Laurelhurst Community Club
Serving 2800 Households in Seattle’s Laurelhurst Neighborhood

February 21, 2002

Senator Georgia Gardner, Chair
Senate State & Local Government Committee
424 John A. Cherberg Building
P.O. Box 40443
Olympia, Washington 98504-0443
Fax 360-786-1999

RE: HB 2902 / SB 2902 Utility Tax for Street Lighting

Dear Senator Gardner and Members of the State and Local Government Committee:

The House passed HB 2902 on February 19th and it is likely that the bill will be before the State and Local Government Committee soon. Your committee passed a similar bill, SB 6690, on February 8th, so it appears to us that the committee would be inclined to act favorably on HB 2902. These bills attempt to legalize Seattle's recently implemented practice of charging ratepayers for street lighting. The Laurelhurst Community Club Board of Trustees asks that before acting on HB 2902, you consider the decision in Seattle v. Sonntag. In that case, the court determined that requiring Seattle City Light to provide street lighting gratis to city government is unlawful and a tax.

Beginning in 1905, the City of Seattle paid for street lighting as a public safety responsibility out of general taxes. This continued until 1999, when the City decided to pass this cost along directly to ratepayers, despite the unanimous recommendation from the ratepayers advisory committee not to pass this cost along. The added cost to City Light ratepayers amounted to nearly $6M in 2000 and 2001 and will amount to nearly $7M in 2002 (about $2 per month per household). This money was supposed to be spent on street paving, but it is unclear whether this happened. The cost of street lighting was in addition to the 60% rate increase that took place in 2001.

The State Auditor found out what Seattle was doing in directly passing along the cost of street lighting to ratepayers during an audit. After the State Auditor issued its audit report saying that Seattle's practice was illegal, Seattle sued. But, Seattle lost in court and now it is seeking a change in state law to legitimize its practice so it doesn't have to refund the money to taxpayers.

We hope you will take the time to consider the important issues associated with HB 2902, including whether any municipal entity other than Seattle would be affected. We have enclosed an article from The Seattle Times on the lawsuit for your information. Thank you for considering the views of the Laurelhurst Community Club.

Sincerely,


Jeannie Hale, President
3425 West Laurelhurst Drive NE
Seattle, Washington 98105
525-5135 / FAX 525-9631
jeannieh@serv.net

cc: 43rd and 46th District State Legislators


Wednesday, December 26, 2001, 12:00 a.m. Pacific

Officials take dim view of utility's streetlight charge

By Jim Brunner
Seattle Times staff reporter

Seattle City Light's two-year practice of charging ratepayers for streetlights has run into serious legal trouble.

The state auditor, state attorney general and, most recently, a King County Superior Court judge have all repudiated the city's practice as illegal. The city has taken the case to the state Court of Appeals.

If the city loses its legal battle, it could mean a refund for ratepayers.

Part of a 5.6 percent City Light rate increase in 1999 was directly attributable to the decision to charge ratepayers a new tax for streetlights, which had previously been paid for out of existing taxes.

That increase added about $2 a month to the bill of the average residential customer, and 57 cents of that was for streetlights, according to City Light spokesman Dan Williams.

However, the size of any potential refund is unknown, and none has been proposed.

The streetlight idea was proposed in 1998 by Mayor Paul Schell, who touted it as a way to free up money for street paving. By charging ratepayers to power and maintain streetlights, money previously earmarked for streetlight maintenance could go for fixing streets.

The City Council, after raising some early objections, voted 8-0 for the proposal in 1999. That lifted a $5 million-a-year expense from the city's general fund and placed it on City Light, which maintains a separate budget funded from electric rates.

Bob Royer, a City Light spokesman, said it made sense for City Light to maintain the streetlights because the utility has the expertise and gets the complaints about them anyway. Trouble is, the plan may have violated state law.

"It's an unfair tax by a government," said state Auditor Brian Sonntag, whose office was sued by Seattle after issuing an audit report that ordered the city to reverse its plan and consider a refund to ratepayers. His analysis was backed by an opinion from the state Attorney General's Office.

Sonntag said the city was required to pay for streetlights because they are a basic service of government, unlike basic electrical service to residences, which can be metered and charged to individual ratepayers. The city has no legal authority to impose what amounts to a new tax for that service, he said.

City officials disagree. They have relied on visual aids and historical arguments to make their case.

In court proceedings, Jim Ritch, City Light's deputy superintendent for finance, pointed to a photo of a streetlight next to a fire hydrant to make his point.

Ritch said fire hydrants have always been paid for by water-utility ratepayers and argued that streetlights should similarly be paid for by electric-utility ratepayers.

Will Patton, an assistant city attorney representing the utility, noted that City Light was created in 1905 for the express purpose of providing streetlights.

The city of Seattle, in essence, was the utility's first customer. In that role, the city has always paid for powering and maintaining the lights - a practice Patton believes was begun to subsidize the fledgling utility in its early war with a competing private utility, the ancestor of Puget Sound Energy.

King County Superior Court Judge Palmer Robinson flatly rejected the city's arguments, ruling Nov. 13 that charging electric ratepayers for streetlights amounted to an illegal tax.

In some ways, the city's current predicament is a case of the tail wagging the dog.

City Light decided to charge Seattle's ratepayers for streetlights only after first agreeing to pay for streetlights in the city of Shoreline.

Shoreline won that concession after threatening to ditch City Light in favor of another utility in 1996. As a condition of renewing its contract, Shoreline demanded that City Light pay for streetlights, lifting the burden from its city budget.

Once that happened, City Light decided it ought to provide the same service to Seattle, Patton said.

If the city loses its appeals, Shoreline and other suburban cities that signed similar contracts could be forced to pay for their own streetlights.

They could also wind up challenging that in court, setting up another round of legal battles for the utility.

The controversy is deja vu for those who closely follow City Light history. Then-Mayor Wes Uhlman of Seattle tried a similar cost-shifting scheme in the 1970s. Bob Graham, who was state auditor at the time, challenged the practice, and the city backed down after the threat of a lawsuit by the state attorney general.

That makes the current situation all the more galling for critics, including Stephen Lundgren, a Ballard activist and president of the Seattle Community Council Federation, which opposed the plan from the outset.

Lundgren, in an April 25 letter to Sonntag, said the city should be required to refund to City Light the money it ought to have been paying all along for the streetlights, plus interest. He estimated that could amount to $12 million or more.

That would be a major hit to the city's general-fund budget, which was already pared down this year due to the slumping economy. But Lundgren, who could not be reached for comment, wrote that the city shouldn't be spared that burden.

"The City of Seattle had ample notice of the unlawfulness of its action and ought not to profit from disregarding the law," Lundgren wrote.

Jim Brunner can be reached at 206-515-5628 or jbrunner@seattletimes.com.


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