DISTRICTS ‑- PUBLIC UTILITY DISTRICTS ‑- BONDS ‑- CONTRACTS ‑- ELECTIONS ‑- NECESSITY FOR VOTER APPROVAL
(1) RCW 54.24.018 does not apply to PUD contractual obligations not involving issuance, by the district, of its own bonds.
(2) If a PUD issues bonds in order to fund a prior contractual liability, the provisions of Wash. Const., Article VIII, § 6 (but not Article VII, § 2 or Article VIII, § 7) would be applicable.
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April 14, 1982
Honorable Carol Monohon
St. Rep., 19/19B District
Route 1, Box 136
Raymond, Washington 98577 Cite as: AGLO 1982 No. 7
Dear Representative Monohon:
By recent letter you requested our opinion on several questions relating to the legal status of certain contractual liabilities which you describe as having been incurred by various public utility districts in our state in connection with the funding of Washington Public Power Supply System (WPPSS) nuclear projects. Specifically, you asked:
"(1) Is the debt incurred by public utility districts participating in the WPPSS projects an 'indebtedness' under RCW 54.24.018?
"(2) If so, is this debt nullified by the fact that it was entered into without a vote of the qualified electors of such public utility district?
"(3) If not, what kind of obligation is it?
"(4) Does the Constitution (Article VII, Sec. 2, and/or Article VIII, Sec. 6 and 7) require a vote of the qualified electors of the public utility district prior to such district incurring indebtedness to fund its participation in WPPSS projects four and five?
"(5) If the 'indebtedness' is not covered by RCW 54.24.018 because it is contractual between the [[Orig. Op. Page 2]] participating utility and WPPSS, what was the consideration which made such contract valid?"
We respond to your questions in the manner set forth in our analysis.
Your first two questions raise the issue of whether the subject contractual liabilities are covered by RCW 54.24.018 which requires voter approval prior to the incurrence of certain bonded debt by a public utility district. Our answer is in the negative. RCW 54.24.018, by its own express terms, only applies to debt incurred by a public utility district through its own issuance of bonds. Conversely, it does not apply to other contractual obligations not involving the issuance, by the district, of its own bonds.1/
Next, question (3) is related to your first two questions and is, in essence, answered by what we have already said. The obligations to which you have referred are contractual obligations not involving, however, a borrowing of money by the districts and a concomitant obligation to repay such borrowed money.
Question (4), as we understand it, calls upon us to assume that in order to discharge itsexisting contractual obligations to WPPSS, a particular public utility district determines to go out, itself, and borrow money through the issuance of district bonds. You ask whether, in that event, either Article VII, § 2 or Article VIII, § § 6 and 7 of the State Constitution would require a vote of the qualified electors of the district ". . . prior to such district incurring indebtedness to fund its participation in WPPSS projects . . .?"
Our answer is in the negative insofar as Article VII, § 2 and Article VIII, § 7 are concerned. The first of those two provisions is not a limitation on the incurrence of municipal debt but, instead, is a limitation upon the imposition of property taxes for the purpose, among other things, of paying debt incurred through the issuance of general obligation bonds. Moreover, in any event that provision of the Constitution expressly excludes both port [[Orig. Op. Page 3]] districts and public utility districts from its coverage.
Article VIII, § 7, of course, is the well known prohibition against loans or gifts of municipal funds, property or credit ". . . except for the necessary support of the poor and infirm." That provision, however, is not a restriction on borrowing by a county, city, town or other municipal corporation. Rather, it comes into play where others seek to borrow from the subject municipality. And even then, Article VIII, § 7 has been held by the Washington Court to be inapplicable where both parties involved (the lender and the borrower) are public agencies. See,Rands v. Clarke County, 79 Wash. 152, 139 Pac. 1090 (1914).
This leaves us, then, only with Article VIII, § 6 (Amendment 27) which reads, in material part, as follows:
"No county, city, town, school district, or other municipal corporation shall for any purpose become indebted in any manner to an amount exceeding one and one‑half per centum of the taxable property in such county, city, town, school district, or other municipal corporation, without the assent of three‑fifths of the voters therein voting at an election to be held for that purpose, nor in cases requiring such assent shall the total indebtedness at any time exceed five per centum on the value of the taxable property therein, to be ascertained by the last assessment for state and county purposes previous to the incurring of such indebtedness, . . ."
This provision, unlike Article VII, § 2, supra, is applicable to public utility districts. And therefore, assuming that the amount of indebtedness to be incurred through the issuance of bonds in a given case is sufficient to trigger the requirement of voter approval which is contained therein, such voter approval would be required before the particular bonds could be sold.
Finally, you asked:
"If the 'indebtedness' is not covered by RCW 54.24.018 because it is contractual between the participating utility and WPPSS, what was the consideration which made such contract valid?"
This, however, is a question which we could not possibly answer in the abstract, without making an examination of the terms [[Orig. Op. Page 4]] and content of the actual contracts involved.
We trust that the foregoing will be of assistance to you.
Very truly yours,
KENNETH O. EIKENBERRY
PHILIP H. AUSTIN
Deputy Attorney General
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1/See, for a discussion of the distinction between "debt" and contractual liability, State ex rel. Wittler v. Yelle, 65 Wn.2d 660, 339 P.2d 319 (1965).