PUBLIC UTILITY DISTRICTS ‑- SCHOOL DISTRICTS - VALIDITY OF AGREEMENT UNDER WHICH P.U.D. COMPENSATES DISTRICT IN LIEU OF TAXES.

PUBLIC UTILITY DISTRICTS ‑- SCHOOL DISTRICTS ‑- VALIDITY OF AGREEMENT UNDER WHICH P.U.D. COMPENSATES DISTRICT IN LIEU OF TAXES.

A public utility district may enter into an agreement to compensate a school district for loss of taxes occasioned by purchase of private property within the school district by the P.U.D.

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                                                                  March 20, 1956

Honorable Paul A. Klasen, Jr.
Prosecuting Attorney
Grant County
Ephrata, Washington                                                                                                              Cite as:  AGO 55-57 No. 229

  Dear Sir:

             By letter previously acknowledged you have asked whether the Grant County Public Utility District could legally enter into a contract which called for a voluntary payment of money to certain school districts.  You have informed us that the utility district intends to acquire a dam site and surrounding lands, now held as private property, for the construction of the Priest Rapids Project.  The contract which you submitted provides for payments which are designed to take the place of any loss of tax revenue occasioned by the school districts due to the acquisition of private property by the utility district for the construction of the project and further calls for payments for the education of the children of persons who are or will be working on the construction of this power project or on activities directly resulting from the construction of such project.

             It is our opinion that the public utility district may legally enter into such a contract.

                                                                      ANALYSIS

             The authority for a public utility district to make voluntary payments to a school district is found in RCW 54.28.080.  The pertinent portions of this statute read as follows:

              [[Orig. Op. Page 2]]

            "* * *  In addition, any public utility district which acquires from any private person, firm, or corporation anoperating property situated within a school district, is authorized to make voluntary payments to such school district for the use and benefit of the school district."  (Emphasis supplied)

             RCW 54.28.010 defines "operating property" as:

             "* * * all of the property utilized by a public utility district in the operation of a plant or system for the generation, transmission, or distribution of electric energy for sale; * * *"

             It seems obvious that the intention of the legislature is to authorize public utility districts to compensate school districts for the loss of revenue occasioned by the removal of private property from the tax rolls.  The loss to the district is just as complete whether the property is actually generating electricity or not.  Indeed, a school district's school population problem is usually more acute during the course of major construction than afterwards.

             The question which immediately arises is whether the acquisition of the vacant dam site and the surrounding lands constitutes the acquisition of an operating property.  We realize the argument could be made that the vacant dam site, as such, is not used as of the time of acquisition in the operation of a plant or system for the generation, transmission or distribution of electrical energy.  We are also aware of the decisions which hold that the authority of a municipal corporation is limited to those powers expressly granted by statute or necessarily to be implied therefrom.  Christie v. Port of Olympia, 27 Wn. (2d) 534, 179 P. (2d) 294; State v. Port of Seattle, 104 Wash. 634, 177 Pac. 671, 180 Pac. 137.

             However, we believe that it is in keeping with former decisions of the Washington court to construe the words "all of the property utilized by a public utility district in the operation of a * * * system for the generation, * * * of electrical energy * * *" in a rather broad manner.  The case ofSmith v. Northern Pacific Railroad, 7 Wn. (2d) 652, 110 P. (2d) 851, is an example of the all-inclusive definition that the courts will place on the term "used as operating property."  This case involved the question of whether certain fuels, materials, supplies and machinery held by a railroad company in storage for future use  [[Orig. Op. Page 3]] could be taxed as an operating property used in the conduct of the company's operations.  In this case the court held that the term "operating property" should not be limited to property actually used and found that the material held for future use was taxable.  The decision pointed out that the word "used" could be considered as referring to the present nature or character of a thing as determined by the customary, or frequentative use of similar things and should not be limited by the actual use made of a specific piece of property in the past.

             A case which resulted in a similar holding is that ofOregon Short Line R. Co. v. Ada County, et al., 18 F. Supp. 842.  In this case the court was faced with the problem of deciding whether property purchased for a terminal and station by a railroad was operating property in the situation in which the land was leased to others for the construction of buildings for receiving freight.  In this case the court held that the land was operating property and said:

             "It cannot be disputed that under the evidence, the buildings erected on the company's right of way are used by the lessees or tenants in storing fruit, grain, and other products for the purpose of shipment and the receiving and delivering of freight from the line of the company which seem necessary and proper in the operation of the road.  Fairly it can be said that the operation of a railroad includes the necessary facilities for handling products and freight presented for shipment and the buildings in question which are used in storing products and freight delivered by the Railroad Company and in shipping such therefrom over its line are essential for that purpose.  As a common carrier the obligation is imposed upon the Railroad Company to furnish all necessary structures in which to receive and deliver freight for shipment over its lines and into which to handle freight from its cars on delivery to the consignee.  The arrangement here made by the Railroad Company with the lessees or tenants to erect buildings upon its right of way enables it to more promptly discharge its duty as to the delivery and receiving of freight and furnishing of reasonable terminal facilities and such an arrangement is not inconsistent with the purpose for which its charter was granted.  The right of way in question, although the structures of others appear thereon, was acquired by the company with a bona fide intention of using it to furnish terminal facilities and with more convenience in delivering and receiving freight which can be said as being property reasonably necessary to the operation of the road and in conducting its business.  * * *"

              [[Orig. Op. Page 4]]

            Under these decisions property which is held for necessary additions or betterments would be covered by wording similar to the phrase "used as operating property."  Webster's Dictionary, Second Edition, defines the word "utilize" as "to make useful, to turn to a profitable account or use."  The word "used" is defined as "the act of employing anything, or state of being employed, application.  * * *"  Under these definitions the words "used" and "utilized" seem to be practically synonymous.  Therefore, we believe that the courts in construing this statute would hold that the acquisition of a dam site for the construction of a hydroelectric project is in the nature of a necessary addition or betterment and therefore property utilized "for the generation of electrical energy."

             While we realize that statutes relating to a city's authority have no direct bearing on the powers of a public utility district, it is interesting to note the provisions of RCW 28.58.220, 35.21.470 and 35.21.440.  These statutes indicate that the legislature has seen fit to make adequate provisions for the voluntary payment of money by a city to assist in the education of the children of the city's employees who work on power projects outside of the municipal boundaries.  While these statutes could not of themselves authorize the Grant County Public Utility District to enter into such a contract, we believe such legislation does show a legislative intent to allow public bodies operating electrical systems to assist school district by way of providing funds for the use and benefit of such districts as are affected thereby.  We therefore believe that this legislative intent coupled with the broad language of this statute should be construed to authorize the public utility district under the facts of the instant case to make payments to the school districts in accordance with such terms as may be agreed upon.

 Very truly yours,
DON EASTVOLD
Attorney General 

QUINBY R. BINGHAM
Assistant Attorney General