Unlike public entities, Salt River is only immune from taxation on those activities that are its primary government purpose. Salt River Project v. City of Phoenix, 129 Ariz. 398, 400, 631 P.2d 553, 555 (1981). Salt River's governmental powers are "limited to the purposes justifying its political existence," Niedner, 590 P.2d at 448 (quoting City of Mesa v. Salt River Project Agricultural Improvement and Power Dist., 92 Ariz. 91, 97, 373 P.2d 722, 726 (1962)), such as the power to levy taxes on real property located within the district, to sell tax-exempt bonds and to exercise eminent domain, Ball, 451 U.S. at 360, 101 S.Ct. at 1815, but it has no power to impose ad valorem property taxes or sales taxes, or to enact general laws.
101 Wash.2d at 794, 681 P.2d 1281. As authority for this statement, Algona cites Salt River Project Agricultural Improvement and Power District v. City of Phoenix, 129 Ariz. 398, 631 P.2d 553 (Ct.App.1981), a case it cites elsewhere as the principal authority for the theory of governmental immunity to which the majority of jurisdictions subscribe. See Algona, 101 Wash.2d at 793–94, 681 P.2d 1281.
The Power District is not only a supplier of power; it is also a political subdivision of Arizona. See Ariz. Rev. Stat. § 48-2302 ; accord, e.g. , City of Mesa v. Salt River Project Agric. Improv. & Power Dist. , 101 Ariz. 74, 416 P.2d 187, 188–89 (1966) (summarizing the Power District's history and status); Salt River Project Agric. Improv. & Power Dist. v. City of Phoenix , 129 Ariz. 398, 631 P.2d 553, 555 (1981) (same). It moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing, among other things, that it has authority to set prices under Arizona law and so is immune from federal antitrust lawsuits.
See generally 84 C.J.S. Taxation § 213 (1954); 1 C. Sands M. Libonati, Local Government Law § 5.14 (1981). The majority of jurisdictions adhere to this rule on the theory that a local tax imposed on a political subdivision such as a county is tantamount to a tax imposed on the State. Salt River Project Agricultural Imp. Power Dist. v. Phoenix, 129 Ariz. 398, 631 P.2d 553 (Ct.App. 1981); Dickinson v. Tallahassee, 325 So.2d 1 (Fla. 1975); Philadelphia v. Southeastern Pa. Transp. Auth., 8 Pa. Commw. 280, 303 A.2d 247 (1973); Willoughby Hills v. Board of Park Comm'rs, 3 Ohio St.2d 49, 209 N.E.2d 162 (1965).
108 Ariz. at 153, 494 P.2d at 25. In Salt River Project Agricultural Improvement Power District v. City of Phoenix, 129 Ariz. 398, 402, 631 P.2d 553, 557 (1981), the court held that an improvement district may exercise a proprietary power and sell surplus electricity because this activity is incidental to its primary purpose of producing electricity to reclaim and irrigate arid lands. Just as providing irrigation water by means of a dam system provides the opportunity for electrical generation or the ability to engage in domestic water service, a reservoir provides opportunities for public recreation such as swimming, boating and fishing.
Governmental activities are exempt from taxation. City of Phoenix v. City of Goodyear, 174 Ariz. 529, 851 P.2d 154 (Tax 1993); Salt River Project Agricultural Improvement and Power Dist. v. City of Phoenix, 129 Ariz. 398, 631 P.2d 553 (App. 1981). Proprietary activities of a government, however, are taxable. A governmental function is generally recognized as one undertaken because of a duty imposed on the entity for the welfare or protection of its citizens or a function that is fundamentally inherent in or encompassed within the basic nature of government. Copper Country Mobile Home v. City of Globe, 131 Ariz. 329, 333, 641 P.2d 243, 247 (App. 1982); Book-Cellar, Inc. v. City of Phoenix, 150 Ariz. 42, 44, 721 P.2d 1169, 1171 (App. 1986).
It is true, as Phoenix points out, that governmental activities are exempt from taxation. Salt River Project Agricultural Improvement and Power Dist. v. City of Phoenix, 129 Ariz. 398, 631 P.2d 553 (App. 1981). Phoenix cites City of Phoenix v. Moore, 57 Ariz. 350, 113 P.2d 935 (1941) as direct support for its position here stating that Moore holds that income from admission fees to city swimming pools and golf courses is based upon the governmental activities of providing health, welfare, and recreational activities for the benefit of the city's citizens and, as such, is immune from taxation.