Was Washington’s municipal conditional-sale debt limit based on actual or assessed property value?

Plain-English summary

In 1968, the Washington Attorney General read the one-and-one-half-percent debt limit in RCW 39.30.010 for certain municipal conditional sales contracts as a percentage of the actual value of taxable property in the contracting government. He rejected assessed valuation as the base for this particular statute. The amount mattered when deciding whether the proposed contract required voter approval.

The opinion compared the statute’s phrase “taxable property” with statutes that expressly used “assessed valuation.” It followed the distinction discussed in an earlier AG opinion and the state court’s analysis in Hansen v. Hoquiam. The answer was confined to the conditional-sale method authorized by RCW 39.30.010; the opinion said other debt methods, including bonds, remained subject to other limits.

Currency note

This opinion was issued in 1968. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Did this opinion use the assessed tax roll as the base for the contract limit?
No. For the RCW 39.30.010 conditional sale, the opinion used actual value of taxable property rather than assessed valuation.

What happened if the proposed contract exceeded the statutory percentage?
The statute quoted in the opinion required a voter proposition when the contract would push total indebtedness above the one-and-one-half-percent limit.

Did this interpretation also change the debt limit for municipal bonds?
No. The opinion’s footnote said debt incurred by other methods, such as bond borrowing, continued to be governed by the more restrictive RCW 39.36.020 provisions.

Background and statutory framework

RCW 39.30.010 allowed cities, towns, counties, metropolitan park districts, and library districts to buy property through executory conditional sales contracts within a stated debt ceiling. The Attorney General contrasted that 1963 statute with the general debt statute and a 1965 school-district conditional-sale statute, both of which referred to assessed valuation.

Citations and references

• Statutes discussed: RCW 39.30.010; RCW 39.36.020; RCW 28.58.550.
• Case discussed: Hansen v. Hoquiam.

Source

• Landing page: https://www.atg.wa.gov/ago-opinions/cities-and-towns-contracts-execution-conditional-sales-contract

Original opinion text

Attorney General John J. O'Connell

CITIES AND TOWNS - CONTRACTS - EXECUTION OF A CONDITIONAL SALES CONTRACT.

The phrase "one and one half percent of the taxable property," as used in § 1, chapter 92, Laws of 1963 (RCW 39.30.010), authorizing executory conditional sales contracts for the purchase of property by certain municipalities including cities and towns, refers to the actual value of the taxable property located within the contracting municipality rather than to the assessed valuation of such taxable property.

June 6, 1968

Honorable Herbert H. Freise
State Senator, 11th District
200 Jones Building
Walla Walla, Washington 99362

Cite as: AGO 1968 No. 23

Dear Sir:

We are writing in response to your recent letter requesting our opinion on a question which we paraphrase as follows:

Does the phrase "one and one half percent of the taxable property," as used in § 1, chapter 92, Laws of 1963 (RCW 39.30.010), authorizing executory conditional sales contracts for the purchase of property by any city, town, metropolitan park district, county or library district, refer to the actual value of the taxable property located within the contracting municipality, or is it limited to the assessed valuation of such taxable property?

In our opinion, this phrase in the statute you have cited refers to the actual value of the taxable property located within the contracting municipality. Our reasoning is set forth in the following analysis.

ANALYSIS

In AGO 1967 No. 19, copy enclosed, we addressed ourselves at some length to the distinction to be drawn between municipal indebtedness limitations which are expressed in terms of a percentage of the taxable property in the municipality or other taxing district, and those which are expressed in terms of a percentage of the assessed valuation of such taxable property.

[[Orig. Op. Page 2]]

The two statutes to which we had reference in that opinion were RCW 57.20.110, relating to the debt limitation of a water district, and RCW 39.36.020, establishing a statutory debt limitation for municipalities and other taxing districts, generally. In determining the meaning of the respective phraseology appearing in these two statutes, we also considered the language of Article VIII, § 6 (Amendment 27) of our state constitution, which provides, in pertinent part, as follows:

"No county, city, town, school district, or other municipal corporation shall for any purpose become indebted in any manner to an amount exceedingone and one half percentum of the taxable property in such county, city, town, school district, or other municipal corporation, without the assent of three fifths of the voters therein voting at an election to be held for that purpose, nor in cases requiring such assent shall the total indebtedness at any time exceedfive percentum on the value of the taxable property therein, to be ascertained by the last assessment for state and county purposes previous to the incurring of such indebtedness, except that in incorporated cities the assessment shall be taken from the last assessment for city purposes: . . ." (Emphasis supplied.)

InHansen v. Hoquiam, 95 Wash. 132, 163 Pac. 391 (1917), our state supreme court held that the constitutional limit upon municipal indebtedness of a percentage "of the value of the taxable property therein to be ascertained by the last assessment" does not mean a percentage of the assessed valuation, where the taxing officers assess the property at a percentage of its true value, but rather means the actual value of the property; i.e., the true value of the property against which its assessed valuation is determined.

After noting this case, we then observed in AGO 1967 No. 19, that it was immediately following this decision that the legislature enacted the general statutory debt limitation provision for municipalities contained in RCW 39.36.020, in which the measuring unit for indebtedness was stated in terms of a percentage of the assessed valuation of the taxable property in the municipality or the taxing district, rather than in terms of a percentage of the value of the taxable property therein.

[[Orig. Op. Page 3]]

We next cited the case ofState ex rel. School Dist. No. 102 v. Clausen, 116 Wash. 432, 199 Pac. 752 (1921), for recognition by the court of the resulting distinction between the constitutional debt limitation provision which it had construed inHansen v. Hoquiam, supra, and the new statutory limitation. Against this background, and reasoning therefrom, we reached the conclusion that the phrase "one percent of the taxable property in such water district" appearing in RCW 57.20.110, meant that the debt limitation of the water district is to be calculated on the basis of the actual value of the taxable property located therein, and not upon the basis of the assessed valuation of such property.

All of the foregoing is very much pertinent to your present inquiry for again we have before us, in the statute to which your question refers, a debt limitation (of sorts) based upon a percentage of the taxable property in a municipality, rather than a percentage of the assessed valuation of such taxable property. That statute (RCW 39.30.010, codifying § 1, chapter 92, Laws of 1963) reads, in full, as follows:

"Any city or town or metropolitan park district or county or library district may execute an executory conditional sales contract with a county or counties, the state or any of its political subdivisions, the government of the United States, or any private party for the purchase of any real or personal property, or property rights in connection with the exercise of any powers or duties which they now or hereafter are authorized to exercise, if the entire amount of the purchase price specified in such contract does not result in a total indebtedness in excess ofone and one half percent of the taxable property in such city or town or metropolitan park district or county or library district: Provided, That if such a proposed contract would result in a total indebtednessin excess of one and one half percent of the taxable property of such city or town or metropolitan park district or county or library district, as the case may be, a proposition in regard to whether or not such a contract may be executed shall be submitted to the voters for approval or rejection in the same manner that bond issues [[Orig. Op. Page 4]] for capital purposes are submitted to the voters: Provided further, That any city or town or metropolitan park district or county or library district may jointly execute contracts authorized by this section, if the entire amount of the purchase price does not result in a joint total indebtedness in excess of one and one half percent of the taxable property in such city or town or metropolitan park district or county or library district." (Emphasis supplied.)

By way of contrast, when the legislature, in 1965, granted essentially the same authority to school districts, it patterned the limiting language after the more restrictive phraseology of RCW 39.36.020, supra, and thereby, in § 1, chapter 62, Laws of 1965 (RCW 28.58.550), provided that a school district can only purchase property through an executory conditional sales contract, without approval of the voters of the district,

". . . if the entire amount of the purchase price specified in such contract does not result in a total indebtedness in excess of one and one half percentof the assessed valuation of the taxable property in such school district: . . ." (Emphasis supplied.)1/

[[Orig. Op. Page 5]]

It seems apparent that the legislature, both in 1963, when it enacted RCW 39.30.010,supra, and in 1965, when it enacted the comparable statute for school districts, was aware of, and intended the statutes to be construed in the light of, Article VIII, § 6 (Amendment 27) of the state constitution,supra. It was also evidently aware of the more restrictive phraseology contained in thestatutory municipal debt limitation which the legislature had enacted in 1917, following the supreme court's decision inHansen v. Hoquiam, supra.

In enacting the 1963 conditional sales contract statute for cities, towns, counties, metropolitan park districts, and library districts, the legislature chose to use the broader language of the constitutional debt limit. However, in 1965, it used the more restrictive statutory formula in authorizing school districts to purchase property by conditional sales contract.2/

Accordingly, for essentially the same reasons as were involved in AGO 1967 No. 19, supra, we likewise conclude that the phrase "one and one half percent of the taxable property" as used in § 1, chapter 92, Laws of 1963 (RCW 39.30.010),supra, refers to the actual value of the taxable property located in the contracting municipality, and not merely to the assessed valuation of such property. Therefore, when such a municipality uses the device of a conditional sales contract to purchase property, it may calculate its "total indebtedness" percentage, for the purpose of determining whether voter approval is necessary, against this valuation basis.3/

[[Orig. Op. Page 6]]

We trust the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

PHILIP H. AUSTIN
Assistant Attorney General

*** FOOTNOTES ***

1/See AGO 65-66 No. 123, copy enclosed, for our views on the meaning of the phrase "total indebtedness" as used in this statute. Unquestionably, the analytical approach thus prescribed is equally applicable to the issue of computing "total indebtedness" of a city, town, metropolitan park district, county or library district which is seeking to purchase property by an executory conditional sales contract under the provisions of RCW 39.30.010,supra for, in this respect, the 1963 act relating to these municipalities and the 1965 act relating to school districts are identical.

2/It is interesting to note that House Bill No. 175, which, when enacted, became chapter 62, Laws of 1965 the school district conditional sales contract statute originally would have based the percentage of indebtedness upon the taxable valuation of the property in the district. However, by a house amendment which was adopted prior to final passage, this was changed from taxable valuation to assessed valuation. See the House Journal for 1965, at page 397.

3/However, of course, when such a municipality is contemplating the incurrence of an indebtedness by some other means e.g., by borrowing money through the issuance of bonds it will continue to be governed by the more restrictive provisions of RCW 39.36.020, supra. The 1963 act (RCW 39.30.010) to which your question refers must be regarded as a special act limited to the single "contract" method of incurring a debt which is authorized thereby. Accord,People v. Breyer, 139 Cal. App. 547, 34 P.2d 1065 (1934); as well as 2 Sutherland, Statutory Construction, § 5204, p. 541, and authorities cited therein.