NOTICE: SLIP OPINION (not the court’s final written decision)
The opinion that begins on the next page is a slip opinion. Slip opinions are the written opinions that are originally filed by the court. A slip opinion is not necessarily the court’s final written decision. Slip opinions can be changed by subsequent court orders. For example, a court may issue an order making substantive changes to a slip opinion or publishing for precedential purposes a previously “unpublished” opinion. Additionally, nonsubstantive edits (for style, grammar, citation, format, punctuation, etc.) are made before the opinions that have precedential value are published in the official reports of court decisions: the Washington Reports 2d and the Washington Appellate Reports. An opinion in the official reports replaces the slip opinion as the official opinion of the court. The slip opinion that begins on the next page is for a published opinion, and it has since been revised for publication in the printed official reports. The official text of the court’s opinion is found in the advance sheets and the bound volumes of the official reports. Also, an electronic version (intended to mirror the language found in the official reports) of the revised opinion can be found, free of charge, at this website: https://www.lexisnexis.com/clients/wareports. For more information about precedential (published) opinions, nonprecedential (unpublished) opinions, slip opinions, and the official reports, see https://www.courts.wa.gov/opinions and the information that is linked there. For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
FILED NOVEMBER 22, 2022 In the Office of the Clerk of Court WA State Court of Appeals Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE
MOSES LAKE IRRIGATION AND ) REHABILITATION DISTRICT, a public ) No. 38030-1-III irrigation and rehabilitation district, ) ) Appellant, ) ) v. ) PUBLISHED OPINION ) DARRYL PHEASANT, in his capacity as ) Treasurer of Grant County, Washington, ) DARRYL PHEASANT, in his capacity as ) Ex Officio Treasurer for MOSES LAKE ) IRRIGATION AND REHABILITATION ) DISTRICT, ) ) Respondent. ) SIDDOWAY, C.J. — Moses Lake Irrigation & Rehabilitation District (the District)
appeals the dismissal of its action seeking to compel the Grant County Treasurer, Darryl
Pheasant, to send statements of District assessments on land and improvements to District
residents. A landowner in the District had filed a legal challenge to the District’s method
of assessment, which led to a determination by a federal court that the District’s
assessments were state taxes. Aware of the legal challenge and federal court ruling, Mr.
Pheasant—believing the District has no taxing authority, and its nontax assessment For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
No. 38030-1-III Moses Lake Irrig. & Rehab. Dist. v. Pheasant
authority applies only to the value of land, not improvements—declined to send notice of
what he considered invalid assessments.
The District responded with the action below, petitioning for an alternate writ of
mandamus directing Mr. Pheasant to send statements of its assessments. The trial court
denied relief, entering summary and declaratory judgments that the District’s method of
assessment amounts to an unauthorized tax and that “land,” as used in RCW 87.03.240
and RCW 87.84.070, means land itself, without improvements.
The District appeals. We affirm the trial court’s determination that the District’s
assessments in reliance on chapter 87.03 RCW are invalid, reverse its determination that
the District’s assessments in reliance on RCW 87.84.070 are invalid, and reverse in part
its limiting construction of “land.” We hold that as used in chapter 87.03 RCW (but not
as used in RCW 87.84.070), “land” includes improvements.
FACTS AND PROCEDURAL BACKGROUND
In 1928, landowners who described their lands as susceptible of irrigation and
desired to organize an irrigation district in Grant County, petitioned the board of county
commissioners for approval of such a district for “all of the purposes mentioned in
Section 7417 of the Supplement to Remington and Ballinger’s Code.” Clerk’s Papers
(CP) at 1101. They identified those purposes as including the construction, purchase,
repair, improvement, operation and maintenance of irrigation works for the irrigation of
lands within the operation of the District. The plan of improvement contemplated was
2 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
“the construction of a permanent dam at the outlet of Moses Lake for the purpose of
catching and holding all of the waters flowing into said Moses Lake.” CP at 1102.
Creation of the Moses Lake Irrigation District was approved, and it obtained a
water right that has been certified to be up to 50,000 acre-feet, for the irrigation of 11,213
acres within the district. Laws governing the operation of irrigation districts are now
codified at chapter 87.03 RCW. As relevant to this appeal, which involves the authority
to raise funds, irrigation districts may do so in three ways: they may make assessments
“in proportion to the benefits accruing to the lands assessed” under RCW 87.03.240; they
may “fix reasonable rates or tolls and charges, and collect the same from all persons for
whom district service is made available for irrigation water, domestic water, electric
power, drainage or sewerage, and other purposes” under RCW 87.03.445(2); and, as also
permitted by RCW 87.03.445(2), they may employ both rates or tolls or charges and
assessment.
For decades, the District assessed its landowners based on acreage. Historical
records reveal that between 1940 and 1946, the assessments ranged from $0.15 per acre
to $1.00 per acre.
The District has never constructed any pumps, canals, or pipelines for delivering
irrigation water from Moses Lake to district members. Instead, landowners are
responsible for building any system to deliver water to their individual properties, and
some members of the District have done so. The District does not monitor who is taking
3 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
water from the lake for irrigation purposes or charge them for taking water. Lake water
can be taken by anyone, for free.
In 1961 and 1963, legislation supported by the District was passed that allowed
any irrigation district that had the major portion of an inland navigable body of water
within its exterior boundaries, and that had been granted rights to 50,000 acre-feet of
water or more, to become an “irrigation and rehabilitation” district. LAWS OF 1961,
ch. 226, §§ 1-8; LAWS OF 1963, ch. 221, §§ 1-11. District records reflect its concern in
1962 that “‘the farmers within the boundaries of the . . . District are presently irrigating
only about 3,000 acres of land and some of this land is being converted from farm land to
residential and other land uses.’” CP at 913. It recognized a “‘real danger of the lake
being reduced to an elevation from its present level[,] which would be disadvantageous to
the people and property owners of the . . . District,’” given that the lake provided “an
abundance of opportunity for recreation associated with water and water sports, all of
which has a definite influence on the value of homes and properties with[in] the
boundaries of the . . . District.” Id.
The legislation provided that in addition to their irrigation purposes, irrigation and
rehabilitation districts could be organized and maintained “to further the recreational
potential of the area and to further the rehabilitation or improvement of inland lakes and
shore lines . . . to further the health, recreation, and welfare of the residents in the area.”
LAWS OF 1963, ch. 221, § 3. It provided that the directors of an irrigation and
4 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
rehabilitation district, in addition to retaining their authority as directors of an irrigation
district, were authorized to “specially assess land located in the district for benefits
thereto” (emphasis added), providing that such assessment “shall not exceed one mill
[$1 per $1,000 of assessed value] upon such assessed valuation without securing
authorization by vote of the electors of the district.” LAWS OF 1961, ch. 226, § 8. The
provisions governing irrigation and rehabilitation districts are codified in chapter 87.84
RCW.
With the approval of the Grant County Commissioners, the District became, and it
remains, the only irrigation and rehabilitation district in the State of Washington.
Following its conversion to an irrigation and rehabilitation district, District directors
voted to set the levy at the one mill limit they were authorized to assess without a vote of
District electors.
Authority to assess for rehabilitation purposes is reduced, and questions about District assessments begin to be raised
In 1973, the legislature reduced the amount the directors of an irrigation and
rehabilitation district can specially assess for recreational and rehabilitation benefits
without a vote of the electors. It was reduced to $0.25 per $1,000.00 of assessed value.
LAWS OF 1973, 1st Ex. Sess., ch. 195, § 132. That remains the limit today. RCW
87.84.070. District directors deemed more than that to be needed for its operations,
which consist of dredging and treating milfoil infestation to maintain the quality and
5 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
volume of the lake, maintaining a pump station whose circulation of water improves
water quality, maintaining the dam, and owning, and maintaining a lakeshore park,
Connelly Park. The park has a boat launch, dock and beach. The District has also
sponsored powerboat races and fishing derbies on the lake.
Following the reduction of its assessment authority as a rehabilitation district, the
District continued to specially assess District properties based on their assessed value at
amounts exceeding $0.25 per $1,000.00 in value, without securing approval of the
District electors. They construed the “land” they were authorized to assess for benefits to
be property, including improvements.
In performing audit work in 2012, staff of the state auditor questioned whether it
was allowable for the District to assess property owners based on assessed valuation,
given RCW 87.03.240’s language that assessments “shall be made in proportion to the
benefits accruing to the lands assessed.” CP at 568 (emphasis omitted). The District’s
response, according to audit records, was that “all property owners have the same
benefits because each of them have the legal right to request water be provided to them
(with the understanding that the cost of infrastructure would be borne by the property
owner),” and in the District’s view, “all benefits were equal.” Id.
Audit staff looked at the issue again in 2013, and one staffer compiled a
spreadsheet that identified parcels within the District as commercial, residential and
6 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
agricultural and calculated their assessment per acre—the assessment approach followed
through at least 1946. Audit staff determined that
[c]ommercial lots with little-to-no need for irrigation water are paying $500-$1,000 per acre, residences that can use irrigation water for their lawns are paying $100-$600 per acre, and large agricultural/potential- agricultural parcels are paying less than $100 per acre.
CP at 568. No adverse audit finding was made, however, based on a legal opinion from
the District’s counsel, accepted by the state auditor, that under RCW 87.03.445, irrigation
districts are statutorily authorized to raise operating funds using rates, tolls, or charges
that are not required to be benefit-based.
In 2014, Michael “Mick” Hansen sued the District, its directors, and Grant County
and some of its officials, challenging the District’s assessments and its allocation of
voting rights to members. Hansen v. Moses Lake Irrig. & Rehab. Dist. et al., Grant
County Superior Court Case No. 14-2-01214-1 (Hansen v. MLIRD).1 Among the county
officials sued was Mr. Pheasant. Mr. Hansen characterized the District as engaging in
1 We take note of adjudicative facts from Hansen v. MLIRD. Under ER 201(c), courts may take judicial notice of adjudicative facts, whether requested to or not. Courts applying the parallel federal rule have recognized “that a ‘court may take judicial notice of a document filed in another “court not for the truth of the matters asserted in the other litigation, but rather to establish the fact of such litigation and related filings.”’” United States v. Jones, 29 F.3d 1549, 1553 (11th Cir. 1994) (quoting Liberty Mut. Ins. Co. v. Rotches Pork Packers, Inc., 969 F.2d 1384, 1388 (2d Cir. 1992)); accord 5 KARL B. TEGLAND, WASHINGTON PRACTICE: EVIDENCE LAW AND PRACTICE § 201.9 (6th ed. 2016) (noting distinction between consulting the record of another case to determine whether it contains something and consulting the record to determine whether disputed facts were found to be true). We take judicial notice of only relevant developments occurring in Hansen v. MLIRD.
7 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
illegal taxation, contending that the District was then financing its operations by a
uniform assessment against all real property within its boundaries, regardless of location
or water use, at a rate of $1.00 per $1,000.00 of assessed value. It had never held an
election for approval of an above-$0.25 per $1,000.00 rate, and he alleged that to justify
the amount being assessed, the District was relying on the statutory powers granted to
irrigation districts under chapter 87.03 RCW. He contended that those statutes required
assessments for irrigation benefits to be made in proportion to the benefits accruing to the
lands assessed, and the District had never conducted any studies to determine the actual
level of irrigation benefit received by parcels or classes of property owners within the
District. He cited the fact that the District had never constructed or maintained a delivery
system. He alleged it had not established any usage rates, tolls or charges for use of its
50,000 acre-feet of water; it did not undertake to regulate or control use of its water; and
it had no records of the amount of water taken from the lake by users.
Mr. Hansen’s claims included federal civil rights claims under 42 U.S.C. § 1983,
and the District removed his action to federal court. Beginning in the federal court, the
District took an unusual approach in responding to Mr. Hansen’s contention that it was
imposing an authorized tax. A defendant’s usual response to such a challenge is to
demonstrate, as best it can, that its assessments lack the characteristics of a tax. E.g.,
Samis Land Co. v. City of Soap Lake, 143 Wn.2d 798, 807-14, 23 P.3d 477 (2001)
(“standby charge” for future water/sewer connection); Carillo v. City of Ocean Shores,
8 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
122 Wn. App. 592, 604-08, 94 P.3d 961 (2004) (“availability charge” for future
water/sewer connection); Arborwood Idaho, LLC v. City of Kennewick, 151 Wn.2d 359,
371-73, 89 P.3d 217 (2004) (ambulance service charge); and City of Snoqualmie v.
Constantine, 187 Wn.2d 289, 300-03, 386 P.3d 279 (2016) (payment in lieu of leasehold
tax). The District began arguing, however, that its uniform rate imposed on the assessed
valuation of District properties is a state tax, and on that basis, that the federal Tax
Injunction Act, 28 U.S.C. § 1341, and Washington’s anti-injunction act, RCW 84.68.010,
were a bar to Mr. Hansen’s challenge. In the case of the federal Tax Injunction Act, it
argued that the federal court lacked jurisdiction over a challenge to the validity of a state
tax. In the case of the state act, it argued that the exclusive remedy for challenging an
invalid tax is a to pay the tax under protest and seek a refund, which Mr. Hansen had not
done.
The federal court was persuaded, in light of Mr. Hansen’s and the District’s
agreement, that the assessments were a state tax. It determined that it lacked jurisdiction
of Mr. Hansen’s federal claim and was prevented from exercising supplemental
jurisdiction over the state claims. It remanded Mr. Hansen’s suit to the Grant County
Superior Court in October 2016.
Over a year later, the District’s board of directors approved an assessment roll it
was required to deliver to the county treasurer by January 15, 2018. The board adopted
rates of $0.25 per $1,000.00 of assessed value under chapter 87.84 RCW, its “irrigation
9 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
and rehabilitation district” authority, and $0.50 per $1,000.00 of assessed value under
RCW 87.03.445, its “irrigation district” authority. The District submitted its assessment
roll reflecting the rates to Mr. Pheasant.
Mr. Pheasant had multiple concerns about the assessments. He believed, and had
confirmed that personnel of the Washington State Department of Revenue (DOR) agreed,
that the District’s authority to assess “land” meant only land, not improvements. He was
aware that in Hansen v. MLIRD, the District had made multiple admissions that its rates
and assessment were a tax, despite that fact that it is a benefit/assessment district, and
lacks taxation authority. He believed that if the rates and assessments were a tax, they
were being imposed on landowners who would be constitutionally or statutorily exempt
from state taxation.
By March 2018, Mr. Pheasant’s attorney in the Grant County Prosecutor’s office
informed the District that Mr. Pheasant refused to send statements of assessment for the
amounts provided him by the District. In response, the District commenced the action
below, petitioning the court for an alternate writ of mandamus ordering Mr. Pheasant to
send out statements of its assessments. Mr. Pheasant’s answer asserted as an affirmative
defense that the District has no taxing authority and the assessments he was being asked
to declare due from landowners were unconstitutional and illegal.
The parties initially briefed their positions with a view to a hearing, but soon
entered into a mediated stay agreement under which Mr. Pheasant agreed to send notices
10 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
of the District’s assessments, the District’s action would be stayed pending final
judgment in Hansen v. MLIRD, and the District would hold Mr. Pheasant and Grant
County harmless from any and all claims arising from District assessments during the
period of the stay. The stay agreement further provided that it “shall not be argued or
construed to constitute an admission by any party.” CP at 757.
The superior court resolves the issue of irrigation district authority in Hansen v. MLIRD and resolves the remaining issues raised by Mr. Pheasant in this action
In an order filed in Hansen v. MLIRD in June 2020, Judge David Estudillo, who
was also the judge assigned to this mandamus action, granted Mr. Hansen’s request for a
declaratory judgment on the illegality of the District’s method of assessment in reliance
on its authority under chapter 87.03 RCW. Judge Estudillo rejected the District’s
threshold argument that he lacked jurisdiction because Mr. Hansen had not paid District
“taxes” under protest, that the District argued was required by RCW 84.68.020. Then,
citing the District’s complete lack of information about irrigation use of its water, Judge
Estudillo explained he could only conclude the current “tax” rate levied against Mr.
Hansen’s property under RCW 87.03.445 was not reasonable, and was otherwise
excessive and disproportionate to the services rendered, in violation of that statute. He
also concluded that for Mr. Hansen’s real property that is not adjacent to Moses Lake, he
was not a person for whom district service is made available for irrigation water,
domestic water, electric power, drainage or sewerage, and other purposes. Accordingly,
11 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
Judge Estudillo ruled that the District may not levy or fix rates or tolls and charges
against Mr. Hansen’s property not adjacent to the lake, and was required to fix
“reasonable” rates or tolls and charges for his property adjacent to Moses Lake before
attempting to levy them under RCW 87.03.445(2) and (4).2 The District appealed.
In October 2020, Mr. Pheasant moved for summary judgment and declaratory
judgment in this action. The District asked that the case remain stayed until the
resolution of the appeal of Hansen v. MLIRD, but Mr. Pheasant responded that Hansen v.
MLIRD resolved only the invalidity of the District’s assessments under its irrigation
district authority and did not address other issues his office needed resolved in order to
know whether to send notices of the District’s proposed assessments. In particular, he
was seeking a decision on the validity of District assessments under RCW 87.84.070,
including the meaning of “land” as used in that statute. In an order entered in February
2020, Judge Estudillo denied any further stay and granted Mr. Pheasant’s requests for
declaratory and summary judgments. His order declared
a. [The District’s] funding mechanism is an unauthorized tax. b. [The District] may not submit tax/assessment roles based on ad valorem value. c. Whether [the District] may not submit tax assessment rolls based on irrigation assessment for properties that do not have access to irrigation water form [District] facilities is moot based on the Court[’]s finding in
2 The court expressly made no ruling regarding the .25 mill assessment the District had been levying against Hansen’ land for rehabilitation services pursuant to RCW 87.84.070.
12 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
the first two Declaratory Judgments. However, if the Court’s findings in the first two Declaratory Judgments are considered incorrect, then the Court finds [the District] may not submit tax assessment roles based on irrigation assessment for properties that do not have access to irrigation water from [District] facilities. d. The District’s funding methodology under RCW 87.03.445(2) is not authorized and the District may not use such methodology to impose an ad valorem tax on land and improvements. “Land” as used in RCW 87.03.240 and RCW 87.84.070 does not include the land and improvements but only the land itself. e. [Mr. Pheasant] has no duty to issue tax statements based on nonconforming tax or assessment rolls that [the District] provides.
CP at 1925-26.
The District appeals.
ANALYSIS
The District makes five assignments of error. Its first and fourth assigned errors
mischaracterize the declaratory judgments entered by the trial court and do not warrant
analysis.
With respect to its first assignment of error, RCW 87.84.070 provides that District
directors are empowered to specially assess land located in the District for benefits
thereto taking as a basis the last equalized assessment for county purposes, provided that
the assessment does not exceed $0.25 per $1,000 of assessed value. Contrary to the
District’s assignment of error, the trial court did not hold otherwise.
Contrary to the District’s fourth assignment of error, the trial court did not hold
that operating and maintaining a reservoir could not be an irrigation district “service.”
13 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
The legal issue presented, and the trial court’s concern, was whether the “rate” the
District claimed to be charging was a “reasonable rate” for “ma[king] available” “service
. . . for irrigation water” to the persons assessed. See RCW 87.03.445(2).
We address the remaining assignments of error in turn.
I. THE TRIAL COURT PROPERLY EXAMINED WHETHER THE DISTRICT’S PROPOSED ASSESSMENTS WERE UNAUTHORIZED TAXES
Mr. Pheasant sought rulings pursuant to the Uniform Declaratory Judgments Act,
chapter 7.24 RCW, regarding his duties as Grant County treasurer and ex officio treasurer
of the District. We review declaratory orders, judgments, and decrees de novo. Borton
& Sons, Inc. v. Burbank Props., LLC, 196 Wn.2d 199, 205, 471 P.3d 871 (2020);
RCW 7.24.070.
The District’s second and third assignments of error are related. The second is
that the trial court erred in “substituting its judgment on assessment methodology under
RCW 87.03.445 for that of the elected [District d]irectors.” Appellant’s Opening Br.
at 1. The third is that the court erred in holding that the District’s “rate assessment is an
unauthorized ‘tax’ when it is expressly authorized by statute and immediately becomes
enforceable as an ‘assessment.’” Id.
The Washington Constitution requires that taxes shall be levied and collected for
“public purposes only.” WASH. CONST. art. VII, § 1. “‘An expenditure is for a public
purpose when it confers a benefit of reasonably general character to a significant part of
14 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
the public.’” CLEAN v. State, 130 Wn.2d 782, 793, 928 P.2d 1054 (1996) (quoting In re
Marriage of Johnson, 96 Wn.2d 255, 258, 634 P.2d 877 (1981)). Consistent with this
constitutional limitation, taxes have been described colloquially as compulsory payments
that can be “imposed anywhere and used for anything,” so long as “the imposition is
‘fair.’” Hugh D. Spitzer, Taxes vs. Fees: A Curious Confusion, 38 GONZ. L. REV. 335,
337 (2003) (capitalization omitted). “Because taxpayers have no guarantee that their
dollars will directly benefit them, a number of protections have evolved to assure fairness
in the distribution of the tax burden.” Id. at 340. The Washington Constitution imposes
fundamental constitutional constraints on governmental taxation authority: the “all-
important tax uniformity requirement”3 and the one percent ceiling.4 Samis, 143 Wn.2d
at 805.
The District now admits it lacks the authority to impose taxes. See Appellant’s
Opening Br. at 6 (“rate assessment method is not a general ‘tax’”), 40 (“MLIRD does not
claim that irrigation districts are authorized to impose general taxes for general
governmental purposes.”). Instead, it is authorized by RCW 87.03.240 to make
“All taxes shall be uniform upon the same class of property within the territorial 3
limits of the authority levying the tax . . . . All real estate shall constitute one class . . . .” WASH. CONST. art. VII, § 1. 4 “Except as hereinafter provided and notwithstanding any other provision of this Constitution, the aggregate of all tax levies upon real and personal property by the state and all taxing districts now existing or hereafter created, shall not in any year exceed one percent of the true and fair value of such property in money.” WASH. CONST. art. VII, § 2.
15 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
“assessments” in proportion to benefits and by RCW 87.03.445(2) to fix and collect
“reasonable rates or tolls and charges” from persons to whom district service is made
available. It is authorized by RCW 87.84.070 to “specially assess land located in the
district for benefits thereto,” provided that the assessment does not exceed $0.25 per
$1,000.00 of assessed value. Because “assessments based on benefits” and “rates, tolls,
or charges for delivery of a service” are not taxes, they are exempt from the constitutional
constraints on taxation authority.
Given the inherent danger that legislative bodies might circumvent constitutional
constraints by levying charges that, while officially labeled something else, possess all
the basic attributes of a tax, “[c]ourts must . . . look beyond a charge’s official
designation and analyze its core nature by focusing on its purpose, design and function in
the real world.” Samis, 143 Wn.2d at 806. Three factors analyzed for this purpose are
referred to as the “Covell factors,” following Covell v. City of Seattle, the decision in
which they were consolidated as a three-part test. 127 Wn.2d 874, 879, 905 P.2d 324
(1995), abrogated on other grounds by Yim v. City of Seattle, 194 Wn.2d 682, 451 P.3d
694 (2019). The factors have been broadened in later cases, which have recognized that a
“tax” versus “regulatory fee” dichotomy identified in Covell failed to account for the full
spectrum of government charges that, while not regulatory fees, are also not taxes. See,
e.g., City of Snoqualmie v. Constantine, 187 Wn.2d 289, 300, 386 P.3d 279 (2016)
16 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
(Government-imposed user charges can include “commodity charges, burden offset
charges, and special assessments;” these, too, are not taxes.).
A governmental charge that is not subject to the constitutional constraints on
governmental taxation but is determined under the three-factor analysis to be a “tax[ ] in
disguise” or a “tax in fee’s clothing” will be held invalid. Arborwood, 151 Wn.2d at 371,
373. That is the issue presented by the District’s action and Mr. Pheasant’s defense: are
the District’s so-called “rates” and special assessments invalid “taxes in disguise”?
A. The portion of the District’s proposed assessments that is based on its “irrigation district” authority is an invalid tax
At issue in Hansen v. MLIRD was only the District’s assessments relying on its
authority as an irrigation district. The statutory authority on which the District relies for
its assessments in excess of $0.25 per $1,000.00 in assessed value is its authority as an
irrigation district to “fix reasonable rates or tolls and charges, and collect the same from
all persons for whom district service is made available for irrigation water.” RCW
87.03.445(2). The District’s position is that by maintaining a reservoir, irrigation water
service is being “made available” because District residents can draw irrigation water
from the lake for parcels adjacent to the lake, and construct a delivery system to transport
water from the lake to nonadjacent parcels. Our unpublished opinion in Hansen v. Moses
Lake Irrigation and Rehabilitation District, No. 37698-2-III (Wash. Ct. App. Sept. 22,
2022) (unpublished), http://www.courts.gov/opinions/pdf/376982_inp.pdf, resolved this
17 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
issue, but in the context of other issues and arguments that were of limited public interest.
The controlling principles and precedents were more squarely presented in this appeal.
In Hansen v. MLIRD, the trial court construed the phrase “for whom district
service is made available for irrigation water” by looking to Otis Orchards Co. v. Otis
Orchards Irrigation District No. 1, 124 Wash. 510, 215 P. 23 (1923), and Northern
Pacific Railway Co. v. Walla Walla County, 116 Wash. 684, 200 P. 585 (1921). As the
trial court observed, in Otis Orchards, the appellant challenged its liability for irrigation
district assessments against its unimproved land and the land on which it grew wheat
without irrigation. 124 Wash. at 512. The irrigation district had a piped delivery system
to all of the appellant’s lands, from which it could draw water at any time, making
“‘water . . . available whenever the appellant sees fit to use it.’” CP at 920 (quoting Otis
Orchards, 124 Wash. at 511). The trial court relied on the Otis Orchards court’s holding
that “‘[i]t is generally understood that the land within a district is benefited by an
irrigation system to the extent that the added facilities for irrigation add to the value of
the land itself, and this does not depend upon the use the owner may make of the water.’”
CP at 920 (quoting Otis Orchards, 124 Wash. at 513). The trial court observed that “[i]t
follows that the land was more marketable and of increased value because irrigation
water could immediately be delivered to it.” CP at 921.
By contrast, the trial court observed, in Northern Pacific Railway, the railroad
successfully challenged charges imposed on land owned in an irrigation district that was
18 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
not capable of being benefitted by irrigation, given its nature and topography. CP at 921.
The trial court cited the court’s rejection of the county’s argument that “‘the mere fact
that the land happens to be within the boundaries of the district necessarily means it is
capable of receiving benefit from the maintenance of the irrigation system of the
district,’” and its holding that the railroad was not liable to contribute toward
maintenance of the system. CP at 921 (quoting N. Pac. Ry., 116 Wash. at 688).
In this case, Mr. Pheasant relied in addition on cases applying the Covell factors.
Those factors are controlling in determining whether a charge is a constitutional fee
rather than as an unconstitutional tax, so they are obviously important in construing
RCW 87.03.445(2). We presume the legislature intended to authorize irrigation districts
(and rehabilitation and irrigation districts) to fix constitutional rates or tolls and charges,
not unconstitutional taxes. We construe the District’s authority to make assessments with
that in mind. See State v. Batson, 196 Wn.2d 670, 674, 478 P.3d 75 (2020) (Statutes are
presumed constitutional and will be construed, wherever possible, to uphold their
constitutionality.).
The first Covell factor is whether the primary purpose in imposing the assessment
is to accomplish a public benefit that costs money or whether its primary purpose is to
pay for a regulatory scheme, a particular benefit conferred on District landowners, or
mitigation of a burden caused by District landowners. Arborwood, 151 Wn.2d at 371.
19 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
If the primary purpose is to raise revenue used for the desired public benefit, the charges are a tax. If the primary purpose is to regulate the fee payers—by providing them with a targeted service or alleviating a burden to which they contribute—that would suggest that the charge is an incidental tool of regulation.
Id. (citing Samis, 143 Wn.2d at 806-07; Covell, 127 Wn.2d at 879).
The second factor is whether the money collected must be segregated and
allocated only to the authorized purpose. Id. at 372. “If the money must be allocated
only to the authorized purpose, the charge is considered to be a fee.” Id. (citing Samis,
143 Wn.2d at 809). This second factor “requires that ‘regulatory fees’ be ‘used to
regulate the entity or activity being assessed.’” Samis, 143 Wn.2d at 810.
The third Covell factor is whether there is a direct relationship between the fee
charged and the service received by those who pay the fee or between the fee charged and
the burden produced by the fee payer. Arborwood, 151 Wn.2d at 372-73 (citing Samis,
143 Wn.2d at 806; Covell, 127 Wn.2d at 879). “If no such relationship exists, the charge
is probably a tax in fee’s clothing.” Id. at 373. If a direct relationship does exist, the
charge may be a fee even if the charge is not individualized to the benefit or burden
associated with each fee payer. Id.
Applying these factors, controlling case law holds that “standby” or “availability”
charges for a service that is not yet being provided or is otherwise not demonstrably
beneficial are unauthorized taxes, not fees. This was the result in Samis, which involved
a challenge to Soap Lake’s flat-rate annual charge on any vacant, unimproved land
20 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
abutting a line providing water or sewer service but which had no connection thereto.
143 Wn.2d at 814. It was the result in Arborwood, in which Kennewick collected the
same monthly charge for ambulance service from every household, business and industry
within the city served by its emergency medical and ambulance services irrespective of
use or need for the service. 151 Wn.2d at 373. It was the result in Carillo, in which
water and sewer availability charges were collected from owners of vacant lots
unconnected to city systems. 122 Wn. App. at 608-09.
These cases teach that for the District’s revenue-raising approach of collecting
reasonable rates from persons for whom district irrigation service is “made available” to
be constitutional, RCW 87.03.445(2) must be construed to authorize assessment of only
those persons who are connected to a district irrigation water delivery system. The trial
court reasonably ruled that with respect to Mr. Hansen’s parcels that are not adjacent to
the lake, he is not a person for whom district service is made available for irrigation water
within the meaning of RCW 87.03.445(2).
In the case of Mr. Hansen’s challenge to the District’s assessment of his one
lakefront parcel, the trial court focused on the District’s statutory authority to fix
“reasonable” rates or tolls and charges. RCW 87.03.445(2). And the assessment of a
“rate,” as distinguished from a “toll” or “charge,” is subject to RCW 87.03.240(1)’s
requirement that assessments be made in proportion to the benefits accruing to the lands
21 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
assessed. RCW 87.03.445(4) provides that only tolls and charges—not rates—are not
subject to RCW 87.03.240(1)).
To be constitutional, such rates must qualify as fees, not taxes, under the Covell
factors, which independently require a direct, reasonable relationship between the fee
imposed and either a service provided to the fee payer or a fee payer harm mitigated.
The trial court recognized that because the setting of rates is a legislative function,
courts review it under the “arbitrary and capricious” test. Teter v. Clark County, 104
Wn.2d 227, 234, 704 P.2d 1171 (1985) (citing Tarver v. City Comm’n of Bremerton,
72 Wn.2d 726, 731, 435 P.2d 531 (1967)). “Arbitrary” action is “‘wilful and
unreasoning action, without consideration and regard for facts and circumstances.’” Id.
at 237 (quoting Miller v. City of Tacoma, 61 Wn.2d 374, 390, 378 P.2d 464 (1963)).
In Teter, landowners challenged water management charges imposed by the
county on properties deemed to contribute to surface water runoff. The charges were
based on “formulae devised after studies of engineering reference material, aerial
photographs, contour maps, and on-site examinations of some of the properties.” Id. at
237. The properties were classified for purposes of computing charges based on the
hydrologic impact of the development and use of the properties upon the peak rates of
runoff, total quantity of runoff, and water quality impacts. Id. Charges were determined
according to engineering knowledge on the ratio of pervious to impervious land in four
development categories. Id.
22 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
The landowners argued that the charges arrived at were arbitrary and capricious
merely because no consideration was given to the individual characteristics of each of the
properties charged. Id. The court held that the county’s rate schedule bore a reasonable
relation to the contribution of each lot to surface runoff:
Respondents are not required to measure each residential lot to ascertain the exact amount of impervious surface on each one. Absolute uniformity in rates is not required. The rates for each class must be internally uniform, but different classes may be charged different rates. Further, only a practical basis for the rates is required, not mathematical precision.
Id. at 238 (citations omitted). The court observed that the county “submitted numerous
documents which show how and why the rate schedule was devised.” Id. It held that the
landowners had not “prove[d] that respondents acted in a willfully unreasonable manner,
without regard to facts and circumstances, by merely asserting that the rates are arbitrary
because respondents did not individualize each rate.” Id.
Mr. Pheasant argues that the District has not conducted any studies, held public
hearings or otherwise sought to determine the benefit of its operations to landowners,
with the result that its actions in setting and maintaining assessments are arbitrary and
capricious and a violation of state law.
The District’s refusal to conduct any review or analysis in imposing its rate is a
paradigm of “wilful and unreasoning action, without consideration and regard for facts
and circumstances.” Teter, 104 Wn.2d at 237. After the legislature reduced the amount
the District could assess for lake improvement and rehabilitation, and in light of its
23 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
members’ diminished need for irrigation service, the District could have sought approval
from its electors of a higher rehabilitation assessment. It could have analyzed to whom it
was making or could make irrigation service available, at what defensible, “reasonable,”
rate. What it could not do is simply continue business as usual and ensure itself an
undiminished revenue stream by ratcheting up a uniform “irrigation service” rate on
assessed value and charging it to irrigation users and nonusers alike.
The trial court properly declared that the portion of the District’s proposed
assessments that relied on its authority under RCW 87.03.445 is an invalid tax.
B. The record does not support the trial court’s ruling declaring the $0.25 per $1,000.00 in value assessment under RCW 87.84.070 to be an invalid tax
In Mr. Pheasant’s memorandum seeking the declaratory judgments, he addressed
the Covell factors and conceded that the purpose of the District’s $0.25 per $1,000.00 in
value assessed as a rehabilitation and irrigation district weighed against finding that
assessment to be a tax. As he explained:
Here, MLIRD as an irrigation and rehabilitation district has been given the purpose to further the recreational potential of the area and to further the rehabilitation or improvement of inland lakes and shore lines and the modification or improvement of existing or planned control structures located in the district in order to further the health, recreation, and welfare of the residents in the area. RCW 87.84.050. Additionally, it has also been given the statutory ability to raise funding by way of a special assessment. RCW 87.84.070. As such, there is a colorable argument that . . . MLIRD has been given a purpose and a means to raise funds, and funds needed for maintenance and operations
24 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
arguably are necessary for MLIRD to fulfill its purpose under RCW 87.84.050. Furthermore, there is a colorable argument that maintenance and operations costs constitute local improvements and directly benefit the land as required under Washington State Constitution art. VII, section 9 and case law. See Kittitas C[ounty] v. Washington State Dep’t of Transp., 13 Wn. App. 2d 79, 89, 461 P.3d 1218, 1224 (2020) (“Special assessments provide ‘for the construction of local improvements that are appurtenant to specific land and bring a benefit substantially more intense than is yielded to the rest of the municipality.’” (quoting Heavens v. King County Rural Library Dist., 66 Wash.2d 558, 563, 404 P.2d 453 (1965))). Maintenance and operations help maintain Moses Lake, which as a recreational lake, arguably enhances the property value of the properties within the district. If MLIRD were to stop its maintenance and operations efforts, arguably Moses Lake’s water quality would decrease and as a result the property within the district may not be as valuable. As there is a colorable argument that maintenance and operations costs, which is MLIRD’s stated purpose for the funds, are indirectly authorized and do benefit the land within MLIRD, this factor also weighs against finding the $0.25 assessed by MLIRD under RCW 87.84 a tax.
CP at 853-54.
Mr. Pheasant argued that the second and third Covell factors weighed in favor of
finding a tax, however, because of the District’s failure to demonstrate the amount it was
applying to rehabilitation purposes versus the amount it was applying to irrigation
purposes. The second and third factors are, again, whether the money collected is applied
only to the authorized purpose and whether there is a direct relationship between the fee
charged and the benefit received.
In this case, however, many expenditures can be characterized as for a
rehabilitation purpose even if the District contends they could also be for an irrigation
25 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
purpose. In such a case, if evidence in the record suggests that at least the amount raised
by specially assessing $0.25 per $1,000.00 in assessed value is being applied to
rehabilitation purposes, the trial court should not have found the special assessment to be
invalid.
Among evidence in the record is the conclusion of state audit staff that the most
significant part of District funds was being spent on rehabilitation rather than irrigation
purposes. In questions posed to the District by the state auditor’s office in 2012, the
following observations were made:
In discussing that the District spends a significant portion of its Irrigation District funding on lake water quality projects (weed harvesting operations, sediment removal efforts), the question arose about whether these efforts are properly authorized purposes for which Irrigation District funding can be spent. In short, on the surface these appear to be more related to rehabilitation purposes (RCWs 87.84.005 and 87.84.050) than they are to irrigation district purposes (RCWs 87.03.010 and 87.03.015). I looked at the District’s budget and actual spreadsheet for 2011, and it appears that at least $550,000 was spent on water quality efforts using irrigation district funding for direct expenses and, of course, additional amounts in related payroll and overhead that could only be estimated. In addition to the assessment methodology question above, we would need to know how water quality efforts would qualify as authorized purposes under the Irrigation District statutes (specifically RCWs 87.03.010 and 87.03.015), as opposed to rehabilitation purposes such as rehabilitation and improvement of inland lakes (rehabilitation statute RCW 87.84.050).
CP at 548-49. And the trial court’s findings that the District spends none of its money on
irrigation works (e.g., pumps, canals and pipelines) reinforces a reasonable inference that
the purpose of most of its expenditures is a lake rehabilitation and improvement purpose.
26 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
RCW 7.24.090 provides that when a declaratory judgment proceeding “involves
the determination of an issue of fact,” such issue may be tried and determined in the same
manner “as issues of fact are tried and determined in other civil actions, in the court in
which the proceeding is pending.” In reviewing a trial court’s factual findings in a
declaratory judgment action, we determine if the findings were supported by substantial
evidence in the record. Schneider v. Snyder’s Foods, Inc., 116 Wn. App. 706, 713,
66 P.3d 640 (2003) (citing Landmark Dev., Inc. v. City of Roy, 138 Wn.2d 561, 573,
980 P.2d 1234 (1999). The trial court’s conclusion that the $0.25 special assessment is
an invalid tax depends on an implicit finding that less than the amount raised by that
assessment is being used for rehabilitation expenditures. Evidence in the record does not
support that implicit finding. The trial court erred in declaring that the portion of the
District’s proposed assessments that relied on its authority under RCW 87.84.070 is an
invalid tax.
II. FOR PURPOSES OF CHAPTER 87.03 RCW, WHICH DOES NOT APPEAR TO BE MR. PHEASANT’S PRINCIPAL CONCERN, WE RELY ON THE DICTIONARY DEFINITION OF “LAND”
The District’s fifth assignment of error is that the trial court erred “in determining
that ‘land’ as used in RCW Ch. 87.03 does not include improvements on the land.” Br.
of Appellant at 1. Its brief addresses the meaning of “land” in only RCW 87.03.445, see
Appellant’s Opening Br. at 40-44, which is not one of the statutes specifically addressed
by the trial court’s rulings. Nevertheless, the trial court ruled that “land” for purposes of
27 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
RCW 87.03.240 does not include the land and improvements but only the land itself.
Presumably, the District is concerned that the judicial construction of “land” for purposes
of RCW 87.03.240 would also apply to RCW 87.03.445.
“Land” is not a defined term in chapter 87.03 RCW. Accordingly, we turn to
principles of statutory interpretation to determine its meaning for purposes of the chapter.
“Our ‘paramount duty in statutory interpretation is to give effect to the
Legislature’s intent.’” State v. Barnes, 189 Wn.2d 492, 495, 403 P.3d 72 (2017)
(quoting State v. Elgin, 118 Wn.2d 551, 555, 825 P.2d 314 (1992)). “When a statute does
not define a term, we give the term ‘its plain and ordinary meaning unless a contrary
legislative intent is indicated.’” Id. (quoting State v. Jones, 172 Wn.2d 236, 242, 257
P.3d 616 (2011). We generally derive this plain meaning from the context of the entire
act as well as other related statutes. Id. at 495-96. “We may also determine the plain
meaning of an undefined term from a standard English dictionary.” Id. at 496 (citing
State v. Fuentes, 183 Wn.2d 149, 160, 352 P.3d 152 (2015)).
“Land” is defined as “[a]n immovable and indestructible three-dimensional area
consisting of a portion of the earth’s surface, the space above and below the surface, and
everything growing on or permanently affixed to it.” BLACK’S LAW DICTIONARY 1048
(11th ed. 2019). A similar definition is found in the phrase “real property.” Real
property is defined as “[l]and and anything growing on, attached to, or erected on it.”
BLACK’S LAW DICTIONARY 1472 (11th ed. 2019).
28 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
The Washington Supreme Court has previously relied on a similarly inclusive
definition of “land,” albeit in a different context. In Island County v. Dillingham
Development Co., 99 Wn.2d 215, 223, 662 P.2d 32 (1983), disagreement over the
meaning of “land” arose where owners of larger-than-5-acre tracts of property that was
largely under water argued they should be entitled to an exemption from platting
requirements for 5-acre divisions of “land.” There, as here, “land” was undefined by
statute, so the court turned to the term’s ordinary meaning. Id. at 224. It relied on the
definition from an earlier edition of Black’s Law Dictionary, which provided “‘[l]and’
includes not only the soil or earth, but also things of a permanent nature affixed thereto or
found therein, whether by nature, as water . . . or by the hand of man, as buildings,
fixtures, fences.” Id. at 224 (emphasis omitted) (quoting BLACK’S LAW DICTIONARY,
1019 (4th rev. ed. 1968)). The court held the ordinance at issue included the land “under
water.” Id. at 224.
Mr. Pheasant’s principal concern in his briefing on appeal is with the meaning of
“land” as used in RCW 87.84.070, which authorizes the directors of a rehabilitation and
irrigation district to “specially assess land” for benefits, “taking as a basis the last
equalized assessment for county purposes.” Br. of Resp’t at 44-45 (emphasis omitted)
(quoting RCW 87.84.070). In that context, Mr. Pheasant argues that we should infer that
the legislature meant for “the normal assessment definitions and methods [to] apply.” Id.
at 44. Arguably, in that context, “land” would have a different meaning. But the District
29 For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.
does not contend that the trial court incorrectly defined land for purposes of chapter 87.84
RCW or RCW 87.84.070. And it does not reply to Mr. Pheasant’s argument about the
proper construction of RCW 87.84.070. The District’s challenge is to the term’s meaning
in chapter 87.03 RCW, which speaks of “land” only as parcels against which rates or tolls
and charges are assessed. Unlike RCW 87.84.070, chapter 87.03 RCW does not use
“land” to mean a county value for assessment purposes.
For purposes of chapter 87.03 RCW, Mr. Pheasant provides no reason why we
should not rely on the definition of “land” from Black’s Law Dictionary, just as the
Supreme Court did in Island County.
We affirm the trial court’s determination that the District’s assessments in reliance
on chapter 87.03 RCW are invalid, reverse its determination that the District’s
assessments in reliance on RCW 87.84.070 are invalid, and reverse in part its limiting
construction of “land.” We hold that as used in chapter 87.03 RCW (but not as used in
RCW 87.84.070), “land” includes improvements.
Siddoway, C.J.
WE CONCUR:
Lawrence-Berrey, J. Pennell, J.