DISTRICTS ‑- FIRE PROTECTION ‑- ANNEXATION OF A PORTION THEREOF ‑- OUTSTANDING INDEBTEDNESS

DISTRICTS ‑- FIRE PROTECTION ‑- ANNEXATION OF A PORTION THEREOF ‑- OUTSTANDING INDEBTEDNESS.

Where a portion of a fire protection district is annexed to a city or town, the property located in the area annexed remains subject to tax levies for payment of outstanding indebtedness (bonded or otherwise) of the district existing at the time of annexation unless the city or town elects to assume said indebtedness.

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                                                                   April 13, 1962

Honorable F. Stuart Foster
State Senator, 14th District
331 Miller Building
Yakima, Washington

                                                                                                              Cite as:  AGO 61-62 No. 113

Dear Sir:

            By letter previously acknowledged you have requested an opinion of this office on a question which we paraphrase as follows:

            In the event that a portion of a fire protection district is annexed to a city or town, does real and personal property located in the area annexed remain subject to tax levies for payment of outstanding indebtedness, bonded or otherwise, of the district existing at the time of annexation?

            We answer your question in the manner set forth in our analysis.

                                                                     ANALYSIS

            A complete answer to your question requires that we set forth, in full, for purposes of examination and analysis, the provisions of §§ 21, 22, 23, and 24, chapter 282, Laws of 1961 (cf. RCW 35.13.220, 35.13.243, 35.13.246, and 35.13.250).  We shall henceforth refer to these enactments by their respective code section designations.

            RCW 35.13.220 provides as follows:

            "Whenever any territory which includes all the territory of a water, sewer orfire protection district, hereinafter referred to as 'the district,' has been heretofore or is hereafterannexed to a city or town, all real and personal property,  [[Orig. Op. Page 2]] franchises, rights, assets, taxes levied but not collected for the district for other than indebtedness, water or sewer lines, facilities, or equipment of the district shall become the property of a city or town to which annexation is made and such city shall, in addition to its other powers, have the same power to manage, control, maintain and operate such facilities and to fix and collect charges to customers as the commissioners of the district had prior to annexation, subject, however, to anyoutstanding indebtedness, bonded or otherwise, of the district or local improvement district or utility local improvement district thereof,which indebtedness a city or town may by resolution of its governing body elect to assume and pay at the times and in the manner said indebtedness is due and payable.  Such election to assume said indebtedness may be made either upon the effective date of such annexation or at any time thereafter during the period such indebtedness remains outstanding.  Until such election is made, the property annexed and the owners and occupants thereof shall continue liable for its and their proportion of the unpaid indebtedness and the district, or local improvement district or utility local improvement district, [[;]] and its officers shall continue to function for the sole purpose of certifying the amount of property tax or assessments to be collected and paid on such indebtedness in the same manner and by the same means as if the annexation had not been made.

            "If a city or town elects to assume outstanding indebtedness, and property taxes or assessments have been levied for such purpose but not collected for the district or local improvement district or utility local improvement district thereof prior to the date of such election by the city or town, the same shall when collected belong and be paid to the annexing city and be used by such city or town so far as necessary for payment as and when due of the indebtedness of the district or local improvement district or utility local improvement district existing and unpaid on the date such city or town elects to assume such indebtedness.  If a city or town takes over any funds which have been collected for paying any bonded or other  [[Orig. Op. Page 3]] indebtedness of the district the same shall be used for the purpose for which collected and for no other purpose."  (Emphasis supplied.)

            RCW 35.13.243 provides as follows:

            "If aportion of the district equal to at least sixty percent of the area or sixty percent of the assessed valuation of the real property included within the district is annexed to a city or town, the city or town may:

            "(1) Adopt an ordinance assuming the full and complete management and control of the entire district,whereupon the provisions of RCW 35.13.220 shall be operative as to such annexation; or

            "(2) Adopt an ordinance assuming jurisdiction of the district's responsibilities, property, facilities and equipment within the area annexed:  Provided, That if the annexed area contains any property, facilities or equipment which, on the date of annexation, were serving any portion of the district not annexed, the city or town shall assume full ownership, management and control of such property, facilities and equipment subject to any one of the following conditions acceptable to the district and city or town concerned:

            "(a) The city or town shall, for the economic life of such property, facilities and equipment, make such property, facilities and equipment available for use by the district to the same extent such property, facilities and equipment served the unannexed portion of the district on the date of annexation; or

            "(b) The city or town shall pay to the district that proportion of the equity of the district in such property, facilities and equipment equal to the proportion the assessed valuation of all property subject to taxation situated within the area of the district not annexed bears to the total assessed valuation of all property subject to taxation situated within the district prior to annexation.  For the purpose of this paragraph, assessed valuation shall be the valuation of the property as last determined by the county assessor.  In determining the equity of the district for purposes of this paragraph due consideration shall be  [[Orig. Op. Page 4]] given to depreciation of the economic life of the property, facilities and equipment due to age and condition, and to replacement costs for comparable property, facilities and equipment to serve that portion of the district not annexed; or

            "(c) The city or town shall, for the economic life of such property, facilities and equipment, provide for continuity of service to the unannexed portion of the district served by such property, facilities and equipment on the date of annexation.

            "A city or town acquiring property, facilities and equipment under the provisions of subdivision (2) of this section shall acquire such propertysubject to the debts and obligations of the district for which such property, facilities and equipment would have been liable if no annexation had been made; and, in such cases, the annexed property, and the owners and occupants thereof,shall continue liable for payments of its and their proportionate share of any unpaid indebtedness, bonded or otherwise, with the right on the part of the district officials to make tax levies and collect charges on such property or owners or occupants, and to enforce such collections as if the annexation had not been made."  (Emphasis supplied.)

            RCW 35.13.246 provides as follows:

            "If theportion of the district annexed to a city or town is less than sixty percent of the area of the district and less than sixty percent of the assessed valuation of the real property within the district, the provisions of RCW 35.13.243, except subdivision (1), as now or hereafter amended, shall apply."  (Emphasis supplied.)

            RCW 35.13.250 provides as follows:

            "Notwithstanding any of the provisions of this chapter to the contrary, as now or hereafter amended, the city may, through its legislative authorityauthorize a contract with the district,  [[Orig. Op. Page 5]] with respect to rights, duties and obligations of the city and the district as to ownership of property, services, assets,liabilities and debts and any other questions arising out of the annexation, which contract may also make provisions for services by the district and use of its facilities or real estate within the city, and which contract may also provide that for such time as the contract may provide such district may continue to exercise all rights, privileges, powers and functions of such district provided by law as if there had been no annexation, including but not by way of limitation the right to levy and collect special assessments, adopt and carry out the provisions of a comprehensive plan, or amendments thereto, for a system of improvements, and issue and sell revenue and general obligation bonds."  (Emphasis supplied.)

            Though somewhat complex and requiring a full and careful reading, we believe these statutory provisions to be clear and unambiguous regarding the question you have raised.

            Your question involves the annexation of only a portion, rather than all of the territory of a fire protection district.  Consequently, we may disregard RCW 35.13.220, supra, except to the extent that this section may become operative through election to pursue the procedure provided for by RCW 35.13.243 (1).

            Turning then to RCW 35.13.243, supra, we note first that this section applies in the case of annexation ofa portion of a district (including a fire protection district) ". . . equal to at least sixty percent of the area or sixty percent of the assessed valuation of the real property included within the district. . . ."  In such a case, the annexing city or town has an election of either (1) assuming the full and complete management and control of the entire district, or (2) assuming jurisdictiononly of the district's responsibilities, property, facilities and equipmentwithin the area annexed.

            If the first of these alternative courses of action is chosen, then ". . . the provisions of RCW 35.13.220, supra, shall be operative as to such annexation."  In other words, if the first alternative is chosen then, both as to disposition of property and as to the assumption or nonassumption of outstanding indebtedness, the annexation is governed by the same statute as applies where all of the territory of a district is annexed.

            Referring back to that portion of RCW 35.13.220, supra, governing the outstanding indebtedness of the annexed district, we note that the annexing city or town again is authorized to make an election.  [[Orig. Op. Page 6]] With regard to,

            ". . . any outstanding indebtedness, bonded or otherwise, of the district . . . [the annexing city or town] may by resolution of its governing body elect to assume and pay [the same] at the times and in the manner said indebtedness is due and payable.  Such election to assume said indebtedness may be made either upon the effective date of such annexation or at any time thereafter during the period such indebtedness remains outstanding. . . ."  (Emphasis supplied.)

            In other words, the annexing city or town may elect to assume the outstanding indebtedness, "bonded or otherwise," of the district.  The phrase "bonded or otherwise" makes it quite clear that "indebtedness" includes such indebtedness as is evidenced by coupon warrants of the type described in your letter.

            However, "until such election is made, the property annexed and the owners and occupants thereof shall continue liable for its and their proportion of the unpaid indebtedness and the district, . . . and its officers shall continue to function for the sole purpose of certifying the amount of property tax or assessments to be collected and paid on such indebtedness in the same manner and by the same means as if the annexation had not been made."  RCW 35.13.220,supra.

            Again, by way of paraphrasing, until and unless the annexing city or town elects to assume the outstanding indebtedness of the annexed district, the property located therein remains liable for its proportion of the indebtedness and subject to taxation for the payment thereof.  After the indebtedness is assumed, the property taxes which "have been levied . . . but not collected" for purposes of the indebtedness ". . . shall when collected belong and be paid to the annexing city and be used by such city or town so far as necessary for payment as and when due of the indebtedness . . ." RCW 35.13.220, supra.  Thus, even after assumption of the indebtedness, the property previously assessed for payment of the indebtedness remains liable for payment of the tax levied before the city's election to assume such indebtedness.

            Next, we shall consider an annexation involving "at least sixty percent of the area or sixty percent of the assessed valuation of the real property included within the district," where the annexing city or town elects to follow the second alternative course of action authorized by RCW 35.13.243,supra; namely, to assume jurisdiction only of the district's responsibilities, property, facilities and  [[Orig. Op. Page 7]] equipment within the area annexed.  In this case, the applicable statutory provision (with regard to disposition of the indebtedness of the district) is found in the last paragraph of RCW 35.13.243, supra.  This paragraph reads as follows:

            "A city or town acquiring property, facilities and equipment under the provisions of subdivision (2) of this section shall acquire such property subject to the debts and obligations of the district for which such property, facilities and equipment would have been liable if no annexation had been made; and, in such cases, the annexed property, and the owners and occupants thereof, shall continue liable for payments of its and their proportionate share of any unpaid indebtedness,bonded or otherwise, with the right on the part of the district officials to make tax levies and collect charges on such property or owners or occupants, and to enforce such collections as if the annexation had not been made."  (Emphasis supplied.)

            Here, then, the annexing city or town which has elected to assume jurisdiction only of the district's responsibilities, property, facilities and equipmentwithin the area annexed has no further election to make.  It cannot assume the outstanding indebtedness of the district.1/ Rather, said outstanding indebtedness remains the obligation of the district, and the annexed property continues to be liable for payment of its proportionate share of any such unpaid indebtedness (again, "bonded or otherwise") and subject to taxation for payment thereof.

            Thirdly, we have the case of annexation of a portion of a district (including a fire protection district) encompassing ". . . less than sixty percent of the area of the district and less than sixty percent of the assessed valuation of the real property within the district."  In this case, we look first to RCW 35.13.246, providing as follows:

            "If the portion of the district annexed to a city or town is less than sixty percent of the area of the district and less than sixty percent of the assessed valuation of the real property within the district, the provisions of RCW 35.13.243, except subdivision (1), as now or hereafter amended, shall apply."

             [[Orig. Op. Page 8]]

            Thus, we are immediately referred back to all of RCW 35.13.243,supra, except subdivision (1) thereof.  Obviously, this means that where less than sixty percent of the area of a fire protection district and less than sixty percent of the assessed valuation of real property within said district is annexed, the property within the area annexed remains liable for payment of its proportionate share of any unpaid indebtedness, bonded or otherwise, of the district and subject to taxation for payment thereof, all in the manner provided for by the last paragraph of RCW 35.13.243, quoted and discussed above.

            Finally, we have RCW 35.13.250, supra, providing, in pertinent part, that: