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Appeals court rules against ratepayers group

The State Court of Appeals has ruled in favor of the city regarding a Bainbridge Ratepayers Alliance’s lawsuit that questioned the validity of bonds raised for the Waste Water Treatment Plant’s upgrade.

The ruling, however, involves only one legal issue of several; the alliance has an 11-count lawsuit filed last March in Kitsap County Superior Court that is still active.

Among other issues, that complaint asks the court “to limit the expenditures from municipal utilities revenue to those that are part of the production and sale of the service being provided and are for the use of the individual customers, each paying only for their own usage.”

Sally Adams, secretary of the alliance, said plaintiffs are still in the discovery stage and that the city has refused to engage in settlement talks.

The state appellate court affirmed both the county Superior Court granting of summary judgment and subsequent dismissal, and the plaintiff’s motion of reconsideration.

The ratepayers group had argued that the city’s proposed payment of the bonds was illegal; the bonds (up to $6 million) exceeded the amount the city needed to complete the sewer improvements; and the city must commit with a city Utility Advisory Committee (formed only after the law suit was filed) before issuing the bonds.

Regarding both the charges that the proposed method of paying for the bonds is illegal and that the bonds exceeded the amount required to complete the project, the court argued that the events the plaintiff was concerned about hadn’t occurred “and is not ripe for consideration.”

The court wrote: “The Alliance does not argue that cities are prohibited from making interfund loans. Instead, it argues that in this instance such loans would result in service charges that would constitute illegal taxes ... charges which may or may not be imposed.”

Addressing the city proposed payment of the bonds being illegal, the court argued: “The bonds [sought] do not unlawfully exceed the amount required to complete the sewer upgrades,’ and again, are not ripe review.

Adams said the nonprofit alliance had no problem with the court’s decision, saying that the group had never opposed the use of debt financing for the city project, saying it was “an appropriate source of funding.” But she thinks the court put the city on notice.

“The court spelled out,” Adams continued, “that not until the city misuses the fees received from others to pay for sewer obligations can we bring a suit ‘ripe’ for a decision before the court. It can issue bonds, but the court’s caution regarding the legal potholes the city could step into if it issues bonds that has left it in legal limbo regarding its ability to issue bonds.”

The treatment plant upgrade was stalled after the city couldn’t borrow funding to complete it as lenders balked because of the ratepayers lawsuit. In January, a settlement between the two sides resulted in the city executing a bond anticipation for $1.9 million after the alliance agreed to waive any legal objections to the loan from Cashmere Bank. The city agreed to pay the ratepayers group $35 in legal costs.

The upgrade has been completed.

Perhaps, but Interim City Manager Brenda Bauer said the appellate court’s reaffirmation of the trial court’s decisions allows the city to pay off the financing.

“The wastewater treatment project is very important to the city and to our Puget Sound environment, but paying for it has been a big challenge for a small city in this difficult economy,” she said in an email. “We are glad that the Court of Appeals has approved the city’s financing plan for the project and we look forward to bringing it to a successful conclusion.”

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