SUPERIOR COURT OF WASHINGTON FOR PIERCE COUNTY EDWARD E. (TED) MICHAEL MARK BUBENIK and NO. MARGARET BUBENIK d/b/a Steele Manor Apartments; THOMAS H. and COMPLAINT FOR DECLARATORY, INDUSTRIAL CUSTOMERS OF INJUNCTIVE, AND MANDAMUS NORTHWEST UTILITIES, an Oregon RELIEF nonpro?t corporation, Plaintiffs, V. CITY OF TACOMA, Defendant. Plaintiffs allege as follows: I. PARTIES 1.1. Plaintiff Edward E. (Ted) Coates resides in Tacoma, Pierce County, Washington. He is a former Director of Utilities for the City of Tacoma, and is a Tacoma Power electric ratepayer. As an electric utility ratepayer, he has standing to sue for the relief requested in this complaint. 1.2. Plaintiff Michael Crowley resides in Tacoma, Pierce County, Washington. He is a former Mayor of the City of Tacoma and a former member of the Tacoma City Council. He COMPLAINT FOR DECLARATORY, INIUNCTIVE, A AND MANDAMUS RELIEF - 1 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 206.292.1144 Tacoma Power electric ratepayer. As an electric utility ratepayer, he has standing to sue for the relief requested in this complaint. 1.3. Plaintiffs Mark Bubenik and Margaret Bubenik are husband and wife and do business as Steele Manor Apartments in Tacoma, Pierce County, Washington. Mr. Bubenik is a former Chief Assistant City Attorney for Tacoma Public Utilities. Mr. and Mrs. Bubenik d/b/a Steele Manor Apartments are Tacoma Power electric ratepayers. As electric utility ratepayers, they have standing to sue for the relief requested in this complaint. 1.4. Plaintiff Thomas H. Old?eld resides in Tacoma, Pierce County, Washington. He is a Tacoma Power electric ratepayer. As an electric utility ratepayer, he has standing to sue for the relief requested in this complaint. 1.5. Plaintiff Industrial Customers of Northwest Utilities is an Oregon nonpro?t association of large industrial users of electricity in the Paci?c Northwest, including industrial electric ratepayers of Tacoma Power. ICNU has associational standing to sue on behalf of its members, including those who are electric ratepayers of Tacoma Power, for the relief requested in this complaint. 1.6. Defendant City of Tacoma (the ?City?) is a Washington municipal corporation located in Pierce County, Washington. The Light Division, doing business as Tacoma Power, of the City?s Department of Public Utilities (the ?Department? or operates the City?s proprietary electric utility, including facilities for the generation, transmission and distribution of electricity to electric utility customers (ratepayers). Tacoma Power also operates a business unit known as the Click! Network (?Click?), which provides retail cable television and COMPLAINT FOR DECLARATORY, INIUNCTIVE, A AND MANDAMUS RELIEF - 2 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 206.292.1144 wholesale high-speed intemet services to residential and business customers. Many of Tacoma Power?s electric utility customers are located in geographic areas that are not served by Click. II. JURISDICTION AND VENUE 2.1. This Court has subject matter jurisdiction over this action. 2.2. Venue is properly laid in this Court because the City transacts business and has its principal place of business in this county and because all or a substantial part of the events giving rise to the claims set forth in this complaint occurred in this county. 2.3. Plaintiffs ?led a Claim for Damages with the City on February 21, 2017 on a form prescribed by the City pursuant to RCW 4.96.020, and have satis?ed any prerequisites under that statute or otherwise for the commencement and prosecution of this action. 2.4. The City has not responded to the Claim for Damages. 2.5. The ?ling of the Claim for Damages suspended for sixty calendar days the running of any limitations period applicable to the claims set forth in the Claim for Damages. 2.6. On April 21, 2017 the parties entered into a Tolling Agreement which further tolled the running of any such limitations period while the Agreement was in effect. The Tolling Agreement was to remain in effect until July 31, 2017, unless terminated earlier upon seven calendar days notice as provided in the Tolling Agreement. As of the date of ?ling this Complaint, the Tolling Agreement remains in effect. FACTS 3.1. The City utilizes a council-manager form of government, administered by a City Council. The City Council is composed of an elected Mayor and eight elected COMPLAINT FOR DECLARATORY, INJI INCTIVE, A AND MANDAMUS RELIEF - 3 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 206.292.1144 Councilmembers. The Mayor is the presiding of?cer of the City Council. The City Council appoints a City Manager who is the chief executive of?cer of the City and who serves at the pleasure of the City Council. The City Manager is responsible to the City Council for the administration of all departments of the City except TPU. 3.2. TPU is governed by a ?ve member Public Utility Board (the ?Board?). The Board is responsible for general utility policy, and its members are appointed by the Mayor and con?rmed by the City Council. budget is presented to the Board for review and approval and then forwarded to the City Council for approval and inclusion in the City?s budget. 3.3. TPU consists of the Light Division (?Tacoma Power?), Water Division (?Tacoma Water?), and Belt Line Railroad Division (?Tacoma Rail?). The Board serves as the sole policy board for the approval of most TPU business. In the case of budgets, rates, bond issues, and additions and betterments to the system and system expansions, actions approved by the Board must also be approved by the City Council. 3.4. The Board appoints the Director of Utilities who is chief executive of?cer of the Department and serves at the pleasure of the Board. The Director of Utilities, with the concurrence of the Board, has the power to appoint division superintendents. 3.5. Utility rates and charges initiated by the Board and adopted by the City Council are not subject to review or approval by any other governmental agency. 3.6. The City Charter provides that the revenues of utilities owned and operated by the City shall never be used for any purposes other than the necessary operating expenses COMPLAINT FOR DECLARATORY, INJI INCTIVE, A AND MANDAMUS RELIEF - 4 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 206.292.1144 thereof, including a reasonable gross earnings tax imposed by the City Council for the bene?t of the general fund of the City, interest on and redemption of the outstanding debt thereof, the making of additions and betterrnents thereto and extensions thereof, and the reduction of rates and charges for supplying utility service to consumers. The funds of any utility may not be used to make loans to or purchase the bonds of any other utility, department, or agency of the City. 3.7. As stated in a non-con?dential Memorandum dated July 16, 2015 to the Mayor, City Council and Public Utility Board from then-City Attorney (now City Manager) Elizabeth A. Pauli and then-Chief Deputy City Attorney (now City Attorney) William C. Fosbre, electric utility revenues may not be used to pay for costs directly associated with providing commercial telecommunications services (such as cable television and internet service) to the public, because such costs are not suf?ciently related to providing electricity to electric utility customers and thus must be paid for from non-utility revenues such as rates or charges to the telecommunication services customers or general government tax dollars. Costs incurred to operate or maintain portions of the telecommunication system used to serve both electric utility customers and commercial telecommunication services to the public must be distributed based on a reasonable allocation methodology. If a portion of the telecommunication system is no longer used to provide electric service, but is still used to provide telecommunication services, then the costs of operating or maintaining that portion of the telecommunication system must be paid from rates or charges for such telecommunication services or from general government tax dollars or other funds, but not from electric utility revenues. COMPLAINT FOR DECLARATORY, INJUNCTIVE, A AND MANDAMUS RELIEF - 5 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 206.292.1144 3.8. As summarized in the aforesaid Memorandum, administration of the commercial telecommunication system ?requires separate accounting of costs and revenues associated with the commercial telecommunication services provided to [the] public as state law and the City Charter prohibits the use of electric utility rate payer revenues to pay for the costs solely associated with providing these commercial telecommunication services. Telecommunication system costs associated with providing both electricity to utility customers and commercial telecommunications services to the public must be allocated and then paid separately by the two enterprises. Whenever the electric utility no longer needs a speci?c portion of the telecommunication system, which the commercial side is still using, then the maintenance costs associated with this speci?c portion of the system can no longer [be] paid with electric utility revenues.? 3.9. Pursuant to actions and resolutions of the Mayor, City Council and Public Utility Board, the Tacoma Power electric utility has been subsidizing both the capital expenses and the operational and maintenance expenses of the Click commercial telecommunications business, by using electric utility revenues to pay for expenses bene?ting or properly allocable to Click?s commercial telecommunication services rather than to electric utility services. Those subsidies were and are unlawful, and in clear violation of Tacoma City Charter Section 4.5, RCW 43.09.210, and well-established legal principles as set forth in City of Tacoma v. Taxpayers of Tacoma, 108 Wn.2d 679 (1987), Okeson v. City of Seattle, 1 50 Wn.2d 540 (2003), and their progeny. COMPLAINT FOR DECLARATORY, INJI INCTIVE, A AND MANDAMUS RELIEF - 6 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 2062921144 3.10 By causing, authorizing, or allowing the Tacoma Power electric utility to provide unlawful subsidies for Click?s commercial telecommunications business, the Mayor, City Council and Public Utility Board have acted and are acting contrary to legal advice provided to them by the City Attorney and Chief Deputy City Attorney in the aforesaid Memorandum dated July 16, 2015. Thus, they have acted and are acting knowingly and willfully in wrongfully causing, authorizing, or allowing such violations of law. 3.11. The unlawful subsidies include unreimbursed capital expenditures for facilities and equipment bene?ting or properly allocable to Click rather than to the electric utility, unreimbursed expenditures for expenses bene?ting or properly allocable to Click rather than the electric utility, and the provision of facilities or services for Click without receiving payment therefor at its true and full value (for example, allowing Click wires or equipment to be attached to electric utility power poles without adequate payment therefor, and paying for audits or studies for Click?s bene?t without adequate reimbursement therefor). 3.12. According to own ?nancial records, Click?s expenses exceeded its revenues by more than $1.4 million in 2014, by nearly $2.9 million in 2015, and by more than $5.7 million in 2016. Those losses were covered by unlawful subsidies from electric utility revenues. Click?s under-recovery of expenses from revenues is projected to amount to approximately $14.95 million for the 2017/2018 biennium. When Click?s capital expenses and depreciation are added to its expenses, its losses since 2014 are even greater, and the amount of unlawful subsidies paid by the electric utility for Click?s commercial telecommunication services is many millions of dollars greater than the ?gures for under? COMPLAINT FOR DECLARATORY, INIUNCTIVE, A AND MANDAMUS RELIEF 7 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 206.292.1144 recovery of expenses. 3.13. The amount of unlawful subsidies from the electric utility for Click commercial telecommunication expenses since 2014 is well in excess of $21 million, and increasing annual subsidies are projected for the foreseeable future. 3.14. On December 15, 2015 the City Council adopted Resolution 39347, which required Tacoma Power to develop a business, ?nancial, and marketing plan to provide Click customers with retail cable television, voice telephone, and internet services. 3.15. A committee was formed to develop such a plan, and eventually it proposed a so-called ?All-In Complete Business Plan? (the ?All-In Plan?), calling for substantial improvements and expansion of Click facilities for providing retail telecommunication services, to be funded in large part by further and increased subsidies from the electric utility. 3.16. On September 28, 2016 the Utility Board adopted Resolution No. U-10879, approving the All-In Plan. Under the All-In Plan, the unlaw?il subsidies from the electric utility for Click are projected to increase by an additional $6-10 million per year for the foreseeable future. 3.17. The unlaw?al subsidies described above have resulted, and will result, in wrongfully in?ated rates paid for electricity by all ratepayers of the Tacoma Power electric utility, including but not limited to ratepayers who do not have access to Click services. IV. CLAIM FOR RELIEF 4.1. There is an actual, present, and existing dispute between the parties as to the legality of using electric utility revenues to pay for Click and capital expenses that are COMPLAINT FOR DECLARATORY, INIUNCTIVE, A AND MANDAMUS RELIEF - 8 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 206.292.1144 attributable or properly allocable to Click for commercial telecommunication services rather than electric utility service and about the amount of unlawful subsidies that have been provided to date for Click expenses from electric utility revenues. 4.2. Electric utility ratepayers have a legally cognizable interest in preserving and protecting electric utility funds from being unlawfully diverted to pay for expenses attributable or properly allocable to Click commercial telecommunication services rather than electric utility service, and in obtaining recovery for the electric utility of previous unlawful subsidies of Click expenses. 4.3. Plaintiffs are without an adequate remedy at law to protect their aforesaid interests in preserving, protecting and obtaining recovery for electric utility funds, and are entitled to declaratory, injunctive and mandamus relief declaring that electric utility revenues and funds may not be used to pay for Click expenses or capital improvements that are attributable or properly allocable to commercial telecommunication services rather than electric utility service, (ii) prohibiting TPU from using electric utility revenues or other electric utility funds to subsidize or pay for Click expenses or capital improvements that are attributable or properly allocable to commercial telecommunication services rather than electric utility service, prohibiting TPU from including expenses or capital investments that are attributable or properly allocable to Click commercial telecommunication services, rather than electric utility service, in the calculation of electric rates, and (iv) requiring TPU or the City to cause Click or the City?s general fund to reimburse the Tacoma Power electric utility for previous subsidies of or payments for Click expenses or capital improvements attributable or properly allocable to COMPLAINT FOR DECLARATORY, INIUNCTIVE, A AND MANDAMUS RELIEF - 9 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 206.292.1144 commercial telecommunication services rather than electric utility service, together with prejudgment and postjudgment interest thereon at the rate of 12% per annum until fully paid. 4.4. The unlawful acts or omissions of the City described above were willful within the meaning of RCW 80.04.440. Accordingly, plaintiffs are entitled to an award of attorney fees against the City, to be taxed and collected as part of the costs in this case. 4.5. Plaintiffs are also entitled to an award of attorney fees under the common fund theory, to be paid from the electric utility funds preserved, protected or enhanced by this action. V. PRAYER FOR RELIEF WHEREFORE, plaintiffs pray for judgment against the City as follows: (1) Declaring that electric utility revenues and funds may not be used to pay for Click expenses or capital improvements that are attributable or properly allocable to commercial telecommunication services rather than electric utility service; (2) Enjoining and prohibiting TPU from using electric utility revenues or other electric utility funds to subsidize or pay for Click expenses or capital improvements that are attributable or properly allocable to commercial telecommunication services rather than electric utility service; (3) Enjoining and prohibiting TPU from including expenses or capital investments that are attributable or properly allocable to Click commercial telecommunication services, rather than electric utility service, in the calculation of electric rates; (4) Ordering TPU or the City to cause Click or the City?s general fund to reimburse the Tacoma Power electric utility for previous subsidies of or payments for Click expenses or COMPLAINT FOR DECLARATORY, INJUNCTIVE, A AND MANDAMUS RELIEF - 10 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 206.292.1144 capital improvements attributable or properly allocable to commercial telecommunication services rather than electric utility service, in an amount to be proven at trial, together with prejudgment and postjudgment interest thereon at the rate of 12% per annum until fully paid; (5) Awarding attorney fees and costs under RCW 80.04.440 and under the common fund theory; and (6) Awarding such other and further relief as the Court may deem just, equitable and proper under the circumstances. Dated this Rat day of June, 2017. HELSELL FETTERMAN LLP By 0K Da?d?F. rca?fSBA No. 2015 Andrew . Kinstler, WSBA No. 12703 Emma Kazaryan, WSBA No. 49885 Attorneys for Plaintiffs COMPLAINT FOR DECLARATORY, INJUNCTIVE, A AND MANDAMUS RELIEF - 11 1001 Fourth Avenue, Suite 4200 Seattle, WA 98154-1154 206.292.1144