Article by Erik Smith. Published on Tuesday, February 09, 2010 EST.

Queen City Doesn’t Like Impact Fees When it Has to Pay – Argument Moves to Olympia

Boundary Dam.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Feb. 9.—Whenever lawmakers talk about imposing impact fees for local-government services, they’re sure to find Seattle in line with an outstretched palm. But things are a little different when the Queen City has to pay.

            Seattle is balking at a payment demand from tiny Pend Oreille County, up in the rugged northeastern corner of the state. The county is home to Boundary Dam on the Pend Oreille River, which generates nearly half the power consumed by the city of Seattle. The county says Seattle City Light, the dam’s owner, ought to pay the same level of fees as other utilities in the state of Washington. Seattle says no, and in the last year it hasn’t paid a dime.

Now county officials are borrowing to make payroll and they say Seattle is trying to starve them out. They’ve taken their dispute to the Capitol. Seattle says it’s none of the Legislature’s business.

            A bill in the state House, HB 2925, would require the city of Seattle to offer the county an amount pegged to a percentage of utility taxes collected by Seattle City Light. “It’s just a little nudge to the parties, to say let’s get serious and negotiate and find a resolution,” said Rep. Joel Kretz, R-Wauconda. 

            Frustrated local-government officials in Pend Oreille County say they have nowhere else to turn.

            “This is a David and Goliath story,” said Nancy Lotze, superintendent of Selkirk Consolidated School District.

            It’s worse than that, said Sen. Bob Morton, R-Orient. “This one is about Goliath trying to choke little David and break David down.”

            No Taxes for Seattle

            Seattle City Light is mounting a strong lobbying effort against the House measure. An identical bill died in a Senate committee last week. If Pend Oreille County doesn’t like the terms that Seattle is offering, the city says the county ought to go to arbitration – or perhaps battle it out in court. 

“Seattle City Light is committed to reaching an agreement with Pend Oreille County that is both fair to Pend Oreille County and Seattle City Light ratepayers,” the utility’s Jackie Kirn told a House panel two weeks ago.

In the meantime, though, the utility isn’t required to make payments because the last agreement expired at the end of 2008. The utility says it won’t pay unless the county agrees to arbitration.

            The problem started some 55 years ago, when planning was under way for Seattle’s big dam on the Pend Oreille. Government agencies like Seattle City Light don’t pay property taxes. So when one government agency builds something on another government’s turf, some sort of payment usually is part of the deal. The idea is to offer compensation for the land that is taken off the property-tax rolls. The federal government, for instance, offers local governments “payments in lieu of taxes” for military bases and installations like the Hanford Nuclear Reservation.

            The wording of the 1955 state law concerning Boundary Dam seemed to endorse that idea. It said the county and Seattle City Light were supposed to negotiate. Seattle was directed to pay for impacts to local-government services and for “lost revenue.”

            But somehow that last idea got lost by the time the dam was finished in 1967. Instead, Seattle City Light has been paying an amount it feels is close to the cost of government services directly attributable to the dam – police, fire, roads. The last time it made a payment, back in 2008, the amount was $1.3 million. The utility says it’s willing to offer a 40 percent increase, but only because the number is pegged to a new calculation of the cost of county services. It also might be willing to pay a little more if the county was willing to do an itemized accounting.

            County officials say that’s the wrong way to look at things. If the dam was owned by a private utility like Avista, tax payments would be three times as high. If it was owned by a public utility district, they say the payments would be four times as high.

            Under the county’s plan, Seattle’s payments would nearly double.

            Frightened of Seattle

            That’s where things have stood for more than a year, and county officials are starting to get nervous. The Pend Oreille County budget isn’t large – just $9.6 million, less than the cost of a parking lot anywhere near Seattle City Hall. Because Seattle isn’t paying, that’s a 10 percent bite from the county budget. Commissioner Laura Merrill said the county was forced to borrow $750,000 last year to make ends meet. “One comment I heard on the Hill was that it seems like negotiation by starvation,” she said.

County officials say they turned to the Legislature because they don’t think they would get a fair shake in arbitration. There aren’t any legal precedents, and arbitrators might well fall back on the old agreement. But they say the biggest problem is that Seattle has more muscle and is bound to win.

 “Seattle City Light is the ninth largest utility company in the United States,” Lotze said at a hearing last month. “They are very good at what they do and although we do not begrudge them their legal expertise, this arbitration requires that the county and the school district have the same level of legal proficiency, and I guarantee we don’t. Senators, I’m a school superintendent, not an attorney.”

Seattle utility officials are telling lawmakers that they face pressures, too – they had to raise rates this year by 13.8 percent, a move that brought howls from the city. And they note that they provide other forms of compensation to Pend Oreille County – the utility sells some of its power at cost to the local public utility district, and it built a high school in the area in 1962.

Pend Oreille County’s proposal “could impose millions of dollars of unanticipated cost to the utility and to our ratepayers,” said lobbyist Tim Gugerty.

Lawmakers Skeptical

Seattle may have just as much muscle in the Legislature as it does in the courtroom, but Pend Oreille County has found a few sympathetic ears. One of them is Geoff Simpson, D-Covington, chairman of the House Local Government Committee, who took Seattle’s lobbyists to task in a House hearing.

 “It seems like you guys are in a real position of power here,” he said. “You have the ability to just lowball the offer and drag things on and eventually Pend Oreille is put in the position of taking whatever is offered to them.”

House Minority Leader Richard DeBolt, R-Chehalis, mocked the idea that the negotiations are evenhanded. “If you can’t reach agreement,” he asked the Seattle lobbyists, “are you going to stop taking power from the dam? Are you going to de-water the dam? What are you going to do?”

The bill sailed through committees in the House and awaits action on the House floor.

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