Stanzel v. City of Puyallup

Citation: 209 P.3d 534Docket: 37697-1-II

Court: Court of Appeals of Washington; June 16, 2009; Washington; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Michael Stanzel, the owner of a property in Pierce County, Washington, known as the "church property," is involved in legal proceedings against the City of Puyallup regarding water service. Stanzel's property, which is zoned for mixed-use development and includes a church building and recreational facilities, receives residential water service from the City despite being outside its corporate limits. He seeks to upgrade the property to comply with codes for church services, which requires a water availability letter from the City.

The City has ceased issuing such letters for properties outside its limits, a policy change communicated to Stanzel by city employee Colleen Harris. Harris indicated that if Stanzel altered the property's use from residential to commercial, his water service would be terminated. Following this, Stanzel made multiple requests for water service, including an inquiry to another utility provider, which could not assist him.

The Pierce County Superior Court denied the City's motion to dismiss Stanzel's land-use petition based on his failure to exhaust administrative remedies and affirmed the authority of the Pierce County hearing examiner to compel the City to provide the necessary water service documentation. Stanzel's attempts to resolve the matter with the City have been met with inaction, prompting his legal challenge.

Stanzel filed a motion with the Pierce County hearing examiner regarding Plexus Investments, LLC, seeking an order to compel the City to provide commercial water service and an availability letter. Despite the City’s objections about jurisdiction, the hearing examiner allowed the case to proceed, referencing a prior ruling that permitted property owners outside city limits to appeal directly to the examiner. The hearing examiner found the City’s preannexation requirement unreasonable but ultimately denied Stanzel's request due to a lack of authority to compel the City, although he indicated he would have compelled service if able. Stanzel was given the option to seek alternative water sources or to be removed from the City's service area.

On August 17, 2007, Stanzel petitioned for judicial review under the Land Use Petition Act (LUPA), asking the superior court to direct the hearing examiner to compel the City for the requested services. The City moved to dismiss, citing Stanzel's failure to exhaust administrative remedies, including not submitting a formal application or fee. The trial court denied the City’s motion, interpreting the Puyallup Municipal Code as applicable only to new connections or extensions, thus allowing Stanzel's case to proceed without starting anew with the City.

Subsequently, the trial court granted Stanzel's petition, reversing the hearing examiner's decision and affirming the examiner's authority to compel the City to provide water service under the case's specific circumstances. Conditions were placed on this ruling, requiring Stanzel to meet typical permitting requirements and to provide detailed project plans to the City. The City has appealed this decision, arguing that the trial court improperly denied the motion to dismiss based on alleged failures to exhaust administrative remedies, emphasizing that such exhaustion is necessary for a decision to be eligible for review under LUPA.

Stanzel did not adhere to the City’s application procedures for obtaining water and sewer connections outside city limits. The City asserts that Stanzel failed to submit a proper application for water service as mandated by the Puyallup Municipal Code (PMC) 14.02.150, which requires specific information such as the applicant's name, social security number, premises location, water service details, intended use, and billing address. Stanzel's initial submission on June 25, 2004, was an unsigned letter that lacked essential information, including social security number, service details, intended use, and billing preferences. A follow-up letter dated January 6, 2005, similarly failed to meet these requirements. Additionally, the City notes that Stanzel did not pay the application fee or participate in a pre-application conference as required by former PMC 14.22.011, which is intended to cover city costs associated with application review. The application fee starts at $2,500, and disputes regarding the fee can be appealed to a hearing examiner. The City emphasizes that Stanzel's insufficient responses, including dismissive remarks about the property use inquiry, demonstrate a lack of compliance with the necessary procedural requirements.

Stanzel did not participate in the required pre-application conference or pay the associated application fee. The City claims Stanzel failed to present an application for review to the city council and did not obtain approval for commercial water service, as mandated by former PMC 14.22.010 (2004). This regulation stipulates that applicants for water or sewer service extensions outside city limits must secure council approval and demonstrate participation in an annexation process. The council's review includes considerations such as system impact, annexation, and compliance with city plans, and any decision made is a discretionary act. It is undisputed that Stanzel did not meet with the council or receive approval. 

Additionally, the City asserts that Stanzel failed to appeal a potential denial of service to the City's hearing examiner, as required by PMC 2.54.070, which grants the examiner jurisdiction over appeals of administrative decisions. Stanzel did not pursue this appeal and instead sought intervention from the County. He argues that he is not subject to the City's application process because he is already connected to the water service and not requesting an extension, a position supported by the hearing examiner's conclusion. Stanzel also contends he did not need to follow the City's application process as he is not making a "material change" to the property's use, referencing PMC 14.02.150(3), which requires a new application only for material changes in service use.

The hearing examiner determined that Stanzel's proposed use of church property would involve minimal site improvements and limited additional water requirements, without significant increases in usage. Stanzel aims to provide water for fire flow and additional restrooms for a game room. Evidence indicates that existing water lines in the area can support this. Stanzel argues he met the City's requirements, and the hearing examiner found that the proposed changes did not materially alter the city's service needs.

The exhaustion of remedies doctrine is relevant, as it applies to claims manageable by an agency with clear complaint resolution mechanisms. The Pierce County Code (PCC) outlines that the Pierce County hearing examiner is the final authority for water service disputes. The examiner noted that Stanzel bypassed the usual dispute resolution process based on a precedent case, Plexus Investments, allowing direct appeals to the county examiner for properties outside the City of Puyallup but within its exclusive water service area.

The PCC mandates that unresolved service disputes be referred to the Pierce County Hearing Examiner, whose decisions must be based on substantial evidence and the criteria in the Coordinated Water System Plan (CWSP). The CWSP states that pre-annexation agreements are not required for timely service within designated water service areas, allowing challenges to such requirements. Additionally, the PCC permits existing or potential customers to seek resolution for service disputes with the designated water purveyor, confirming that Stanzel has a valid forum to contest the City's failure to issue a water availability letter.

Stanzel argues that exhausting remedies with the City would be futile, as the City would still require an annexation agreement, a point the court does not address due to prior analysis. The court concludes that Stanzel is not obligated to exhaust remedies with the City, the PCC does not necessitate a preannexation agreement, and therefore, the trial court correctly denied the City’s motion to dismiss.

The City claims the trial court erred by asserting that the hearing examiner could compel the City to provide water to Stanzel, arguing this exceeds the statutory authority of hearing examiners under the PCC. The trial court evaluated Stanzel's LUPA petition according to RCW 36.70C.130(1)(b), which permits relief if the party demonstrates that a land use decision is an erroneous interpretation of the law, considering the deference owed to local jurisdictions. 

The City argues that the trial court did not defer to Pierce County's interpretation of the hearing examiner’s authority, which is allegedly limited to adjusting water service boundaries and imposing reasonable project conditions. The City references RCW 36.70.970(1), asserting that hearing examiners only possess the authority granted by the legislative authority, which does not include compelling water service provision.

Further, Pierce County’s code defines the hearing examiner's authority, allowing decisions on specified land use matters and the imposition of conditions to ensure project compatibility with environmental goals and plans. Additionally, PCC 19D.140.090 outlines a procedure for resolving disputes regarding water service areas and timely service provision, clarifying the extent of the hearing examiner's authority in such matters.

Timely and reasonable service disputes can be addressed by customers within designated water service areas through the Lead Agency. Such disputes are limited to existing or potential customers located within exclusive service boundaries established in the Coordinated Water System Plan (CWSP). If the Hearing Examiner determines that a purveyor is unable or unwilling to provide timely service, they may adjust service boundaries or impose conditions to ensure compliance, supported by substantial evidence.

The City argues that the Hearing Examiner lacks authority to compel actions beyond boundary adjustments and reasonable conditions. In contrast, Stanzel asserts that Appendix C of the CWSP outlines criteria for assessing timely and reasonable service, limiting the review to interpretation of service area boundaries, service schedules, conditions of service, and annexation provisions.

Pre-annexation agreements are deemed unnecessary for providing timely service within exclusive water service areas, allowing potential customers to challenge such requirements as unreasonable through the dispute resolution process. The City contends that Stanzel's arguments attempt to introduce new record elements on appeal, particularly regarding the City's signing of earlier and subsequent CWSP versions. The City maintains that issues raised for the first time in a reply brief should not be considered, referencing case law to support its position. Thus, the court declined to address this new issue.

The City referenced a section of the 2001 CWSP that purportedly allows water purveyors to require annexation as a service condition; however, this argument was not examined because it was not presented during the hearing or trial. The court noted that the PCC allows water customers to challenge pre-annexation requirements, and the primary question was whether the hearing examiner had the authority to mandate that the City continue water service to Stanzel's property.

It was determined that requiring pre-annexation agreements for new water service applications is not inherently unlawful, as established in previous cases. The hearing examiner differentiated Stanzel's situation by noting that he was already a water customer receiving service from the City and that any increase in usage would be minimal. The City had previously committed to providing water to the area in question. Despite this, the hearing examiner concluded that compelling the City to provide water service under the PCC was beyond his authority.

The trial court upheld this conclusion, affirming that the hearing examiner's authority is statutory, enabling him to adjust boundary lines and attach reasonable conditions to ensure project compatibility with relevant regulations. The record indicated Stanzel had no viable alternatives for water service, as other providers lacked distribution lines, and significant costs were associated with alternative solutions. Thus, the hearing examiner was deemed to have the authority to avoid imposing a pre-annexation agreement requirement on Stanzel, given his inability to secure service elsewhere. The decision was affirmed by the judges.