By Cindy Alia December 13, 2019
Early in December, the State Supreme Court quietly and somewhat contradictorily reversed a Superior Court Decision that disallowed King County's ordinance to charge a fee for utilities use of rights of way.
A tax by any other name…
On November 7, 2016, the King County Council adopted Ordinance 18403 to authorize the imposition and collection of rent from water, sewer, gas and electric utilities using county roads and rights-of-way. According to the county the Ordinance would generate $10,000,000 yearly, which will be deposited to the County’s general fund. On December 29, 2017, the county Facilities Management Division adopted the rule for Determining Franchise Compensation to implement the Ordinance. The rule was effective as of January 29, 2018.
On January 25, 2018, King County filed a lawsuit in King County Superior Court (Case No. 18-2-02238-0 SEA) against 21 water-sewer districts opposing the County’s ordinance and rule. The County sought a declaratory judgment that the Ordinance and Rules were valid.
The water- sewer districts filed against the County challenging the validity of the ordinance and rule, claiming water-sewer districts have the right to locate their facilities in county roads and rights-of-way without having to pay rent to the County. A group of non-profit water associations and an electric utility intervened in the lawsuit challenging the County’s authority to charge rent for their use of county roads and rights-of-way.
In that action, the county failed to prove its case, and the King County Superior Court Judge Samuel Chung granted the motions for summary judgment filed by the water-sewer districts and intervenors and ruling the County cannot charge rent for the use of county roads and rights-of-way. The County filed for appeal with the State Supreme Court, and that court reversed the Superior Court decision.
What does this mean to the end user of the types of services that will fall under this ruling? The end user will pay more for services to cover the costs of this yearly “rental” of county rights of way. Currently districts and water associations are working to calculate what that fee will be, and that calculation will have to be agreed upon by the county.
After that agreement the rental will have to be paid and the costs will have to be covered by the end user because these districts and associations only charge for the costs of service, this now being a cost of service. Each district or association will find bearing the cost of this ruling to vary because the county will be using a method of charging for rights of way based on the value of the property fronting the rights of way in use; the land value of rights-of-way within the applicant's service area; the approximate amount of area within the right-of-way that will be needed to accommodate the applicant's use; a reasonable rate of return to King County for the applicant's use of the right-of-way; the business opportunity made available to the applicant; density of households served; a reasonable annual adjustment; and other factors reasonably related to the value of the franchise or the cost to King County of negotiating the franchise.
What is the definition of some of these factors? A reasonable rate of return to the county? The business opportunity to the applicant? A reasonable annual adjustment?
This decision is unique to King County yet now that the Supreme Court has ruled as it has, the fancy of King County may be appreciated and replicated by other money hungry counties. Just another reason to closely observe what your county has planned in terms of future ordinances.
There is talk of additional legal action on this topic, though no current information on what form of action that would take is not widely known at this time.