In Freeman v. State, the Washington Supreme Court rejected an attempt to block the lease of the two center lanes on I-90 to Sound Transit for light rail use. In so ruling, the Court held that WSDOT may lease highways financed with MVF monies where a plan exists to reimburse the MVF. It further held that WSDOT may enter into contracts to transfer highway property based on a contingent determination that such highway property will not be needed in the future.

BACKGROUND

As part of its plan to expand the light-rail network in the greater Seattle area, Sound Transit entered into an agreement with WSDOT in 2004 to lease the two reversible HOV lanes in the center of I-90 between Seattle and the Eastside for use as a future light rail corridor. I-90 has been funded, in part, with monies in the state “motor vehicle fund” (“MVF”), a special fund created in 1944 by the 18th amendment to the state constitution (art. II, § 40) to prevent the diversion of fees, taxes, and appropriations intended to be used for highway purposes (which do not include light rail). Thus, an immediate question raised was whether the WSDOT-Sound Transit agreement violates the state constitution.

Cognizant of the MVF restriction, Sound Transit and WSDOT negotiated terms intended to compensate WSDOT for its investment in I-90 and to provide equivalent replacement HOV lanes, i.e., an attempt to put WSDOT and I-90 in the same position if there were no light rail. The WSDOT-Sound Transit agreement calls for Sound Transit to pay for a portion of improvement and maintenance costs for the center lanes, the value of a 40-year lease, and for the construction of two outer HOV lanes to replace the center lanes that will be dedicated to light rail. The agreement further provides that these outer lane construction payments will be credited toward Sound Transit’s lease payments.

WSDOT entered into this agreement pursuant to RCW 47.12.120, which provides that WSDOT “may rent or lease any lands . . . or air space above or below any lands that are held for highway purposes but are not presently needed” and that WSDOT may enter into such a lease “upon such terms and conditions as the department may determine.” The agreement states that WSDOT determined that the two center HOV lanes will not be “presently needed” when the replacement outer HOV lanes are open, and it further provides that neither possession nor control of the center lanes will be transferred to Sound Transit until the outer HOV lanes are open to traffic. WSDOT made this determination after considering numerous transportation studies and against the backdrop of the initial agreement governing the configuration of I-90 that declared the highway would have no more than eight lanes, two of which would be designed and maintained to allow for dedicated public transit use.

As with many transportation planning projects in Evergreen State, light rail on I-90 has not been without controversy. Two years ago, the state supreme court rejected a challenge to the use of monies in the “motor vehicle fund” (“MVF”) for an appraisal of the center HOV lanes. That same year, voters rejected a ballot initiative that would have prohibited WSDOT from transferring or using the center lanes for light rail.

In this case, opponents of Sound Transit’s and WSDOT’s plans renewed their objections to the use of existing I-90 infrastructure, advancing two principal arguments. First, they argued that the lease violates the MVF nondiversionary restriction. Second, they argued that the agreement runs afoul of RCW 47.12.120 because the center HOV lanes are presently needed. The Washington Supreme Court (7-2) rejected both arguments.

ANALYSIS

The Court (Justice Fairhurst) concluded that the MVF restriction does not bar the lease for the following reasons:

  • The MVF restriction in the 18th Amendment protects funds (e.g., taxes and revenues) from nonhighway uses but does not apply to highways themselves.
  • Sound Transit is bound to make payments for the existing infrastructure, as well as fund the construction of replacement outer lanes, thus ensuring that the MVF monies expended on I-90 would not be improperly diverted.
  • In reaching this conclusion, the Court gave “great weight” to an Attorney General’s Opinion that a public highway asset could be purchased, consistent with the MVF restriction, so long as the consideration paid prevented the unlawful diversion of motor vehicle funds.

Nor does the agreement violate the terms of RCW 47.12.120:

  • At the outset the Court clarified that judicial review under the Administrative Procedure Act (“APA”) is not available because “any sale, lease, contract, or other proprietary decision in the management of public lands or real property interests” does not constitute an agency action subject to APA review. RCW 34.05.010(3).
  • Nonetheless, the Court analyzed the statutory challenge under the Uniform Declaratory Judgment Act, applying the arbitrary and capricious standard typically applied to agency decisions challenged under the APA (even though APA review unavailable).
  • The Court held that WSDOT has discretion decide whether a highway is “presently needed” in light of WSDOT’s broad statutory authority to administer highways and the lack of any statutory language suggesting that another entity has such authority. In so ruling, the Court concluded that WSDOT may exercise this discretion on a contingent basis, as it did here, because (a) a contrary rule would severely limit the agency’s contracting ability, (b) the center lanes will not be needed upon the opening of the two outer lanes, which would not be built with Sound Transit’s support, and (c) the lease will not reduce highway capacity because the I-90 configuration agreement permits only 8 motor vehicle lanes.
  • The Court further held that WSDOT’s decision was neither arbitrary nor capricious because the record was clear that WSDOT made its decision after reviewing numerous transportation studies. In so ruling, the Court granted Sound Transit’s motion to strike certain pieces of evidence that opponents sought to introduce after the trial court entered its initial decision, explaining that the evidence at issue were not needed “to fairly resolve the issues on review” as required by RAP 9.11(a).

Justice James Johnson, joined by Justice Charles Johnson, dissented:

  • The dissent questioned whether the 18th Amendment permits the purchase of highway property so long as the MFV is reimbursed but never fully articulated reasons why such an acquisition-reimbursement transaction would be inconsistent with the 18th Amendment.
  • In any event, the dissent raised concerns that the terms of the WSDOT-Sound Transit transaction would not fully reimburse the MVF for monies expended on I-90 and also questioned the persuasive authority of the Attorney General Opinion.
  • With respect to WSDOT’s determination that the center lanes will not be “presently needed” when the outer two lanes are constructed, the dissent, relying in part on dictionary definitions, pointed out that, as a textual matter, RCW 47.12.120 does not permit such a future, contingent determination.

COMMENTARY

The immediate impact of this ruling is that there is one fewer potential legal impediment to expanding the Seattle area’s light rail network.

Legally, this decision has potential long-term precedential significance in the following areas:

  • On the substantive constitutional and statutory issues – the scope of MVF restrictions and WSDOT’s leading powers – the Court signaled that it will not read into the 18th amendment a prohibition that is not explicit or necessarily inferred, thus avoiding a restriction of agency discretion. Likewise, the Court expressed concern about limiting an agency’s ability to engage in future planning.
  • The Uniform Declaratory Judgment Act remains a vital source of judicial review authority, especially when APA review is not available.
  • Even when APA review is not available, the familiar administrative law “arbitrary and capricious” standard applies to agency decisions.
  • Courts will defer to discretionary decisions of agencies when the record is clear the agency engaged in reasoned decisionmaking, taking into consideration relevant facts and circumstances.
  • Attorney General opinions can constitute persuasive authority.