451 U.S. 355 (1981)

BALL ET AL.
v.
JAMES ET AL.

No. 79-1740.

Supreme Court of United States.

Argued February 23, 1981. Decided April 29, 1981. APPEAL FROM THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.

*356 Rex E. Lee argued the cause for appellants. With him on the briefs were Jon L. Kyl and Neil Vincent Wake.

Bruce Meyerson argued the cause for appellees. With him on the brief was Amy J. Gittler.^[*]

*357 JUSTICE STEWART delivered the opinion of the Court.

This appeal concerns the constitutionality of the system for electing the directors of a large water reclamation district in Arizona, a system which, in essence, limits voting eligibility to landowners and apportions voting power according to the amount of land a voter owns. The case requires us to consider whether the peculiarly narrow function of this local governmental body and the special relationship of one class of citizens to that body releases it from the strict demands of the one-person, one-vote principle of the Equal Protection Clause of the Fourteenth Amendment.

I

The public entity at issue here is the Salt River Project Agricultural Improvement and Power District, which stores and delivers untreated water to the owners of land comprising 236,000 acres in central Arizona.^[1] The District, formed as a governmental entity in 1937, subsidizes its water operations by selling electricity, and has become the supplier of electric power for hundreds of thousands of people in an area including a large part of metropolitan Phoenix. Nevertheless, the history of the District began in the efforts of Arizona farmers in the 19th century to irrigate the arid lands of the Salt River Valley, and, as the parties have stipulated, the primary purposes of the District have always been the storage, delivery, and conservation of water.

As early as 1867, farmers in the Salt River Valley attempted to irrigate their lands with water from the Salt River. In 1895, concerned with the erratic and unreliable flow of the river, they formed a "Farmers Protective Association," which helped persuade Congress to pass the Reclamation Act of 1902, 32 Stat. 388, 43 U. S. C. § 371 et seq. Under *358 that Act, the United States gave interest-free loans to help landowners build reclamation projects. The Salt River Project, from which the District developed, was created in 1903 as a result of this legislation. In 1906, Congress authorized projects created under the Act to generate and sell hydroelectric power, 43 U. S. C. § 522, and the Salt River Project has supported its water operations by this means almost since its creation. The 1902 Act provided that the water users who benefited from the reclamation project had to agree to repay to the United States the costs of constructing the project, and the Salt River Valley Water Users Association was organized as an Arizona corporation in 1903 to serve as the contracting agent for the landowners. The Association's Articles, drafted in cooperation with the Federal Reclamation Service, gave subscribing landowners the right to reclamation water and the power to vote in Association decisions in proportion to the number of acres the subscribers owned. The Articles also authorized acreage-proportionate stock assessments to raise income for the Association, the assessments becoming a lien on the subscribing owners' land until paid. For almost 15 years, the Federal Reclamation Service operated and maintained the project's irrigation system for the landowners; under a 1917 contract with the United States, however, the Association itself took on these tasks, proceeding to manage the project for the next 20 years.

The Association faced serious financial difficulties during the Depression as it built new dams and other works for the project, and it sought a means of borrowing money that would not overly encumber the subscribers' lands. The means seemed to be available in Arizona's Agricultural Improvement District Act of 1922, which authorized the creation of special public water districts within federal reclamation projects. Ariz. Rev. Code of 1928, § 3467 et seq. Such districts, as political subdivisions of the State, could issue bonds exempt from federal income tax. Nevertheless, many Association members opposed creating a special district for *359 the project, in part because the state statute would have required that voting power in elections for directors of the district be distributed per capita among landowners, and not according to the acreage formula for stock assessments and water rights. In 1936, in response to a request from the Association, the state legislature amended the 1922 statute. Under the new statutory scheme, which is essentially the one at issue in this case, the legislature allowed the district to limit voting for its directors to voters, otherwise regularly qualified under state law, who own land within the district, and to apportion voting power among those landowners according to the number of acres owned. Ariz. Rev. Stat. Ann. §§ 45-909, 45-983 (Supp. 1980-1981).^[2] The Salt River Project Agricultural Improvement and Power District was then formed in 1937, its boundaries essentially the same as the Association's. Under the 1937 agreement, the Association made the District its contracting agent, and transferred to the District all its property, and the Association in turn agreed to continue to operate and maintain the Salt River Project. Under the current agreement, the District itself manages the power and water storage work of the project, and the Association, as agent for the District, manages water delivery. As for financing, the statute now permits the special districts to *360 raise money through an acreage-proportionate taxing power that mirrors the Association's stock assessment scheme, Ariz. Rev. Stat. Ann. §§ 45-1014, 45-1015 (1956), or through bonds secured by liens on the real property within the District, though the bonds can simultaneously be secured by District revenues, Ariz. Rev. Stat. Ann. § 45-936 (Supp. 1980-1981).

II

This lawsuit was brought by a class of registered voters who live within the geographic boundaries of the District, and who own either no land or less than an acre of land within the District. The complaint alleged that the District enjoys such governmental powers as the power to condemn land, to sell tax-exempt bonds, and to levy taxes on real property. It also alleged that because the District sells electricity to virtually half the population of Arizona, and because, through its water operations, it can exercise significant influence on flood control and environmental management within its boundaries, the District's policies and actions have a substantial effect on all people who live within the District, regardless of property ownership. Seeking declaratory and injunctive relief, the appellees claimed that the acreage-based scheme for electing directors of the District violates the Equal Protection Clause of the Fourteenth Amendment.

On cross-motions for summary judgment and on stipulated facts, the District Court for the District of Arizona held the District voting scheme constitutional and dismissed the complaint. A divided panel of the Court of Appeals for the Ninth Circuit reversed. 613 F. 2d 180. Noting this Court's repeated application of the one-person, one-vote principle established in Reynolds v. Sims, 377 U. S. 533, the Court of Appeals turned its attention to the case in which this Court marked a significant exception to that principle by upholding a state law permitting only landowners to vote in the election of directors of a water district: Salyer Land Co. v. Tulare Lake Basin Water Storage District, 410 U. S. 719. The decision *361 in Salyer resulted from this Court's examination of the nature of the services provided by the water district in that case, and its conclusion that "by reason of its special limited purpose and of the disproportionate effect of its activities on landowners as a group," the water district there was not subject to the strict one-person, one-vote demands of the Reynolds decision. 410 U. S., at 728. Accordingly, the Court of Appeals considered the constitutionality of the Salt River District's electoral system by comparing the purposes and effects of the activities of the Salt River District with those of the Tulare Lake Basin Water Storage District.

The Court of Appeals stressed that the water district in Salyer covered a sparsely populated area of wholly agricultural land. 613 F. 2d, at 183. It also noted that the primary function of the Tulare Lake Basin Water Storage District had remained the storage and delivery of water for agriculture, and that the district did not provide such other general public services as utilities. Ibid. Finally, the Court of Appeals pointed out that the income for the district in Salyer came completely from assessments against the landowners. 613 F. 2d, at 183. The Court of Appeals found the Salt River District, at least in its modern form, very different. It pointed out that the Salt River District is a major generator and supplier of hydroelectric power in the State, and that roughly 40% of the water it delivers goes to urban areas for nonagricultural uses. Id., at 183-184. The court therefore concluded that the Salt River District does not serve the sort of special, narrow purpose that proved decisive in Salyer. 613 F. 2d, at 183-184. Moreover, though it recognized that the District has $290 million of general obligation bonds outstanding that are secured by a lien on lands owned by the voting members, the Court of Appeals found it significant that all the general obligation bonds have so far been serviced out of the District's electricity revenues, and that all capital improvements have been financed by revenue bonds, which have been issued in the amount of $600 million, and *362 which are junior to the general obligation bonds. Id., at 184. The court thus concluded that the actual financial burden of running the District has not fallen primarily on the voting landowners, and therefore that the activities of this water district, unlike those of the district in Salyer, do not disproportionately affect landowners as such. 613 F. 2d, at 184-185.^[3]

The Court of Appeals was correct in conceiving the question in this case to be whether the purpose of the District is sufficiently specialized and narrow and whether its activities bear on landowners so disproportionately as to distinguish the District from those public entities whose more general governmental functions demand application of the Reynolds principle. We conclude, however, that, in its efforts to distinguish Salyer the Court of Appeals did not apply these criteria correctly to the facts of this case.

III

Reynolds v. Sims, supra, held that the Equal Protection Clause requires adherence to the principle of one-person, one-vote in elections of state legislators. Avery v. Midland County, 390 U. S. 474, extended the Reynolds rule to the election of officials of a county government, holding that the elected officials exercised "general governmental powers over *363 the entire geographic area served by the body." 390 U. S., at 485.^[4] The Court, however, reserved any decision on the application of Reynolds to "a special-purpose unit of government assigned the performance of functions affecting definable groups of constituents more than other constituents." 390 U. S., at 483-484.^[5] In Hadley v. Junior College District, 397 U. S. 50, the Court extended Reynolds to the election of trustees of a community college district because those trustees "exercised general governmental powers" and "perform[ed] important governmental functions" that had significant effect on all citizens residing within the district. 397 U. S., at 53-54. But in that case the Court stated: "It is of course possible that there might be some case in which a State elects certain functionaries whose duties are so far removed from normal governmental activities and so disproportionately affect different groups that a popular election in compliance with Reynolds . . . might not be required . . . ." Id., at 56.^[6]

The Court found such a case in Salyer. The Tulare Lake Basin Water Storage District involved there encompassed 193,000 acres, 85% of which were farmed by one or another of four corporations. Salyer Land Co. v. Tulare Lake Basin Water Storage District, 410 U. S., at 723. Under California law, public water districts could acquire, store, conserve, and distribute water, and though the Tulare Lake Basin Water *364 Storage District had never chosen to do so, could generate and sell any form of power it saw fit to support its water operations. Id., at 723-724. The costs of the project were assessed against each landowner according to the water benefits the landowner received. Id., at 724. At issue in the case was the constitutionality of the scheme for electing the directors of the district, under which only landowners could vote, and voting power was apportioned according to the assessed valuation of the voting landowner's property. The Court recognized that the Tulare Lake Basin Water Storage District did exercise "some typical governmental powers," including the power to hire and fire workers, contract for construction of projects, condemn private property, and issue general obligation bonds. Id., at 728, and n. 7. Nevertheless, the Court concluded that the district had "relatively limited authority," because "its primary purpose, indeed the reason for its existence, is to provide for the acquisition, storage, and distribution of water for farming in the Tulare Lake Basin." Id., at 728 (footnote omitted). The Court also noted that the financial burdens of the district could not but fall on the landowners, in proportion to the benefits they received from the district, and that the district's actions therefore disproportionately affected the voting landowners. Id., at 729.^[7] The Salyer Court thus held that the strictures of Reynolds did not apply to the Tulare District, and proceeded to inquire simply whether the statutory voting scheme based on land valuation at least bore some relevancy to the statute's objectives.^[8]*365 The Court concluded that the California Legislature could have reasonably assumed that without voting power apportioned according to the value of their land, the landowners might not have been willing to subject their lands to the lien of the very assessments which made the creation of the district possible. 410 U. S., at 731.

As noted by the Court of Appeals, the services currently provided by the Salt River District are more diverse and affect far more people than those of the Tulare Lake Basin Water Storage District. Whereas the Tulare District included an area entirely devoted to agriculture and populated by only 77 persons, the Salt River District includes almost half the population of the State, including large parts of Phoenix and other cities. Moreover, the Salt River District, unlike the Tulare District, has exercised its statutory power to generate and sell electric power, and has become one of the largest suppliers of such power in the State. Further, whereas all the water delivered by the Tulare District went for agriculture, roughly 40% of the water delivered by the Salt River District goes to urban areas or is used for nonagricultural purposes in farming areas.^[9] Finally whereas all operating costs of the Tulare District were born by the voting landowners through assessments apportioned according to land value, most of the capital and operating costs of the Salt River District have been met through the revenues generated *366 by the selling of electric power.^[10] Nevertheless, a careful examination of the Salt River District reveals that, under the principles of the Avery, Hadley, and Salyer cases, these distinctions do not amount to a constitutional difference.

First, the District simply does not exercise the sort of governmental powers that invoke the strict demands of Reynolds. The District cannot impose ad valorem property taxes or sales taxes. It cannot enact any laws governing the conduct of citizens, nor does it administer such normal functions of government as the maintenance of streets, the operation of schools, or sanitation, health, or welfare services.^[11]

*367 Second, though they were characterized broadly by the Court of Appeals, even the District's water functions, which constitute the primary and originating purpose of the District, are relatively narrow. The District and Association do not own, sell, or buy water, nor do they control the use of any water they have delivered. The District simply stores water behind its dams, conserves it from loss, and delivers it through project canals.^[12] It is true, as the Court of Appeals noted, that as much as 40% of the water delivered by the District goes for nonagricultural purposes. But the distinction between agricultural and urban land is of no special constitutional significance in this context. The constitutionally relevant fact is that all water delivered by the Salt River District, like the water delivered by the Tulare Lake Basin Water Storage District, is distributed according to land ownership,^[13] and the District does not and cannot control the use to *368 which the landowners who are entitled to the water choose to put it. As repeatedly recognized by the Arizona courts, though the state legislature has allowed water districts to become nominal public entities in order to obtain inexpensive bond financing, the districts remain essentially business enterprises, created by and chiefly benefiting a specific group of landowners. Niedner v. Salt River Project Agricultural Improvement and Power Dist., 121 Ariz. 331, 590 P. 2d 447; Uhlmann v. Wren, 97 Ariz. 366, 374, 401 P. 2d 113, 124; Local 266, I. B. E. W. v. Salt River Project Agricultural Improvement and Power Dist., 78 Ariz. 30, 41-42, 275 P. 2d 393, 402. As in Salyer, the nominal public character of such an entity cannot transform it into the type of governmental body for which the Fourteenth Amendment demands a one-person, one-vote system of election.^[14]

Finally, neither the existence nor size of the District's power business affects the legality of its property-based voting scheme. As this Court has noted in a different context, the provision of electricity is not a traditional element of governmental sovereignty, Jackson v. Metropolitan Edison Co., 419 U. S. 345, 353, and so is not in itself the sort of general or important governmental function that would make the government provider subject to the doctrine of the Reynolds case.^[15] In any event, since the electric power functions were stipulated to be incidental to the water functions which are the District's primary purpose, they cannot change *369 the character of that enterprise.^[16] The Arizona Legislature permitted the District to generate and sell electricity to subsidize the water operations, which were the beneficiaries intended by the statute.^[17] A key part of the Salyer decision was that the voting scheme for a public entity like a water district may constitutionally reflect the narrow primary purpose for which the district is created. In this case, the parties have stipulated that the primary legislative purpose of the District is to store, conserve, and deliver water for use by District landowners, that the sole legislative reason for making water projects public entities was to enable them to raise revenue through interest-free bonds, and that the development and sale of electric power was undertaken not for the primary purpose of providing electricity to the public, but "to support the primary irrigation functions by supplying power for reclamation uses and by providing revenues which could be applied to increase the amount and reduce the cost of water to Association subscribed lands."

The appellees claim, and the Court of Appeals agreed, that the sheer size of the power operations and the great *370 number of people they affect serve to transform the District into an entity of general governmental power. But no matter how great the number of nonvoting residents buying electricity from the District, the relationship between them and the District's power operations is essentially that between consumers and a business enterprise from which they buy.^[18] Nothing in the Avery, Hadley, or Salyer cases suggests that the volume of business or the breadth of economic effect of a venture undertaken by a government entity as an incident of its narrow and primary governmental public function can, of its own weight, subject the entity to the one-person, one-vote requirements of the Reynolds case.

The functions of the Salt River District are therefore of the narrow, special sort which justifies a departure from the popular-election requirement of the Reynolds case. And as in Salyer, an aspect of that limited purpose is the disproportionate relationship the District's functions bear to the specific class of people whom the system makes eligible to vote. The voting landowners are the only residents of the District whose lands are subject to liens to secure District bonds. Only these landowners are subject to the acreage-based taxing power of the District, and voting landowners are the only residents who have ever committed capital to the District through stock assessments charged by the Association.^[19]*371 The Salyer opinion did not say that the selected class of voters for a special public entity must be the only parties at all affected by the operations of the entity, or that their entire economic well-being must depend on that entity. Rather, the question was whether the effect of the entity's operations on them was disproportionately greater than the effect on those seeking the vote.^[20]

As in the Salyer case, we conclude that the voting scheme for the District is constitutional because it bears a reasonable relationship to its statutory objectives. Here, according to the stipulation of the parties, the subscriptions of land which made the Association and then the District possible might well have never occurred had not the subscribing landowners been assured a special voice in the conduct of the District's business. Therefore, as in Salyer, the State could rationally limit the vote to landowners. Moreover, Arizona could rationally make the weight of their vote dependent upon the number of acres they own, since that number reasonably reflects the relative risks they incurred as landowners and the distribution of the benefits and the burdens of the District's water operations.^[21]

*372 The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

JUSTICE POWELL, concurring.

I concur fully in the Court's opinion, and write separately only to emphasize the importance to my decision of the Arizona Legislature's control over voting requirements for the Salt River District.

The Court previously has held that when a governmental entity exercises functions that are removed from the core duties of government and disproportionately affect a particular group of citizens, that group may exercise more immediate control over the management of the entity than their numbers would dictate. Salyer Land Co. v. Tulare Lake Basin Water Storage District, 410 U. S. 719 (1973). See Hadley v. Junior College District, 397 U. S. 50, 56 (1970); Avery v. Midland County, 390 U. S. 474, 483-484 (1968). This rule is consistent with the principle of "one person, one vote" applicable to the elections of bodies that exercise general governmental powers. Reynolds v. Sims, 377 U. S. 533 (1964). The Salt River District is a governmental entity only in the limited sense that the State has empowered it to deal with particular problems of resource and service management. The District does not exercise the crucial powers of sovereignty typical of a general purpose unit of government, such as a State, county, or municipality.^[1]

*373 Our cases have recognized the necessity of permitting experimentation with political structures to meet the often novel problems confronting local communities. E. g., Holt Civic Club v. Tuscaloosa, 439 U. S. 60, 71-72 (1978). As this case illustrates, it may be difficult to decide when experimentation and political compromise have resulted in an impermissible delegation of those governmental powers that generally affect all of the people to a body with a selective electorate. But state legislatures, responsive to the interests of all the people, normally are better qualified to make this judgment than federal courts.^[2] Given the broad reforms effected by Reynolds v. Sims, we should expect that a legislature elected on the rule of one person, one vote will be vigilant to prevent undue concentration of power in the hands of undemocratic bodies. The absence of just such a political safeguard was a major justification for the Court's role in requiring legislative reapportionment. See Baker v. Carr, 369 U. S. 186, 258-259 (1962) (Clark, J., concurring).

The Court's opinion convincingly demonstrates that the powers exercised by the Salt River District are not powers that always must be exercised by a popularly elected body. Ante, at 366-371. Both storage and delivery of water are functions that in other areas of the Nation are performed by private or administrative bodies. These tasks sometimes are performed by an elected government entity, because of the aridity of the Southwest, federal water policy, and the historical *374 interest of Arizona landowners in irrigation, not because of their inherent character nor an insistent demand that the people as a whole decide how much water each will receive or how much each will pay for electricity.

Appellees argue that control of water is of prime importance in the Southwest and that many people purchase electricity from the District. These observations raise the question whether this Court should interfere with the constitution of the District, but do not answer it. The Arizona Legislature recently has demonstrated its control over the electoral processes of the District. It has reformed the District to increase the political voice of the small householder at the expense of the large landholder. Ante, at 359, n. 2. This reform no doubt reflects political and demographic changes in Arizona since the District was established.

The authority and will of the Arizona Legislature to control the electoral composition of the District are decisive for me in this case. The District is large enough and the resources it manages are basic enough that the people will act through their elected legislature when further changes in the governance of the District are warranted. We should allow the political process to operate. For this Court to dictate how the Board of the District must be elected would detract from the democratic process we profess to protect.

JUSTICE WHITE, with whom JUSTICE BRENNAN, JUSTICE MARSHALL, and JUSTICE BLACKMUN join, dissenting.

In concluding that the District's "one-acre, one-vote" scheme is constitutional, the Court misapplies the limited exception recognized in Salyer Land Co. v. Tulare Lake Basin Water Storage District, 410 U. S. 719 (1973), on the strained logic that the provision of water and electricity to several hundred thousand citizens is a "peculiarly narrow function." Because the Court misreads our prior cases and its opinion is conceptually unsound, I dissent.

*375 I

The right to vote is of special importance because the franchise acts to preserve "other basic civil . . . rights." Reynolds v. Sims, 377 U. S. 533, 562 (1964). It is presumed that "when all citizens are affected in important ways by a governmental decision," the Fourteenth Amendment "does not permit . . . the exclusion of otherwise qualified citizens from the franchise." Phoenix v. Kolodziejski, 399 U. S. 204, 209 (1970). Any state statute granting the franchise to residents on a selective basis poses the "danger of denying some citizens any effective voice in the governmental affairs which substantially affect their lives." Kramer v. Union Free School District No. 15, 395 U. S. 621, 627 (1969).^[1] See Avery v. Midland County, 390 U. S. 474 (1968). As a result, any classification restricting the franchise, except those involving residence, age, or citizenship, is unconstitutional "unless the district or State can demonstrate that the classification serves a compelling state interest." Hill v. Stone, 421 U. S. 289, 297 (1975). See Kramer, supra, at 626-627; Phoenix, supra, at 209 (giving power to property owners alone "can be justified only by some overriding interest of those owners that the State is entitled to recognize").

This fundamental principle has been applied in a variety of contexts to invalidate discriminatory election schemes limiting the franchise, in whole or in part, to property owners. In Kramer, the Court found invidious a system for local school district elections which limited eligibility to those who either (1) owned or leased taxable realty in the locality; or (2) were parents or custodians of children enrolled in the local public *376 schools. In Cipriano v. City of Houma, 395 U. S. 701 (1969), a case with particular relevance to the present action, the Court invalidated a state law which limited participation in a bond election for the support of a municipal utility system to property holders. The revenue bonds, secured by funds generated by the utility system itself, did not create any enforceable lien against any property in the city. Id., at 705. Noting that the impact fell on property and nonproperty owners alike since all persons "use the utilities and pay the rates," the Court rejected the voting classification scheme disenfranchising nonproperty owners. Nor may the vote be limited to property owners in bond issuance elections with respect to general obligation bonds secured by property tax revenues. Phoenix, supra, at 209-213. See also Police Jury of Parish of Vermilion v. Hebert, 404 U. S. 807 (1971), summarily rev'g 258 La. 41, 245 So. 2d 349 (cannot limit vote for road improvement bonds to property holders). The Court has thus rejected the view that simply because property is directly burdened because of some governmental action, that fact alone justifies limiting the franchise to property owners where nonowners are also substantially affected. Hill, supra, at 299.

To be sure, the Court approved limiting the vote to landowners in electing the board of directors of a Water Storage District in Salyer Land Co. v. Tulare Lake Basin Water Storage District.^[2] See Associated Enterprises, Inc. v. Toltec *377 Watershed Improvement District, 410 U. S. 743 (1973). But nothing in Salyer changed the relevant constitutional inquiry. Rather, the Court held the Reynolds-Avery-Kramer line of cases inapplicable to the water district because of its "special limited purpose and the disproportionate effect of its activities on landowners as a group . . . ." 410 U. S., at 728 (emphasis supplied). Although the water district there involved exercised certain governmental authorities, its purposes were quite narrow. The Water Storage District was also found to have only an insubstantial effect on nonvoters. Only 77 persons lived within its boundaries and most worked for one of the four corporations which owned 85% of the land within the District. On the other hand, the burdens of the District fell entirely on landowners since all of the costs associated with the District's projects were assessed against landowners in proportion to the benefits received. There was "no way that the economic burdens of district operations can fall on residents qua residents . . . ." Id., at 729.

An analysis of the two relevant factors required by Salyer demonstrates that the Salt River District possesses significant governmental authority and has a sufficiently wide effect on nonvoters to require application of the strict scrutiny mandated by Kramer.

II

The District involved here clearly exercises substantial governmental powers. The District is a municipal corporation organized under the laws of Arizona and is not, in any sense of the word, a private corporation. Pursuant to the Arizona Constitution, such districts are "political subdivisions of the State, and vested with all the rights, privileges and benefits, and entitled to the immunities and exemptions granted municipalities and political subdivisions under this *378 Constitution or any law of the State or of the United States." Ariz. Const., Art. 13, § 7. Under the relevant statute controlling agricultural improvement districts, the District is "a public, political, taxing subdivision of the state, and a municipal corporation to the extent of the powers and privileges conferred by this chapter or granted generally to municipal corporations by the constitution and statutes of the state, including immunity of its property and bonds from taxation." Ariz. Rev. Stat. Ann. § 45-902 (1956).^[3] The District's bonds are tax exempt, and its property is not subject to state or local property taxation. This attribute clearly indicates the governmental nature of the District's function. The District also has the power of eminent domain, a matter of some import. The District has also been given the power to enter into a wide range of contractual arrangements to secure energy sources.^[4] Inherent in this authorization is the power to control the use and source of energy generated by the District, *379 including the possible use of nuclear power. Obviously, this broad authorization over the field of energy transcends the limited functions of the agricultural water storage district involved in Salyer.

The District here also has authority to allocate water within its service area. It has veto power over all transfers of surface water from one place or type of use to another, and this power extends to any "watershed or drainage area which supplies or contributes water for the irrigation of lands within [the] district . . . ." Ariz. Rev. Stat. Ann. § 45-172.5 (Supp. 1980-1981).

Like most "private" utilities, which are often "natural monopolies," see Otter Tail Power Co. v. United States, 410 U. S. 366 (1973), private utilities in Arizona are subject to regulation by public authority. The Arizona Corporation Commission is empowered to prescribe "just and reasonable rates" as well as to regulate other aspects of the business operations of private utilities. See Ariz. Rev. Stat. Ann. § 40-321 (1974). The rate structure of the District now before us, however, is not subject to control by another state agency because the District is a municipal corporation and itself purports to perform the public function of protecting the public interest that the Corporation Commission would otherwise perform. See Ariz. Const., Art. 13, § 7, Art. 15, § 2. See also Rubenstein Construction Co. v. Salt River Project Agricultural Improvement & Power Dist.,