Environmental Outcomes Now a Key Criteria For
Determining Loans and Grants
The Joint Legislative Audit and Review Committee (JLARC), comprised of members of the House and
Senate, undertook an audit of the twelve capital budget programs which provide loans or grants to local
governments.
Their report, JLARC Report 01-1, issued on January 22, 2001, finds that most of the state’s loan and grant
programs have only been distributing money rather than investing it in the environment.
They find that it is unclear how moneys spent on individual local government projects contribute to the long-term
solutions for systemic environmental issues. The report recommends changes to the existing loan and grant
programs that the JLARC believes will bring a greater environmental benefit to Washington.
The report contains 6 recommendations which should achieve the following goals:
“Increase the systematic collection and sharing of information...;
Integrate practices from the investment model into program structures and operations to shift the focus of
program activities towards making sound environmental investments;
Streamline and better integrate program services to local governments; and
Ensure that funding agencies work together to achieve these goals.”
To implement these goals the JLARC issued their audit report calling for the 6 natural resource agencies to modify
their grant and loan criteria to achieve increased environmental benefits for the state. To achieve these goals each
grant or loan applicant must explain the outputs and outcomes of their project and explain how the outcome results
are to be monitored.
Outputs are considered to be the activity or project that is proposed to be built, installed, planted, or otherwise
created. The outcome is the environmental benefit that will be the result of having built the project. For example,
if your project is planting trees to provide shade for a salmon stream then planting the trees is the output and the
cool water in the stream resulting from the shade cast by the trees when they mature is the outcome. The growth
and health of the trees as well as the resulting cooling effects are going to have to be monitored during the life of
the project.
After the report was issued in January the legislature then passed House Bill 1785 which implements the
JLARC report. Each natural resource agency is to create an advisory committee comprised of members of the
local governments who utilize the loans or grants,
tribes and other interested parties. These advisory committees are to help the agencies to develop the specific
outputs and outcomes that will be used to rate project funding applications.
If fully implemented these program changes will favor environmental mitigation projects, new wastewater
treatment plants, stormwater measures, or nonpoint control projects over traditional projects funded by the Public
Works Trust Fund and the Ecology Financial Assistance grants and loans. Replacement or rehabing sewer lines
will fall to the bottom of the list because they will not have new environmental benefits and water supply projects
will not benefit the environment and therefore would also score below environmental projects. With the current
oversubscription to these funding sources and the growth in environmental projects resulting from ESA it will be
ever more difficult to obtain state funding traditional special district projects.
We have learned that the resource agencies and the PWTF staff have been meeting to determine how they should
respond. JLARC staff and electeds have been informed that the agencies cannot implement the statue and policy
as currently written and have apparently obtained agreement by the JLARC that they will only have to determine
and report possible environmental benefits of projects they fund. This means the authors of the report agree not
to demand full implementation of HB 1785 but will accept what the agencies are able to provide without impacting
current programs. The agencies appear to be unable or at least unwilling to challenge the statutory changes as
they currently stand.
The concern is that while current agreement between the JLARC and the implementing agencies to offer and
accept less that required by the new bill will work for now it may fail in the future. Environmentalists could bring
suit demanding that the new law be implemented as drafted and passed by the legislature and the current
agreements between the parties be negated.
The Assocation will continue to work legislators and the agencies to resolve the problems in this new
legislation.
Rolling Power Blackouts Annual Awards
Presentation Moved to New Time at Fall
Conference
The presentation of the Association’s Annual Awards will be held on Thursday night in conjunction with
the evening dinner event. Moving the awards presentation earlier in the conference will provide more recognition
for awards recipients during the conference.
The Fall Conference has been the time each year when Commissioner of the Year, Manager of the Year, and
District of the Year awards have traditionally been presented. The presentation on Friday night following the
banquet was one of the final events of the Conference and gave little time for award recipients to celebrate with
others. The other awards including Distinguished Service Award and other recognitions will also be handed out
at the same time.
SUPREME COURT STRIKES DOWN “STANDBY
CHARGES”
By Rod P. Kaseguma
The Washington State Supreme Court recently struck down a “standby charge” on unimproved and vacant
land that abuts a water or sewer line. Thus, if your district imposes the same “standby charge,” or a similar charge,
such as a service charge on residential lots that are located next to sewer lines but are served by septic systems,
you should review the resolution in view of the case, Samis Land Company v. Soap Lake.
In that case, the City of Soap Lake by ordinance imposed on vacant, unimproved land abutting a water or sewer
line but not connected to the line a $60.00 per year “standby charge” per lot or unplatted area. The Samis Land
Company, which owns approximately 200 platted, vacant lots in the City, filed suit against the City for refund of
more than $46,000 paid in standby charges, alleging that the standby charge was an unconstitutional
(anddisguised) property tax, rather than a legal regulatory fee.
To determine whether the charge was a valid regulatory fee or an invalid tax, the Court applied the well-known
three-part test of Covell v. Seattle:
1.
Whether the primary purpose of the ordinance is to regulate or to collect revenue to finance broad-based
public improvements that cost money;
2.
Whether the money collected from the fees is segregated and allocated exclusively to regulating the entity
or activity being charged; and
3.
Whether a direct relationship exists between the rate charged and either a service received by the fee
payers or a burden to which they contribute.
Regarding the first part of the test, the City argued that the charge was a small part of the overall plan to
improve regulation of the city-wide water and sewer system for the general protection of the health, safety and
welfare. In other words, the City contended that the charge was part of an overall regulatory design for “public
services.” The Court noted that the “overall plan” did not include any reference to a utility service or burden
applicable to the vacant, unimproved land. The Court therefore found that the City’s primary motivation was to
generate additional revenues for broad-based public improvements, not to regulate the fee payers. Supreme
Court, continued from page 3
found that the unimproved, vacant land was subject to no identifiable utility-related “regulatory” activity.
Consistent with these observations, the Court concluded that the charges were allocated to maintaining and
improving the city-wide utility system, which “regulated” the land connected to the city utility system, rather than
the fee payers.
Finally, with respect to the third part of the test, the Court found that there is neither an identifiable service being
received by the fee payers nor a burden to which they contribute. The Court rejected the City’s argument that the
charges were justified as payment for the general benefit of living in a community with a financially viable,
efficient and operable water and sewer system, or as enhancement of the value and marketability of properties
having city water and sewer service readily available.
Because all three parts of the test were not satisfied, the Court held that the standby charge was a “thinly disguised”
and unconstitutional flat-fee tax, without regard to the value of each parcel.
In summary, the standby charge was struck down because the City (1) failed to identify a specific regulatory
purpose for the charge, such as protection and preservation of aquifers and surface bodies of water, (2) failed to
segregate the charges into a fund for the specific regulatory purpose, (3) failed to articulate a service or burden
applicable to the fee payers, and (4) failed to show that the primary motivation was to regulate, rather than to raise
revenue to finance broad-based public improvements.
An interesting aspect of the case is that the dissenting judge stated that the City may have prevailed if it had
spelled out more specifically in the ordinance the regulatory purpose of the standby charge.
In view of the dissenting judge’s comment, a district that imposes a standby charge upon unimproved, vacant
land could attempt to justify the charge by articulating in a new resolution the purposes, motivations, services and
burdens that were lacking in the City ordinance. However, such a resolution would face an uphill battle, given
the skepticism of the Samis Court.
In contrast, a standby charge for residential lots that are located next to sewer lines but are served by septic
systems would stand a good chance of being upheld. In this situation, districts can adopt a new resolution stating,
for example, that septic systems are contributing to surface and sub-surface pollution, and providing for the charge
to be used for elimination or reduction of such pollution, thereby benefiting both the public and the fee payers.
Furthermore, where the standby charge is imposed on vacant, unimproved lots lying between residential lots
served by septic systems, the charge on the vacant, unimproved lots may be easier to justify, especially where the
sewer lines were installed to alleviate perceived or actual health concerns.
The Samis case requires that resolutions imposing “standby charges” on land that is not connected to a water or
sewer line clearly articulate and meet the requirements of the Covell test. Districts should review these resolutions
with legal counsel as soon as possible.
Addressing the second part of the test, the City stated that the charges were deposited in a
separate water capital improvement fund, and that the charges were used for the regulatory
purpose of financing water and sewer facilities to protect the public health. The Court was
skeptical, responding that the mere allocation of charges to a broad category of important
public services does not necessarily turn the charges into “regulatory fees.” The CourtSewer
District Commissioners Resigning Over Bond Issue
The Washington State Auditor released its audit findings on the Holmes Harbor Sewer District on Friday,
August 3rd. As a result of ratepayer outcry 2 of the 5 commissioners have resigned their seats. Contained in the
10 findings were several violations of law that are misdemeanors and gross misdemeanors.
The findings include:
1.
Commissioners violated state law when they created an ULID outside District boundaries and issued
bonds to pay for improvements and real property.
2.
Commissioners failed to deposit bond proceeds with the County Treasurer or the Treasurer’s designated
fiscal agent.
3.
District did not comply with contracts associated with the issuance of the bonds.
4.
The District violated state law when it paid to the developer, to the developer’s attorney and to the
developer’s lender a total of nearly $1.5 million of bond proceeds, without any documentation or basis for these
payments, or without any understanding regarding the benefit the District received or the public purpose furthered
by the payments.
5.
The District improperly and unlawfully spent bond proceeds to purchase the entire property included in
the ULID, which property includes the private property on which the office buildings were to be built.
6.
The commissioners improperly delegated their governmental authority to procure and administer public
works contracts associated with public improvements to a private contractor.
7.
The District has committed to spending public funds for a private purpose and plans to lend its credit to a
private party by committing to fund nonpublic improvements in the proposed ULID.
8.
District Commissioners violated other state laws when they proceeded with authorizing improvements to
be made in the ULID and related expenditures before amending the District’s General Comprehensive Plan to
include such improvements and before submitting the amendment to Snohomish County, Island County,
Snohomish Health District, and the City of Everett, and before obtaining the approval of those entities.
9.
The District failed to establish and maintain a bond reserve fund in compliance with the bond covenants
established in another ULID.
10.
The Commissioners did not maintain complete records of their Board meetings as required by the Open
Public Meetings Act.
Information gathered from interview with State Auditor Brian Sontag indicate that the Federal Securities and
Exchange Commission, the State Attorney General, the Island County Prosecutor, and other regulator entities
have been provided information on these findings and urged to follow up with enforcement actions.
To read the audit report you can obtain a Word version at: http://www.sao.wa.gov/reports/findings/62486.doc
Or find a PDF version at: http://www.sao.wa.gov/Reports/AuditReports/AuditReportFiles/ar62486.pdf
Commissioners and managers are urged to review this report as it points up many problems that other districts
may have and not be aware.