness under chapter 39.36 RCW).2
Nonetheless, Rohrbach argues that under RCW 35A.40.080, the City does not
have express authority to issue taxpayer bonds to expand the fiber optic network. The
plain language of RCW 35A.40.080 does not support Rohrbach?s argument. RCW
35A.40.080 unambiguously allows a code city to issue taxpayer bonds as authorized by
other statutes, including RCW 35.37.040 and RCW 39.36.020. RCW 35A.40.080
provides:
In addition to any other authority granted by law, a code city shall have
authority to ratify and fund indebtedness as provided by chapter 35.40
RCW; to issue revenue bonds, coupons and warrants as authorized by
chapter 35.41 RCW; to authorize and issue local improvement bonds and
warrants, installment notes and interest certificates as authorized by
chapter 35.45 RCW; to fund indebtedness and to issue other bonds as
authorized by chapters 39.44, 39.48, 39.52 RCW, RCW 39.56.020, and
39.56.030 in accordance with the procedures and subject to the
limitations therein provided.[3]
2 RCW 35.37.040 provides, in pertinent part:
Every city and town, may, without a vote of the people, contract indebtedness or borrow
money for strictly municipal purposes on the credit of the city or town and issue
negotiable bonds therefor in an amount which when added to its existing nonvoter
approved indebtedness will not exceed the amount of indebtedness authorized by
chapter 39.36 RCW, as now or hereafter amended, to be incurred without the assent of
the voters.
Under RCW 39.36.020(2)(a)(ii), a code city may incur indebtedness of less than 1.5 percent of the assessed
value of property in the city without a vote of the taxpayers. King County, 133 Wn.2d at 608-09. Rohrbach
does not argue that Ordinance No. 3721 exceeds the City?s debt threshold.
3 (Emphasis added.)
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No. 64492-1-I/14
Rohrbach also asserts the City does not have the authority to operate a
fiber optic network and provide private individuals and businesses with access to
the network. But Rohrbach cites no authority expressly prohibiting the City from
operating a fiber optic network and allowing access to its network. And in an
analogous case, City of Issaquah v. Teleprompter Corp., 93 Wn.2d 567, 572-75,
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No. 64492-1-I/15
611 P.2d 741 (1980), the Washington State Supreme Court held that absent an
express legislative enactment to the contrary, the city of Issaquah was not
prohibited from owning, operating, and providing cable television services.4
Issuance Of Taxpayer Bonds For A Public Purpose
Rohrbach also contends that Ordinance No. 3721 violates article VII, section 1
of the Washington State Constitution and RCW 35.37.040 because the City is not
issuing taxpayer bonds strictly for public purposes. Rohrbach concedes that the bonds
are being issued for a public purpose but asserts that because the City?s current use is
only 0.0014 percent of the available bandwidth, the network primarily benefits private
individuals and businesses.
Article VII, section 1 of the Washington State Constitution provides, in pertinent
part: ?All taxes . . . shall be levied and collected for public purposes only.? Public funds
cannot be used ?to benefit private interests where the public interest is not primarily
served.? Japan Line, Ltd. v. McCaffree, 88 Wn.2d 93, 98, 558 P.2d 211 (1977).
Accordingly, the expenditure of public funds by the municipality must further public
purposes. CLEAN v. State, 130 Wn.2d 782, 792-93, 928 P.2d 1054 (1996).
What constitutes a ??public municipal purpose is not susceptible of precise
definition, since it changes to meet new developments and conditions of times.?? United
States v. Town of N. Bonneville, 94 Wn.2d 827, 833, 621 P.2d 127 (1980) (quoting
4 We note that courts in other jurisdictions have reached the same conclusion as to telecommunication
services. See In re Application of Lincoln Elec. Sys., 265 Neb. 70, 80-87, 655 N.W.2d 363 (2003), overruled
on other grounds; Nixon v. Mo. Mun. League, 541 U.S. 125, 124 S. Ct. 1555, 158 L. Ed. 2d 291 (2004)
(holding that a ?home rule? city has the legal authority to provide telecommunication services incidental to other
public purposes); GTE Nw. Inc. v. Or. Pub. Util. Comm?n, 179 Or. Ct. App. 46, 39 P.3d 201 (2002) (holding that
a county with ?statutory home rule? powers has the authority to provide telecommunication services).
15
No. 64492-1-I/16
McQuillin Mun. Corp. § 39.19, at 32 (3d ed. 1970)). In CLEAN, our Supreme Court
concluded that ??[a]n expenditure is for a public purpose when it confers a benefit of
reasonably general character to a significant part of the public.?? CLEAN, 130 Wn.2d at
793 (quoting In re Marriage of Johnson, 96 Wn.2d 255, 258, 634 P.2d 877 (1981)).
In CLEAN, the Court rejected the argument that the county?s issuance of
taxpayer bonds violated article VII, section 1 if private individuals or businesses also
benefit. In CLEAN, the Court addressed the question of whether the county?s decision
to issue taxpayer bonds to construct a baseball stadium violated Washington
Constitution article VII, section 1. CLEAN, 130 Wn.2d at 792. The Court deferred to
?the judgment of the Legislature? and held that issuance of the taxpayer bonds further
public purposes even though the privately owned baseball club would also benefit from
the expenditure of public funds. CLEAN, 130 Wn.2d at 792-97, 821.
Likewise, in Chandler v. City of Seattle, 80 Wn. 154, 155-57, 141 P. 331 (1914), the
Court upheld issuance of bonds to expand the municipal electricity plant. The planned
expansion increased available electricity and reduced the cost of electricity. To further
offset the cost, the city planned to sell excess electricity and surplus steam power to private
parties. Chandler, 80 Wn. at 156-57. The Court held that where a project has both public
and private purposes, the expenditure of public funds is authorized as long as the ?bona
fide intention?5 is for a public purpose. Chandler, 80 Wn. at 159.
Rohrbach also argues the City must establish that the fiber optic network is
necessary for ?the continued economic and social viability? of the City. Bonneville, 94
5 (Italics omitted.)
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No. 64492-1-I/17
Wn.2d at 834. In an attempt to narrowly define a public purpose, Rohrbach misstates
the holding in Bonneville. In Bonneville, the Court held that the city had authority to
enter into land transactions with the government because the agreement directly
benefited a significant number of the city?s residents and would allow the city to grow.
Bonneville, 94 Wn.2d at 834. The Court states that the fact that private ends are
incidentally advanced is immaterial to the determination of whether legislation furthers
a public purpose. Bonneville, 94 Wn.2d at 834. Likewise, in CLEAN, the Court stated
that ??[w]here it is debatable as to whether or not an expenditure is for a public purpose,
we will defer to the judgment of the legislature.?? CLEAN, 130 Wn.2d at 793 (quoting
Anderson v. O?Brien, 84 Wn.2d 64, 70, 524 P.2d 390 (1974)). While the Court
concluded that because the question of whether the construction of the baseball
stadium would have an economic benefit was ?debatable,? the Court deferred to the
legislative findings that the new stadium would result in additional jobs, entertainment,
and tourism. CLEAN, 130 Wn.2d at 796-97.
Here, as in CLEAN and Chandler, the record supports the determination that the
City?s issuance of bonds to expand the fiber optic network furthers public purposes.
Ordinance No. 3721 expressly states that the primary purpose of issuing the taxpayer
bonds is to expand the City?s fiber optic network in order to convert to a wireless water
meter system. The City already has excess bandwidth capacity. Ordinance No. 3721
authorizes extension of the geographic reach of the City?s fiber network throughout the
entire City. The undisputed record also shows that the vast majority of the revenue
generated by the bonds will be used to replace the existing water meters and install
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No. 64492-1-I/18
meter radios. Of the $4.2 million in taxpayer bonds, approximately $1.8 million will be
spent on replacing water meters, and approximately $1.3 million on meter radios. By
contrast, only $100,000 is needed to install the cable necessary to geographically
extend the fiber optic network for the wireless water meter project. There is also no
dispute that the wireless water meter project and use of the network for public safety
purposes will improve services for the residents and save money. The City?s plan to
allow additional public sector and intergovernmental agencies, and private individuals
and businesses to use the current network ?to the extent capacity is available? does not
violate article VII, section I.
Rohrbach also asserts that issuing bonds to expand the fiber optic network
violates article VIII, section 7 of the Washington State Constitution. Washington
Constitution article VIII, section 7 provides:
No county, city, town or other municipal corporation shall hereafter give
any money, or property, or loan its money, or credit to or in aid of any
individual, association, company or corporation, except for the necessary
support of the poor and infirm, or become directly or indirectly the owner
of any stock in or bonds of any association, company or corporation.
??The manifest purpose of [article VIII, section 7] . . . is to prevent state funds
from being used to benefit private interests where the public interest is not primarily
served.?? CLEAN, 130 Wn.2d at 797 (quoting McCaffree, 88 Wn.2d at 98). In
determining whether an expenditure of public funds violates article VIII, section 7 we
look at consideration and donative intent. Gen. Tel. Co. of the Nw., Inc. v. City of
Bothell, 105 Wn.2d 579, 588, 716 P.2d 879 (1986). Courts do not inquire into the
adequacy of consideration unless there is proof of donative intent or a grossly
18
No. 64492-1-I/19
inadequate return. Adams v. Univ. of Wash., 106 Wn.2d 312, 327, 722 P.2d 74 (1986).
Rohrbach?s reliance on Lassila v. City of Wenatchee, 89 Wn.2d 804, 576 P.2d
54 (1978) is unpersuasive. In Lassila, the Washington Supreme Court held that the
city?s decision to purchase property with the intent to resell it to a private party violates
Washington Constitution article VIII, section 7 even if the city received a fair price and
the sale furthered the city?s development efforts. Lassila, 89 Wn.2d at 811-12.
In CLEAN, the Court distinguished Lassila in holding that the issuance of
taxpayer bonds to construct a sports stadium was not an unconstitutional gift of public
funds to the private tenant because the county remained the owner of the stadium and
the private tenant had to pay reasonable rent. CLEAN, 130 Wn.2d at 798-99.
Again, the situation we faced in Lassila is not analogous to the present
case. There, the City of Wenatchee was essentially acting as a middle
person for a private enterprise. Wenatchee received nothing of value for
its expenditure of public money and no public purpose was served by the
expenditure. Here, unlike the situation in Lassila, we can discern no
intent on the part of the Legislature to have the stadium sold to the
Mariners, the Stadium Act providing that ownership of the facility is to
remain in the hands of the public facilities district.
CLEAN, 130 Wn.2d at 799.
Here, as in CLEAN, there is no question that the City will own the fiber optic
network and plans to charge private individuals or businesses to use the available
current excess capacity.
CONCLUSION
Because issuance of the taxpayer bonds as authorized by Ordinance No. 3721
is for the primary purpose of expanding the fiber optic network in order to replace water
meters with a wireless water meter system, as well as to provide public safety officers
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No. 64492-1-I/20
access to the network, we conclude the City has the statutory and constitutional
authority to issue the bonds, and affirm.
WE CONCUR:
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