HomeMy WebLinkAbout08272018 City Council Work Session - Memo Electric Utility Board IssuesLAy�ow,, Eta-71)e
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Birch Horton Bittner & Cherot
a nro%essional cormrafion
MEMORANDUM
TO: MAYOR AND COUNCIL MEMBERS
CITY OF SEWARD
FROM: THOMAS F. KLINKNER
RE: ELECTRIC UTILITY BOARD ISSUES
FILE NO.: 507,486.1006
DATE: JULY 23, 2018
The City of Seward ("City") is considering whether to establish a citizens' board
("Board") to oversee the City's electric utility ("Utility"). As part of its deliberations, the
Council has asked that we address the following legal issues:
1. Does the City have the power to establish the Board?
2. May the Board have regulatory authority, or can it be advisory only?
3. Can Utility customers who reside outside City limits serve on the Board?
4. Should Board members be elected or appointed?
5. Would the establishment of the Board be subject to voter approval, and if
so, would approval by a simple majority of voters be sufficient?
6. Will establishing the Board make the Utility subject to state public utility
regulation?
7. Will amendments to the City Charter be necessary to establish the Board,
and if so, what is the procedure for amending the Charter?
1. Does the City have the power to establish the Board?
Short answer: Yes, subject to the provisions of City Charter § 3.6(b) and (c), and
the City Charter limitation on establishing a Board composed of elected members,
discussed under question no. 4, below.
The City is a home rule city. The Alaska Constitution provides that "[a] home rule
borough or city may exercise all legislative powers not prohibited by law or by charter."
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a rule that is repeated in the City Charter.' The Council therefore may take any action
regarding the Utility that is not prohibited by a provision of state law or the City Charter.
Title 29 of the Alaska Statutes contains most laws that apply to municipal governments.
Those laws do not apply to a home rule municipality such as the City unless they
specifically are made applicable to home rule municipalities.2 Whether law or charter
prohibits a particular action regarding the Utility is determined under the Alaska
Constitution's provision that "[a] liberal construction shall be given to the powers of local
government units.,,3 The City operates the Utility under the authority of Chapter 13 of
the City Charter. City Charter § 13.1 provides, "The city shall have all the powers not
prohibited by law to acquire, own, operate and regulate public utilities, either within or
beyond its corporate limits, and may also sell utility services beyond its corporate limits."
City Charter § 3.6 specifically provides for the creation of citizen boards :4
3.6. - Powers of council to appoint citizen boards.
(a) The council may in its discretion by ordinance create or abolish
boards or may grant to them the power to conduct hearings, to make
recommendations and initial decisions which, unless appealed within ten
days, shall become final. The council shall provide for appeals by any
party affected by the proceedings or by city administration officers and
shall direct that all decisions must be promptly filed with the city clerk as
public record.
(b) Unless the council shall otherwise determine by a majority vote,
all questions presented to the council concerning any subject which has
been delegated to a citizen board shall be submitted to the board for
consideration.
(c) Boards established by the council shall not be authorized to
employ or direct the employment or removal of any administration officer
or employee of the city.
While City Charter § 3.6(a) is permissive only, § 3.6(b) and (c) are stated in mandatory
terms, and would govern the Board. In addition, as will be discussed question no. 4
below, the City Charter does not permit a Board that is composed of elected members.
' Alaska Const. Art. 10, § 11; City Charter § 1.4 states similarly that [t]he city may
exercise all legislative powers not prohibited by law or by this Charter."
2 AS 29.10.200 provides that "Only the following provisions of this title apply to home
rule municipalities as prohibitions on acting otherwise than as provided. These
provisions supersede existing and prohibit future home rule enactments that provide
otherwise ... ", then lists the specific statutes in Title 29 that apply to home rule
municipalities in this manner.
3 Alaska Const. Art. 10, § 1.
4 City Charter § 5.3(b) and (c) also contemplate the creation of boards, by providing for
the appointment of their members and the establishment of their members' terms of
office.
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2. May the Board have regulatory authority, or must it be advisory only?
Short answer: The Board may exercise regulatory authority as well as serving in
an advisory capacity.
AS 29.35.070(a), which applies to home rule municipalities, provides in relevant
part, "the council acting for the area in a city may regulate, fix, establish, and change
the rates and charges imposed for a utility service provided to the municipality or its
inhabitants by a utility that is not subject to regulation under AS 42.05',5 (Emphasis
added). While AS 29.35.070(a) grants authority to regulate utility rates and charges to
the Council, it uses the permissive term "may" in doing so. This indicates that the
authority to regulate utility rates is not vested in the Council exclusively, but that the
Council also could delegate this authority to the Board. Similarly, while City Charter
§ 3.6(a) states that "[t]he council may ... grant to [boards] the power to conduct
hearings, to make recommendations and initial decisions ...", this permissive language
does not preclude the Council from creating a Board with regulatory authority .6
The City Charter also supports the Council having authority to delegate
regulatory authority to the Board. City Charter § 13.2(a) provides, "The council may
provide by ordinance for the establishment of utilities and provide for their regulation,
promotion, control and the fixing of the rates to be charged ..." (Emphasis added).
The "provide for" term in this authorization indicates that the Council need not take
these actions directly, but could delegate them.'
3. Can Utility customers who reside outside City limits serve on the Board?
Short answer: Yes, Utility customers who reside outside City limits may serve on
the Board.
The response to question no. 1 determines the answer to this question. Nothing
in law or the City Charter prohibits the Council from permitting Utility customers who
reside outside City limits from serving on the Board.
5 The Utility is exempt from regulation under AS 42.05 (Alaska Public Utilities
Regulatory Act) pursuant to AS 42.05.711(b).
6 See, Interior Cabaret, Hotel, Restaurant & Retailers Assn v. Fairbanks North Star
Borough, 135 P.3d 1000, 1004 (Alaska 2006) (In statute providing that sales tax
exemptions "may be granted by ordinance", "[t]he use of the permissive term 'may'
suggests that ordinances are not the sole means by which exemptions may be granted."
See also, Municipality of Anchorage v. Repasky, 34 P.3d 302, 311-13 (Alaska 2001)
(statute providing for municipal assembly to appropriate local funding for school district
budget does not preclude exercise of mayoral line item veto power on approved local
funding appropriation.
7 This is in contrast to statutes that specifically require legislative action to exercise a
power. See, Whitson v. Anchorage, 608 P.2d 759, 761 (Alaska 1980) (levying of taxes),
and Carmony v. McKechnie, 217 P.3d 818, 821-22 (Alaska 2009) (land use regulation).
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4. Should Board members be elected or appointed?
Short answer: Board members may be appointed. Board members may not be
elected unless the City Charter is amended to allow their election.
City Charter § 3.6(a) speaks of the power of the Council "to appoint citizen
boards." City Charter § 2.1 identifies elected and appointed City officials as follows:
2.1 - Enumerated.
(a) The elective officers of the city are the mayor and six council
members.
(b) The appointive officers of the city are the city manager, the city
clerk and the city attorney.
(c) The administration officers are all other officers of the city other
than elective officers and appointive officers.
The enumeration of elective officers in City Charter § 2.1(a) appears to be exclusive.
Making Board members elected would require amendment of City Charter § 2.1(a) to
add them to the list of elective officers of the City. In addition, residents of the Utility
service area outside the City could not be elected to the Board without amendment of
City Charter § 2.2(a), which provides, "[t]o be eligible to file for election to a city office a
person shall be an elector of the city and shall have resided in the city or territory
annexed to the city continuously for a period of not less than one year immediately
preceding the date of filing."
5. Would the establishment of the Board be subject to voter approval, and if
so, would approval by a simple majority of voters be sufficient?
Short answer: The establishment of the Board would not be subject to voter
approval, except for voter approval of amendments to the City Charter that may be
necessary to structure the Board in the desired manner.
As discussed in response to question no. 1 above, City Charter § 3.6(a�
authorizes the Council to create appointed citizen boards without voter approval.
However, if structuring the Board in the desired manner (e.g., making Board members
elected) requires amendments to the City Charter, those amendments would be subject
to voter approval as discussed in response to question no. 7 below.
6. Will establishing the Board make the Utility subject to state public utility
regulation?
Short answer: Establishing the Board will not make the Utility subject to state
public utility regulation.
8 Under City Charter § 13.4, the sale, lease or other disposal of the Utility would be
subject to approval by three -fifths of the City voters that vote on the question. Creating
the Board would not require any sale, lease or other disposal of the Utility that would be
subject to voter approval.
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The Utility is exempt from state public utility regulation under the terms of AS
42.05.711(b), which provides:
(b) Except as otherwise provided in this subsection and in (o) of this
section, public utilities owned and operated by a political subdivision of the
state, or electric operating entities established as the instrumentality of two
or more public utilities owned and operated by political subdivisions of the
state, are exempt from this chapter, other than AS 42.05.221--42.05.281
and 42.05.385. However,
(1) the governing body of a political subdivision may elect to be
subject to this chapter; and
(2) a utility or electric operating entity that is owned and operated
by a political subdivision and that directly competes with another utility or
electric operating entity is subject to this chapter and any other utility or
electric operating entity owned and operated by the political subdivision is
also subject to this chapter; this paragraph does not apply to a utility or
electric operating entity owned and operated by a political subdivision that
competes with a telecommunications utility.
The creation of the Board would not establish any of the conditions in this statute that
limit exemption from regulation of City -owned utilities, regardless of whether the Board
had regulatory or only advisory authority.
7. Will amendments to the City Charter be necessary to establish the Board,
and if so, what is the procedure for amending the Charter?
Short answer: No amendments to the City Charter are necessary to establish
the Board, unless, as discussed in response to question no. 5 above, the Board is to be
elected and/or include members elected from the Utility service area outside the City
limits. The procedure for amending the City Charter is described below.
Proceedings to amend the City Charter may be commenced by the vote of four
members of the Council or by an initiatory petition signed by a number of voters equal to
25 percent of the number of votes cast at the last regular election.9 An amendment that
is proposed by the Council is submitted to the voters at any election to be held in the
City not less than sixty days after its proposal by the Council, or at a special election
called by the Council for the purpose of voting thereon.10 An initiatory petition to amend
the City Charter is filed with the mayor, and if found to be proper and in order, submitted
to the voters at the next regular City election held after ninety days following the filing of
the petition." An amendment to the Cit Charter is effective if approved by a majority of
qualified voters voting on the question.'
9 City Charter § 14.2, Seward City Code 4.15.025(b).
10 City Charter § 14.3.
11 City Charter § 14.4.
12 City Charter §§ 14.3, 14.4.
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