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Viking Construction, Inc. v. Hayden Lake Irrigation District

May 28, 2010

VIKING CONSTRUCTION, INC., AN IDAHO CORPORATION, PLAINTIFF-APPELLANT,
v.
HAYDEN LAKE IRRIGATION DISTRICT, AN IDAHO QUASI-MUNICIPAL CORPORATION, DEFENDANT-RESPONDENT.



Appeal from the District Court of the First Judicial District of the State of Idaho, in and for Kootenai County. The Hon. John P. Luster, District Judge.

The opinion of the court was delivered by: Eismann, Chief Justice.

2010 Opinion No. 56

The judgment of the district court is vacated.

This is an appeal from a summary judgment upholding an increase in a connection fee charged as an "equity buy-in" to hook up to a domestic water system in an irrigation district. Because there is a genuine issue of material fact as to whether the connection fee was calculated as the value of that portion of the system capacity that the new user will utilize at that point in time, we vacate the judgment and remand this case for further proceedings.

I. FACTS AND PROCEDURAL HISTORY

The Hayden Lake Irrigation District (Irrigation District) is an irrigation district that delivers both irrigation and domestic water. Viking Construction, Inc., (Viking) is a construction company that builds custom and speculation homes. It owns multiple parcels of land located within the Irrigation District.

For years, the Irrigation District has charged a fee to connect to its domestic water distribution system. A portion of the connection fee covers the actual cost of connecting to the water system, but the majority of the fee is intended to be the cost of buying an equity interest in the system.

At a regular meeting on September 7, 2004, the Irrigation District increased the connection fee from $2200 to $2700 effective the following day. Prior to the meeting, Viking had sixty-five presold homes for delivery after September 8, 2004. Viking had calculated the sale price of the homes based upon the connection fee being $2200. It asked the Irrigation District to delay the fee increase, but the District refused to do so.

On December 10, 2004, Viking filed a complaint for declaratory and injunctive relief. It sought a declaration that the Irrigation District could not charge any connection fees or could not increase the connection fee, an injunction against doing so, and a judgment for the amount of all connection fees previously paid by Viking. Both parties filed motions for summary judgment. The district court granted the Irrigation District‟s motion and entered judgment dismissing the complaint with prejudice. Viking then timely appealed.

II. ISSUES ON APPEAL

1. Did the district court err in holding that Idaho Code § 43-1909(e) authorizes the Irrigation District to impose a connection fee?

2. Did the district court err in holding that the amount of the connection fee is reasonable?

3. What does it mean that an irrigation district shall not operate its works primarily as a source of revenue to the district?

4. Must there be a constitutional provision authorizing the Irrigation District Bond Act?

5. Irrigation district statutes applicable to irrigation works may not apply to domestic water works.

6. Could the Irrigation District set the connection fee by amending its by-laws?

7. Alleged violation of the Due Process and Equal Protection Clauses of the Fourteenth Amendment.

8. Does the connection fee violate §§ 2, 4, and 5 of Article XV of the Idaho Constitution?

9. Does the connection fee violate §§ 2, 5, and 6 of Article VII of the Idaho Constitution?

10.Does the connection fee violate contracts between the Irrigation District and the federal government?

11. Is Viking entitled to an award of attorney fees on appeal?

III. ANALYSIS

A. Did the District Court Err in Holding that Idaho Code § 43-1909(e) Authorizes the Irrigation District to Impose a Connection Fee?

The district court held that the connection fees were authorized by Idaho Code § 43-1909(e), which provides that the district shall have power "[t]o prescribe and collect rates, fees, tolls or charges . . . for the services, facilities and commodities furnished by works." The court compared this provision with the identical language in Idaho Code § 50-1030(f),*fn1 which this Court held in Loomis v. City of Hailey, 119 Idaho 434, 807 P.2d 1272 (1991), authorized a city to collect a sewer and water connection fee. Since there is no basis for giving differing constructions to the identical language in the two statutes, Idaho Code § 43-1909(e) authorizes charging a connection fee to connect to an irrigation district‟s domestic water system.

Viking argues that the district court erred in holding that section 43-1909(e) is applicable in this case. That statute is part of the Irrigation District Domestic Water System Revenue Bond Act (Irrigation District Bond Act), I.C. §§ 43-1907 to 43-1920. According to Viking, "The power granted in I.C. § 43-1909(e) is contingent on the issuance of revenue bonds, after and only after, approval of the electorate." In support of this argument, Viking cites to remarks by legislators in the legislative record stating that the purpose of the Act was to permit irrigation districts to issue revenue bonds for domestic water systems.

"[T]he purpose of an unambiguous statute is not the concern of the courts when attempting to interpret a statute." In re Permit No. 36-7200 in Name of Idaho Dept. of Parks and Recreation, 121 Idaho 819, 824, 828 P.2d 848, 853 (1992). The asserted purpose for enacting the legislation cannot modify its plain meaning. The scope of the legislation can be broader than the primary purpose for enacting it. "This Court has stated that when the language of a statute is definite, courts must give effect to that meaning whether or not the legislature anticipated the statute‟s result." Id. We do not construe a statute unless its wording is ambiguous. As we stated in State v. Schwartz, 139 Idaho 360, 362, 79 P.3d 719, 721 (2003) (emphasis added, citations omitted):

The interpretation of a statute is a question of law over which we exercise free review. It must begin with the literal words of the statute; those words must be given their plain, usual, and ordinary meaning; and the statute must be construed as a whole. If the statute is not ambiguous, this Court does not construe it, but simply follows the law as written. Unless the result is palpably absurd, we must assume that the legislature means what is clearly stated in the statute. If the statute as written is socially or otherwise unsound, the power to correct it is legislative, not judicial.

Viking has not pointed to any ambiguity in Idaho Code § 43-1909.*fn2 The statute begins, "In addition to the powers which it may now have, any district shall have power under and subject to the following provisions." It applies to any district. By its terms, it is not limited to a district issuing bonds, as are, for example, Idaho Code §§ 43-1911 and 43-1912, respectively begin with the wording "The directors of the district issuing bonds pursuant to this act" and "Any district issuing bonds under this act."

Viking also contends that the words "under and subject to the following provisions" limit the powers granted by Idaho Code § 43-1909 to irrigation districts that have issued revenue bonds. According to Viking, because the power granted is "under and subject to" subsections (a) through (g), "[t]he Act clearly demonstrates the legislature‟s express intention for a comprehensive plan." Thus, Viking‟s argument is that an irrigation district must exercise all of the listed powers, or it cannot exercise any of them. Viking cites no authority for so construing a statute such as section 43-909 that lists powers granted by the legislature, nor is such construction logical. The statute lists powers that any district may exercise. There is nothing in the language of the statute requiring an irrigation district to exercise all of the powers in order to exercise any of them. If that were the proper construction, in order to "operate and maintain any works," I.C. § 43-1909(c), the district would also have to "exercise the right of eminent domain," I.C. § 43-1909(b), and to "issue its revenue bonds," I.C. § 43-1909(d), regardless of whether it desired to acquire more property or finance a project. The district court did not err in holding that Idaho Code § 43-1909(e) applies to the Irrigation District even though it has not issued revenue bonds.

B. Did the District Court Err in Holding that the Amount of the Connection Fee Is Reasonable?

1. Did the district court err in holding that the connection fee was imposed under the Irrigation District's proprietary function?

Viking argued to the district court that the connection fee had to be either a regulatory fee or a tax. Because the connection fee does not bear a reasonable relationship to the cost of enforcing any regulation, Viking asserted that it was not a regulatory fee, and therefore it could only be a tax. The district court rejected that argument based upon Loomis v. City of Hailey, 119 Idaho 434, 807 P.2d 1272 (1991). Loomis recognized three categories of authority that could possibly be applicable and held that the connection fee was neither a tax nor a regulatory fee, but was a fee imposed pursuant to the city‟s proprietary function.

The Loomis Court began its analysis by stating, "First, we must determine whether the connection fee constitutes an impermissible tax." Id. at 437, 807 P.2d at 1275. The Court stated that the connection fees would not be construed as taxes if either "the rates, fees and charges conform to the statutory scheme set forth in the Idaho Revenue Bond Act or [they] are imposed pursuant to a valid police power." Id. at 438, 807 P.2d at 1276. "However, if the rates, fees and charges are imposed primarily for revenue raising purposes they are in essence disguised taxes and subject to legislative approval and authority." Id.*fn3

The Loomis Court then addressed whether the connection fee was imposed pursuant to the city‟s police power. It stated, "Municipalities may impose fees pursuant to its "police powers‟ to enact regulations for the furtherance of the public health, safety or morals. It is well established that fees imposed under this "police power‟ must bear some ...


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