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NOTICE This opinion is
subject to further editing and modification.
The final version will appear in the bound volume of the official
reports. |
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No. 95-3114-OA
STATE OF WISCONSIN
: IN SUPREME COURT
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Libertarian Party of Wisconsin, Libertarian Party of Metropolitan
Milwaukee, Fritz Beck, Robert Collison, Bryan Harwood, Richard Luedtke, Jeffrey H. Marker, Todd M. Mascaretti, Barbara Pokrandt, Cory Schultka and James Varley, Petitioners, v. State of Wisconsin, Tommy G. Thompson, Governor, James R. Klauser, Secretary of Administration, Mark D. Bugher, Secretary of Revenue, Fritz Ruf, Executive Director,
Wisconsin Housing and Economic Development
Authority, F. Thomas Ament, County Executive, County of Milwaukee, John O. Norquist, Mayor, City of
Milwaukee, Southeast Wisconsin Professional
Baseball Park District, a Special District Created Under Sec. 229.66, Stats., Robert Trunzo, Chairperson of the
Board of That District, Steve Agostini, Lorraine Blaubach Frank Busalacchi, Frederick Gierach, Elaine Kraut, Mickey Lehman, Craig Leipold, Karen Makoutz, Ulice Payne, Jr., Douglas Stansil,
Members of the Board of That District, and Milwaukee Brewers Baseball Club, a Wisconsin Limited Partnership, Respondents. |
FILED APR 9,
1996 Marilyn L. Graves Clerk of Supreme Court Madison, WI |
ORIGINAL ACTION in this court
commenced pursuant to leave granted. Declaratory
judgment granted and injunctive relief denied.
PER CURIAM. The
Libertarian Party et al. (Libertarian Party) brings this declaratory judgment
action to challenge the constitutionality of 1995 Wis. Act 56 (the Stadium Act)
on state grounds. The Stadium Act
provides for the formation of local baseball park districts and empowers those
districts to build and maintain professional baseball park facilities. The Libertarian Party argues that the
Stadium Act is unconstitutional for the following reasons: (1) the Stadium Act is a special or private
tax law in violation of Wis. Const. art. IV, §§ 31 and 32; (2) the Stadium Act
permits the contracting of state debt without a public purpose in violation of
Wis. Const. art. VIII, §§ 4 and 7(2); (3) the Stadium Act violates the internal
improvements clause of Wis. Const. art. VIII, § 10; (4) the Stadium Act
violates the municipal debt limitation of Wis. Const. art. XI, § 3(3); and (5)
the Stadium Act pledges state credit in violation of Wis. Const. art. VIII, §
3. We conclude the Stadium Act
survives these constitutional challenges and accordingly, we deny the
Libertarian Party's request for injunctive relief.
The facts are
undisputed. 1995 Wisconsin Act 56 was
enacted in a special legislative session after vigorous public debate. In passing the Stadium Act, the legislature
determined that substantial statewide public purposes would be served by
providing a mechanism for the formation of local baseball park districts in
sufficiently populous areas of the state and empowering those districts to
build and maintain professional baseball park facilities:
(1) The legislature determines that the provision of assistance by
state agencies to a district under this subchapter, any appropriation of funds
to a district under this subchapter and the moral obligation pledge under §
229.74(7) serve a statewide public purpose by assisting the development of a
professional baseball park in the state for providing recreation, by
encouraging economic development and tourism, by reducing unemployment and by
bringing needed capital into the state for the benefit and welfare of people
throughout the state.
1995 Wisconsin Act 56, § 51 (creating § 229.64).[1] The Stadium Act provides for the creation of
local professional baseball park districts to include any county within the
state with a population in excess of 500,000 and all counties that are
contiguous to that county and not already included in a different
district. § 51 (creating §
229.67). The governing board of a
district is to consist of members appointed by the governor, the mayor of the
most populous city within the district and the county executives of those
counties located within the district. §
51 (creating § 229.66). A district is
empowered to construct and operate professional baseball park facilities,
although the initial construction costs of the facilities may not exceed $250
million. § 51 (creating § 229.68).
A district may issue revenue
bonds for a portion of these costs (if a supermajority of the members of the
board agree) and is empowered to impose a sales and use tax to repay the
bonds. The tax is not to exceed 0.1
percent of covered transactions and may be imposed only within a district's
boundaries. § 38 (creating § 77.705)
and § 51 (creating § 229.68). The
proceeds of this tax are to be deposited in a special fund to be used for
operating expenses and retirement of the bonds. § 51 (creating § 229.685).
A district has no other taxing power and bondholders may not look to its
property, or any property within the district, as security or a source of
repayment.
The state is not obligated on
and does not guarantee the bonds, although under certain circumstances the
state may provide a nonbinding "moral obligation" pledge. § 51 (creating §§ 229.74(7) and
229.75). The state may provide certain
services to the district, some of which may be provided only for compensation
and only if land has been granted to the state, and the state has entered into
a lease agreement with the district. See
§ 4 (creating § 16.82(6)); § 6 (creating 16.854); § 7 (creating § 18.03(5s)); §
13 (creating 20.505 (1)); § 46 (creating 77.76(1)); § 47 (creating
77.76(3m)). The legislation contains a
specific disclaimer that a district is
not authorized to create a debt of the state or a county in the district's
jurisdiction. All bonds issued by a
district are payable solely from the funds pledged for their payment as
specified in the bond resolution authorizing the issuance. § 51 (creating § 229.75(2)). In addition, neither the state nor the counties
in a district are liable for the payment of the principal or interest on the bonds
or the performance of any pledge or obligation or agreement that may be
undertaken by a district. Therefore,
any such pledge, obligation or agreement undertaken by a district poses no
pecuniary liability or charge upon the general credit or taxing power of the
state or a county in the district. § 51
(creating § 229.75(2)).
Furthermore, the bonds issued
by a district are secured only by the district's interest in the baseball park
facilities, by income from the facilities, by proceeds from the bonds issued by
the district and amounts placed in a special redemption fund, investment
earnings, and by the sales and use taxes imposed by the district. § 51 (creating § 229.75(3)). The district is prohibited from pledging its
full faith and credit on the bonds, and the legislature has declared that the
bonds are not a liability of the district.
§ 51 (creating § 229.75(3)).
Following the enactment of
this legislation, an entity known as the Southeast Wisconsin Professional
Baseball District (the District)[2]
consisting of Milwaukee County and its four contiguous counties of Ozaukee,
Racine, Washington and Waukesha, was formed.
The governing board of the District has been appointed, and the District
has entered into various agreements to construct a new stadium to be built on a
site adjacent to the current Milwaukee County Stadium. Under these agreements, the District will
own 64 percent of the new stadium facilities, and the Milwaukee Brewers, a
professional baseball team franchise, will own the remaining 36 percent. The stadium will be built on land owned by
the state and leased for a 99 year term to the District. In addition, the District will sublease the
new stadium facilities to the Brewers for a 30 year period. This new 42,500 seat stadium, consistent
with the authorizing legislation, will cost a maximum of $250 million.
Of that total cost, the
District will provide $160 million.
That money will come from, among other sources, sales and use tax
revenues and other revenues raised by the District's issuance of tax exempt
revenue bonds. Although the bonds have
not yet been issued, the governing board of the District by resolution has
authorized a 0.1 percent sales and use tax to be collected commencing on
January 1, 1996, in the five counties comprising that District.
The remaining $90 million
needed for the construction of the new stadium will come from the Brewers. The team has agreed to make a $90 million
"equity contribution" to the project construction fund. In addition, the Brewers will pay an annual
rent equal to 10 percent of the total annual debt service payable by the
District on the District's tax exempt revenue bonds, an estimated $1.1 million
per year for the 30 year term of the lease between the Brewers and the
District.
On November 20, 1995,
Governor Thompson et al. (Governor) petitioned this court for leave to commence
an original action for declaratory judgment seeking a declaration that the
Stadium Act is constitutional. Upon
accepting original jurisdiction, and recognizing that the Libertarian Party had
previously commenced an action in Milwaukee County Circuit Court, this court
"inverted" or realigned the parties, directing that the Libertarian
Party should be henceforth denominated Petitioners, and the Governor should be
denominated as the Respondent in this original action.[3]
The Libertarian Party argues
that the Stadium Act violates several provisions of the state constitution and
asks this court to grant a permanent injunction restraining the implementation
of the act. The Libertarian Party
asserts 15 separate constitutional challenges.
Upon reviewing the record and briefs, however, we recognize that not all
of the challenges are meritorious.
Therefore, any of the Libertarian Party's challenges not discussed with
specificity can be deemed to lack sufficient merit to warrant individual
attention. See State v. Waste
Management of Wisconsin, Inc., 81 Wis.2d 555, 564, 261 N.W. 2d 147, 151 (an
appellate court need not address every issue raised), cert. denied, 439
U.S. 865, 99 S.Ct. 189 (1978).
We begin with the presumption
that the Stadium Act is constitutional and must be upheld unless proven
unconstitutional beyond a reasonable doubt.
Sambs v. City of Brookfield, 97 Wis. 2d 356, 370, 293 N.W.2d 504
(1980); State ex rel. Warren v. Nusbaum, 59 Wis. 2d 391, 412-13, 208
N.W.2d 780 (1973). Our legislature has
plenary power except where forbidden to act by the Wisconsin Constitution. Such general police power is in sharp
contrast to that exercised by Congress, which has only those powers
specifically provided by the United States Constitution: "[I]t is competent for the legislature
to exercise all legislative power not forbidden by the constitution or
delegated to the general government, or prohibited by the constitution of the
United States." Bushnell v.
Beloit, 10 Wis. 155, 168-69 (1860).
THE ACT
IS NOT A SPECIAL OR PRIVATE TAX LAW
We begin our discussion with
the Libertarian Party's claim that the Stadium Act violates Wis. Const. art.
IV, § 31(6) which prohibits the legislature from enacting any
"special or private laws . . . for assessment or collection of
taxes."[4]
The Libertarian Party claims
that, by authorizing a sales and use tax that applies only in five counties and
by providing for income, franchise and property tax exemptions that may be
beneficial to the Milwaukee Brewers, the Stadium Act violates Wis. Const. art.
IV, § 31(6) which prohibits the enactment of private laws. Additionally, the Libertarian Party
contends that because the legislation exempts the stadium facilities from real
and personal property taxes, the Stadium Act grants a local property tax
exemption, which directly provides economic benefit to the Milwaukee Brewers.
A claim under Wis. Const.
art. IV, § 31 is resolved by determining whether the law is a permissible
enactment under art. IV, § 32, which provides:
The legislature may provide by general law for
the treatment of any subject for which lawmaking is prohibited by section 31 of
this article. Subject to reasonable
classifications, such laws shall be uniform in their operation throughout the
state.
This court has consistently
applied certain rules for determining the legislature's competence under Wis.
Const. art. IV, § 32 to pass laws affecting only certain entities, such as
cities or counties of a certain class or size, notwithstanding the prohibitions
of Wis. Const. art. IV, § 31. These
rules are as follows:
First,
the classification employed by the legislature must be based on substantial
distinctions which make one class really different from another.
Second,
the classification adopted must be germane to the purpose of the law.
Third,
the classification must not be based on existing circumstances only. Instead, the classification must be subject
to being open, such that other cities could join the class.
Fourth,
when a law applies to a class, it must apply equally to all members of the
class.
.
. . .
[Fifth,]
the characteristics of each class should be so far different from those of the
other classes so as to reasonably suggest at least the propriety, having regard
to the public good, of substantially different legislation.
City of Brookfield, 144
Wis. 2d at 907-08. If a law passed by
the legislature meets all these criteria, then it is a "general law"
and uniform within the meaning of Wis. Const. art. IV, § 32 and therefore
proper, notwithstanding that it comes within one of the specific categories of
prohibited legislation found within Wis. Const. art. IV, § 31. "[I]f the legislation being challenged
contains classifications which are open, germane, and relate to true
differences between the entities being classified, then the legislation is
considered general and of uniform application." City of Brookfield, 144 Wis. 2d at 911.
In the present case, the
classification employed in the Stadium Act satisfies all five of the Brookfield
requirements. First, the classification
employed by the legislature makes a substantial distinction on the basis of
population. Wisconsin Stat. § 229.67
provides that each district consists of "any county with a population of
more than 500,000 and all counties that are contiguous to that county and that
are not already included in a different district." Population has frequently been upheld as a
relevant ground upon which to create legislative distinctions. In Johnson v. The City of Milwaukee,
88 Wis. 383, 391, 60 N.W. 270 (1894), a case decided soon after the
Constitution was amended to create Wis. Const. art. IV, §§ 31 and 32, this
Court stated:
It is usually appropriate to classify by
population, especially where the object to be advanced by it bears fairly a
relation to the number of population in either class; and, while opinions may
fairly differ as to where the line of distinction should be drawn, that is
fairly a subject for the exercise of legislative discretion. It is not open to question by the courts,
unless it shall appear to be a mere device to evade the constitutional
provisions.
Id. at 391.
Second, the classification
adopted in the Stadium Act is germane to the purposes of the law. The purpose of the Stadium Act is to promote
the recreational opportunities that flow from an economically viable professional
baseball team and economic development associated with baseball. § 51 (creating § 229.64(1) and
(2)). In State v. Milwaukee Braves,
Inc., 31 Wis. 2d 699, 710, 144 N.W.2d 1 (1966), cert. denied,
385 U.S. 990 (1967), this court acknowledged that substantial business activity
is generated by major league games played before large crowds. In addition, Milwaukee, unlike smaller
communities, "has the demographic economic and population characteristics
necessary to support a Major League baseball club." Id.
In the present case, the legislature rationally could have concluded
that the only area in the state that could currently support major league
baseball was a populous county such as Milwaukee and its four contiguous
counties. Greater population ensures
more ticket sales and better corporate support. It also promises a greater economic multiplier from spending for
food, lodging and entertainment, and a larger base of economic activity to
generate revenue to defray the District's expenses.
In addition, the legislature
could have rationally concluded that the activities of the District ought to be
paid for by a tax on economic activity within its boundaries. Contrary to the Libertarian Party's
assertion that "geographical disparities" are not allowed, a variety
of this state's taxes are only imposed within the boundaries of local units of
government. Local property taxes and
sales taxes are two such examples. In
this case, by requiring sufficient population, the legislature properly
precluded the formation of districts that are unlikely to support professional
baseball.
Third, the classification is
open such that other districts can be created.
A district may be created whenever any county attains a population of
more than 500,000. § 51 (creating §
229.64(2)). The only argument in the
Libertarian Party's brief regarding the Brookfield test is that the
Stadium Act does not establish an "open" classification. The Libertarian Party contends that
"realistically, no other city in Wisconsin will ever have a major league
baseball team as long as Milwaukee has one."
In Thielen v. Metropolitan
Sewerage Commission, 178 Wis. 34, 189 N.W. 268 (1922), this court upheld a
law allowing sewerage commissions to be established in counties containing a
first-class city. The only first-class
city in the state was Milwaukee. The
law provided for funding of the district's operations through a district-wide
property tax to be imposed only in that district. Id. at 36-39. This
court rejected the claim that the law violated Wis. Const. art. IV, § 31
because it could only apply to Milwaukee County. It held that, although no other county was likely to utilize that
law, it was still a general enactment and therefore did not violate § 31:
Whatever may be said for or against a
classification which permits the enactment of legislation which in fact at the
time of its adoption applies and in all human probability for some considerable
time in the future can never apply to any but a single county within the state,
it is a matter which is no longer an open question in this state. The act being by its terms general, it is
not within the provisions of sub. 7, sec. 31, art. IV, Const.
Id. at 51.
In the present case, it is
immaterial that the area surrounding Milwaukee County is currently the only
area within the class created by the Stadium Act. The Stadium Act is properly subject to being open such that other
cities can join the class.
Fourth, the Stadium Act
applies equally to all members of the class.
Its terms govern all baseball park districts, without exception.
Fifth, "the
characteristics of each class [are] so far different from those of the other
classes so as to reasonably suggest at least the propriety, having regard to
the public good, of substantially different legislation." Davis v. Grover, 166 Wis. 2d 501,
536, 480 N.W.2d 460 (1992). This court
recognized in Davis that a large urban area was the best location to
experiment with legislation aimed at improving the quality of education. Id. at 535. Milwaukee County and its contiguous counties, having the greatest
population concentration in the state, provide a class that is substantially
different from other population concentrations in the state.
The Libertarian Party also
contends that the Stadium Act's income, franchise and property tax exemptions violate
Wis. Const. art. IV, § 31 and benefit only the Brewers. We disagree. Wisconsin Stat. § 70.11(36)(1993-94), which contains a property
tax exemption for all professional sports facilities, was created by 1991 Act
37, § 34. Its validity is not involved
in this proceeding and, even if it were, no question of classification arises
because the exemption applies to all professional sports and entertainment
stadiums.
Moreover, the tax exemption
contained in the Stadium Act is for the District and its bonds, not
professional baseball teams. The
District's property and bonds are treated like those of any other local unit of
government. Any incidental benefit
inuring to the Brewers is legally immaterial for purposes of this
analysis. Whether the legislature's
basis for the classification is wise and judicious, and whether it operates as
fairly as other classifications are questions for the legislature, not for the
courts. Madison Metropolitan
Sewerage Dist. v. Committee on Water Pollution, 260 Wis. 229, 252-53, 50
N.W.2d 424 (1951). As this court said
in Land, Log & Lumber Co. v. Brown, 73 Wis. 294, 40 N.W. 482
(1889):
It is for the legislature to fix
the limits of the taxing district, and not for the courts . . . So in regard to
local improvements in cities, this court holds that the district to be taxed
for such improvements may be fixed, either directly or indirectly, by the
legislature; and that the justice or injustice of the limits of the taxing
district, when fixed by the legislature or some other authority authorized by
law to fix the same, cannot be questioned by the courts.
Id. at 304.
Based on the above, we
conclude that the Stadium Act contains classifications which are open, germane,
and relate to true differences between the entities being classified. Therefore, the Stadium Act is not a special
or private tax law.
CONTRACTING STATE DEBT WITHOUT A PUBLIC
PURPOSE
Read together, Wis. Const.
art. VIII, §§ 4 and 7(2) provide:
The state shall never contract any public debt
except . . . [t]o acquire, construct, develop, extend, enlarge or
improve land, waters, property, highways, railways, buildings, equipment or
facilities for public purposes.
The prohibitions embodied in
this paragraph are aimed at assuring that public money be raised and used only
for public purposes. The question,
therefore, is whether the Stadium Act satisfies the constitutional requirement
of fostering a valid public purpose.
The Libertarian Party argues
that the Stadium Act creates a public debt in violation of Wis. Const. art.
VIII, § 4 and is not within any of the public purpose exceptions
identified in Wis. Const. art. VIII, § 7(2) for which the state may
incur a public debt. In essence, the
Libertarian Party contends that baseball can never constitute a legitimate
public purpose. We disagree.
First, the Libertarian Party's argument fails to distinguish
between the District authorized under the Stadium Act and the game of baseball
itself. The question is not whether the
game of baseball or the Milwaukee Brewers serve a public purpose; rather, the
question is whether the legislation creating local baseball park districts
satisfies the public purpose doctrine.
In State ex rel. Bowman v.
Barczak, 34 Wis. 2d 57, 148 N.W.2d 683 (1967), this court recognized
that although there is no specific clause in the state constitution
establishing the public purpose doctrine, nevertheless such doctrine is firmly
accepted as a basic constitutional tenet mandating that public appropriations
may not be used for other than public purposes. Id. at 62. The
public purpose doctrine commands that public funds can be used only for public
purposes. State ex rel. Warren v.
Reuter, 44 Wis. 2d 201, 211, 170 N.W.2d 790 (1969). In Reuter, this court described the
public purpose concept as follows:
[T]he concept of public purpose
is a fluid one and varies from time to time, from age to age, as the government
and its people change. Essentially,
public purpose depends upon what the people expect and want their government to
do for the society as a whole and in this growth of expectation, that which
often starts as hope ends as entitlement.
Id.
at 213.
Although this court is not
bound by the declaration of public purpose contained in any legislation, what
constitutes a public purpose is, in the first instance, a question for the
legislature to determine and its opinion must be given great weight by this
court. Id. at 212.
In the present case, the
legislature has expressly declared that the formation of local baseball park
districts will serve a statewide public purpose by "encouraging economic
development and tourism, by reducing unemployment and by bringing needed
capital into the state for the benefit and welfare of people throughout the
state." § 51 (creating §
229.64). These are clearly public
purposes and will provide direct, not remote, advantages or benefits to the
public at large. See State ex
rel. Wisconsin Dev. Authority v. Dammann, 228 Wis. 147, 277 N.W. 278
(1938).
In addition, the fact that a
private entity such as the Brewers will benefit from the Stadium Act does not
destroy the predominant public purpose of this act. In Reuter, this court addressed a similar argument against
a legislative appropriation to the Marquette School of Medicine. That appropriation was challenged as
supporting a private school which would not serve a public purpose. We found that this argument confused the
means with the end and explained that an act is constitutional if it is
designed in its principal parts to promote a public purpose so that the
attainment of the public purpose is a reasonable probability. Reuter, 44 Wis. 2d at 214. The benefit to the private Marquette School
of Medicine was not enough to destroy the public purpose of that
appropriation. Similarly, the fact that
a private entity such as the Brewers might benefit from the Stadium Act does
not destroy the predominant public purposes of this act.
Other jurisdictions have
reached similar conclusions. See
Annotation: Validity of Governmental
Borrowing or Expenditure for Purposes of Acquiring, Maintaining or Improving
Stadium for Use of Professional Athletic Team, 67 A.L.R.3rd 1186 (1976).[5] In Lifteau v. Metropolitan Sports
Facilities Commission, 270 N.W.2d 749 (Minn. 1978), the Minnesota
Supreme Court held that the construction of a publicly owned sports facility
for use by professional sports organizations and others was a public purpose
for which public funds could constitutionally be expended. The court stated:
The
trial court found that the public desire for sports facilities was great and we
may take judicial notice of the important part that professional sports plays
in our social life.
. . .
We
are not persuaded by plaintiff's argument that the law is a bad law because it
benefits indirectly some private individuals or corporations; that it is
economically unsound; that stadia all over the country have experienced cost
overruns; and that the new stadium, if built, will prove to be a "loser"
from a revenue standpoint. These
arguments are proper arguments to be made to the legislature, or to the
Commission itself.
. . .
Decisions such as these are economic matters and
political decisions to be made by legislative bodies, not the courts.
Id. at 754-55.
We agree. More than 65 years ago, this court
recognized that providing for recreation--i.e., a wildlife refuge--was a public
purpose and a matter for legislative discretion. State ex rel. Hammann v. Levitan, 200 Wis. 271, 228
N.W. 140 (1929). In Levitan,
this court stated:
What should be done in the way
of providing public recreation is in the first instance a matter of legislative
discretion. Whether the project set up
in the laws under consideration here is the best or wisest method of expending
public funds is a matter for the determination of the legislature.
Id. at 281.
Therefore, legislative determinations of public purpose should be
overruled only if it can be established that the particular expenditure is
"manifestly arbitrary or unreasonable." State ex rel. Hammermill Paper Co. v. La Plante, 58 Wis.
2d 32, 56, 205 N.W. 2d 784 (1973). The
Libertarian Party's assertion that the benefit to the public is only incidental
in comparison to the benefit to the Milwaukee Brewers does not satisfy this
burden. While some private benefit will
result, the project is sufficiently public in nature to withstand
constitutional challenge. Therefore, we
conclude that the Stadium Act authorizes constitutionally permissible
expenditures for a public purpose.
THERE
IS NO INTERNAL IMPROVEMENTS VIOLATION
We now address whether the
Stadium Act violates the internal improvements clause of the Wisconsin
Constitution. Wisconsin Const. art.
VIII, § 10 provides in part:
Except
as further provided in this section, the state may never contract any debt for
works of internal improvement, or be a party in carrying on such works.
(1) Whenever
grants of land or other property shall have been made to the state, especially
dedicated by the grant to particular works of internal improvement, the state
may carry on such particular works and shall devote thereto the avails of such
grants, and may pledge or appropriate the revenues derived from such works in
aid of their completion.
This clause prohibits the
state from being a party in carrying on any work of internal improvement,
unless a grant of land or other property has been made to it, specifically
dedicated by the grant to such work. Sloan,
Stevens & Morris v. State, 51 Wis. 623, 629-32, 8 N.W.2d 393
(1881).
The questions that must be
answered in any challenge to this provision are "(1) Is the object sought
to be accomplished an `internal improvement'; (2) does it call for the State to
`contract any debt' to carry it out, or; (3) does the legislation cause the
State to `be a party in carrying on such works'?" Development Dept. v. Bldg. Comm'n,
139 Wis. 2d 1, 7, 406 N.W.2d 728 (1987).
If this court concludes that the stadium is not an internal improvement,
our analysis of this clause is at an end.
We begin with the recognition
that not all construction projects are works of internal improvement. The state may directly engage in
construction or other activities if those activities are incident to a
predominantly governmental purpose:
If a law is predominantly public
in its aim, it will not be held to violate the internal improvements provision,
in spite of the fact that the state carries on internal improvements incident
to the main public purpose of the law.
Wisconsin Solid Waste Recycling Auth. v. Earl, 70 Wis. 2d 464, 492,
235 N.W.2d 648 (1975).
The question of whether any
particular activity involves a predominantly governmental function varies with
time: "[B]oth this court and the
legislature have been cognizant of changing times and the ever-changing needs
of the state and its people." State
ex rel. Warren v. Nusbaum, 59 Wis. 2d 391, 435-36, 208 N.W.2d 780
(1973). At least two factors are
considered: "(1) [t]he dominant
governmental function, and (2) the inability of private capital to satisfy the
need." Id. at 436.
In State v. Milwaukee
Braves, Inc., 31 Wis. 2d 699, 721, 144 N.W.2d 1 (1966), we declared that
"the interest of the state in preserving business activity within its
borders" was a valid governmental interest with respect to a professional
baseball team. This court has also
upheld state construction for recreational purposes. See Levitan, 200 Wis. at 277 (1929) (construction
of a wildlife refuge facility). In Levitan,
we stated:
We should not place a narrow or restricted
construction upon a constitutional amendment so obviously intended by the
people to confer authority upon the state to promote the general welfare in
this field. As the country emerges more
and more from pioneer conditions, problems connected with public recreation
become more and more prominent.
Compared with former times the people of this country enjoy a large
amount of leisure. The proper
employment of this leisure constitutes one of our newest but in many respects
one of our most important problems.
Whether leisure is a social asset or a social liability depends upon the
use which is made of it.
Id. at 280-81. Like the recreational benefits obtained from
natural parks, recreational benefits are also received from sports
facilities.
Furthermore, we find no merit
to the Libertarian Party's argument that construction of the stadium serves a
predominantly private purpose. In Lifteau,
the Minnesota Supreme Court upheld legislation creating a seven county metropolitan
sports taxing district similar to the professional baseball district authorized
in the Stadium Act. Relying on the
cases collected in 67 A.L.R.3rd 1186 (1976), the Minnesota court noted that: "In every case considering the issue
except two . . . it has been held that the acquisition or construction of a
stadium to be used in part by one or more professional sports teams constitutes
a public purpose for which public expenditures could be legally
undertaken." Lifteau, 270
N.W. 2d at 753-54.
In the present case, the
purposes of the Stadium Act, as stated by the legislature, are as follows:
[To] assist[] the development of a professional
baseball park in the state for providing recreation, by encouraging economic
development and tourism, by reducing unemployment and by bringing needed
capital into the state for the benefit and welfare of people throughout the
state.
§ 51 (creating § 229.64(1)).
The reduction of
unemployment, the promotion of tourism, and the encouragement of industry are
all predominately governmental purposes sufficient to avoid a violation of the
internal improvements clause. See
Earl, 70 Wis. 2d at 481, 492; State v. Village of Lake Delton, 93
Wis. 2d 78, 93, 286 N.W. 2d 622 (Ct. App. 1979). Therefore, we conclude that the Stadium Act does not violate Wis.
Const. art. VIII, § 10, barring state participation in works of internal
improvement.
VIOLATION
OF MUNICIPAL DEBT LIMITATION
The Libertarian Party claims
that, by letting the District borrow money when it lacks the power to levy a
direct annual tax to repay the borrowed money, the Stadium Act violates the
municipal debt limitation contained in Wis. Const. art. XI, § 3(3) which
provides:
Any county, city, town, village, school district
. . . or other municipal corporation incurring any indebtedness . . .
shall . . . provide for the collection of a direct annual tax sufficient to pay
the interest on such debt as it falls due, and also to pay and discharge the
principal thereof within 20 years from the time of contracting the same.
This constitutional debt
limitation seeks to ensure that a political subdivision does not become
overburdened by obligations. It seeks
to impose the burden of debt repayment upon those who create the obligations, not
upon future generations. City of
Hartford v. Kirley, 172 Wis. 2d 191, 204, 493 N.W.2d 45 (1992). We have acknowledged that the constitution
does not prohibit creative financing. Id. We judge each new, creative financing technique according to its
own attributes, its similarity to other financing arrangements the court has
examined, and to the objectives of the constitutional debt limit. Id. at 205.
In the present case, the
District's bonds are payable solely from a special fund that does not include
any property tax revenues. In this
respect, the District's bonds are analogous to special assessment bonds which
do not create an indebtedness. Fowler
v. City of Superior, 85 Wis. 411, 54 N.W. 800 (1893).
In City of Hartford,
this court compared the characteristics of special assessment bonds to tax
increment bonds. We noted that
"[d]ebts secured by special assessments . . . do not burden any property
of the municipality other than the revenues from the special assessment tax
pledged as repayment." City of
Hartford, 172 Wis. 2d at 207. In
contrasting tax increment financing with special assessments which are
generated in addition to general property taxes, this court noted that special
assessments do not impinge on the municipality's general property tax
revenues.
Unlike special assessments, which are generated
in addition to general property taxes, tax increments are not independent
sources of revenue. Nor does tax
incremental financing involve a special tax; . . . the municipality does not
impose any special taxes to pay off [tax increment] bonds."
Id. at 207.
The District's bonds have the
same characteristics as special assessment bonds. Under the Stadium Act, tax revenues from the sales and use taxes
that the District may impose are placed in a special fund. § 51 (creating § 229.685). These taxes, imposed under Wis. Stat.
Chapter 77, subchapter V, are specifically identified as "special taxes
that are generated apart from any direct annual tax on taxable property." § 51 (creating § 229.64(1)). Moreover, the District may not levy any
taxes that are not expressly authorized under the provisions of subchapter V of
Wis. Stat. ch. 77. See Wis.
Stat. § 229.68(15). Consequently,
the District may not levy property taxes for purposes of securing any bonds the
District might issue. Not only does the
District lack power to levy or pledge any property tax revenue, it cannot
pledge its full faith and credit, and no funds of the District other than those
placed in the special fund may be used for payment of debt service. § 51 (creating § 229.75(3)). Therefore, the District's bonds do not
create indebtedness within the meaning of Wis. Const. art. XI, § 3(3).
Further, the Stadium Act is
entirely consistent with the "special fund doctrine." This doctrine recognizes that "an obligation
payable exclusively from a special fund created by the imposition of fees,
penalties or excise taxes, and for the payment of which the general credit of
the state or municipality is not pledged . . . is not a debt within the meaning
of constitutional debt limitations."
Annotation, 100 A.L.R. 900, 901 (1936). See, e.g., State v. Tampa Sports
Authority, 188 So. 2d 795, 797 (Fla. 1966) (sources other than ad valorem
taxes were pledged to support bonds); City of Phoenix v. Phoenix Auditorium
and Convention Center Assn., 412 P.2d 43, 44 (Ariz. 1966) (excise
taxes were pledged to support bonds).
One commentator describes the special fund doctrine as follows:
The
courts of a majority of the states, in applying the Special Fund Doctrine
concerned themselves with the obligation to pay the debt service of the
bonds. If the pledge was to pay such
debt service solely from revenues other than the property tax, then the
doctrine applied and permitted the financing of structures and services which,
in themselves, were not revenue producing . . . .
Charles S. Rhyne, Municipal Law § 14-7, at 335 (1957).
We find that under the Stadium
Act, the bonds to be issued by a baseball park district are revenue bonds which
are payable only from the sales and use taxes the District is authorized to
impose and revenue from the stadium itself.
The Stadium Act mandates that the District can only issue bonds pursuant
to Wis. Stat. § 66.066, the specific statute authorizing a
municipality--including a local professional park district--to issue revenue
bonds. See § 51 (creating §
229.68(8)) (granting the stadium district power to issue revenue bonds under §
66.066). Moreover, the bonds to be
issued by the District are secured by the District's interest in the park's
facilities, the income from those facilities, by the proceeds of the bonds
issued by the District, and by the sales and use taxes imposed by the
District. Wis. Stat. § 229.75(3). No property tax revenues are involved.
Finally, the District's bonds
are also obligations of a public utility, that is, a revenue-producing
enterprise that serves a public purpose.
The Wisconsin constitution includes an exception for public utilities in
Wis. Const. art. XI, § 3(5): An
indebtedness created for the purpose of purchasing, acquiring, leasing,
constructing, extending, adding to, improving, conducting, controlling,
operating or managing a public utility of a town, village, city or special
district, and secured solely by the property or income of such public utility,
and whereby no municipal liability is created, shall not be considered an
indebtedness of such town, village, city or special district . . . .
The term "public
utility" as used in Wis. Const. art. XI, § 3(5) "must be considered
to include all plants or activities which the legislature can reasonably
classify as public utilities in the ordinary meaning of the term." Payne v. Racine, 217 Wis. 550, 555,
259 N.W. 437 (1935). Moreover,
"anything calculated to promote the education, the recreation or the
pleasure of the public is to be included within the legitimate domain of public
purposes." Capen v. City of
Portland, 228 P. 105, 106 (Ore. 1924).
The Stadium Act expressly
declares that, for financing purposes, baseball park facilities are public
utilities. Wis. Stat. § 24 (creating §
66.067). The Stadium Act also declares
that baseball park facilities serve the public interest by providing
recreation, as well as encouraging economic development and tourism, and
reducing unemployment. § 51 (creating §
229.64(1)). Finally, the Stadium Act
treats the sales and use tax revenues as income of the utility. § 22 (creating § 66.066(1)(c)).
Therefore, because the District's bonds do not create an
indebtedness, and because the municipal debt limitation does not apply to the
District, we conclude that the Stadium Act
does not violate the municipal debt limitation.
PLEDGE
OF STATE CREDIT
The Libertarian Party's final
argument is that the Stadium Act pledges state credit for the benefit of the
Brewers in violation of Wis. Const. art. VIII, § 3, which provides that
"the credit of the state shall never be given, or loaned, in aid of any
individual, association or corporation."
This section prohibits the state from granting its credit in aid of a
private business.
The Libertarian Party
advances three arguments under this section:
(1) that the clause prohibits gifts as well as loans, and the Stadium
Act contains certain cash and "in-kind" subsidies; (2) that the state
and the District created under the act are "a legal identity" and
thus, the District's liability on any bonds is actually the state's liability;
and (3) that the Stadium Act's declaration of a "moral obligation" to
pay the bonds in the event of default creates a legal obligation. We address each argument in turn.
The Libertarian Party's
primary argument focuses on what they refer to as the "massive state
financing" of this stadium project which includes $160 million of
revenue bonds to be issued by the District plus another $50 million of bonds to
be issued by WHEDA. According to the
Libertarian Party, because the proceeds from both will go directly to the
Brewers, the "no credit" clause of the state constitution is
violated.
Wisconsin Const. art. VIII, §
3 prohibits the pledge of the state's credit on behalf of any private person,
but this section says nothing about grants of cash or subsidies, or the
provision of services. We agree that
such activities must serve a public purpose and satisfy other constitutional
limitations. However, the Libertarian
Party provides no support for its suggestion that state grants implicate the
credit clause. To reach such a
conclusion would put in jeopardy many of our current state subsidies, such as
unemployment compensation, welfare, and tuition grants. This we decline to do.
Second, the Libertarian Party
argues that a local professional baseball district does not have a separate legal
identity, but is merely an "administrative agency" of the state.
This court has previously
held that the legislature has the power to create local units of government
which are not subject to the same constitutional restrictions as the
state. In Redevelopment Authority v.
Canepa, 7 Wis. 2d 643, 97 N.W.2d 695 (1959), this court recognized that
"in a sense all governmental bodies created under the constitution of the
state, including cities and villages, could be termed `state agencies.'" Id. at 652. This court also observed that:
[W]hile the state is subject to the prohibitions
limiting the power of the state to contract a debt and prohibiting the carrying
on of works of internal improvement, governmental units created by the state
and carrying on their public functions in particular localities or geographical
subdivisions of the state are not so subject.
Id. at 651.
In State ex rel. Gubbins
v. Anson, 132 Wis. 461, 112 N.W. 475 (1907), this court discussed at length
the legislature's authority to create a new governmental unit with territorial
limits different from those of existing counties, cities or other municipal
corporations. It concluded that the
legislature has the power to alter the delegation of powers to local
governmental units, and that in creating new units of government, it may
provide for the governance of such bodies as it sees fit.
Finally, in Warren v.
Nusbaum, 59 Wis. 2d 391 (1973), this court considered whether the Wisconsin
Housing Finance Authority was subject to many of the same limitations and
prohibitions that the Libertarian Party suggests apply to a local professional
baseball district. The Authority was
governed by a board made up of solely appointed members, serving without compensation,
and was denominated by the legislature as a body corporate, separate from the
state. Recognizing that it must look
beyond such a legislative denomination and examine the powers and structure
conferred upon the Authority, this court focused on the Authority's powers,
including the power to sue and be sued, to enter into contracts, to incur debt,
and to own, improve and convey real estate.
We held that the Authority was a separate entity from the state. Id. at 424.
In the present case, the
District has similar powers. For
example, the District has the power to sue and be sued in its own name, and
significantly, like all the counties in the state, the District has the power
to levy sales and use taxes. Although
the Stadium Act places an upper limit on the tax rate that may be imposed, the
District is nonetheless empowered to impose a sales and use tax. The fact that the District might use the
state to collect those taxes or that the District has an appointed board, does
not lead to the conclusion that the District is legally identical to the state.
Third, the Libertarian Party
contends that the "moral obligation" pledge in § 51 (creating §
229.74(7)) creates an impermissible state liability because the state has
acknowledged a moral obligation to pay the bonds if the team defaults;
therefore, such an obligation amounts to a loan of the state's credit.
However, absent a legally
enforceable contractual obligation on the part of the state, Wis. Const. art.
VIII, § 3 cannot be violated:
It is
our conclusion that the giving or loaning of the credit of the state which it
was intended to prohibit by sec. 3, art. VIII, Wis. Const., occurs only when
such giving or loaning results in the creation by the state of a legally
enforceable obligation on its part to pay to one party an obligation incurred
or to be incurred in favor of that party by another party.
Dammann, 228 Wis. at
197. Here, § 51 (creating § 229.75)
specifically provides that the state is not liable for the actions of the
District. This section also provides
that the state is not liable on the District's bonds, that the bonds are not a
debt of the state and that the bonds must contain a statement to that effect. 1995 Wis. Act § 51 (creating § 229.75(2))
provides:
The state and each county in the district's
jurisdiction are not liable for the payment of the principal of or interest on
a bond or for the performance of any pledge, mortgage, obligation or agreement
that may be undertaken by a district.
The breach of any pledge, mortgage, obligation or agreement undertaken
by a district does not impose pecuniary liability upon the state or a county in
the district's jurisdiction or a charge upon its general credit or against its
taxing power.
1995 Wis. Act. § 51 (creating
§ 229.74(7)) provides for a moral obligation pledge in which the legislature
"expresses its expectation and aspiration that, if ever called upon to do
so . . .," it shall make an appropriation in an amount necessary to
restore the special debt service reserve fund to an amount equal to the special
debt reserve fund requirement. This
court has recognized that such a pledge creates no enforceable claim: "The term `moral obligations' recognizes
the absence of any legally enforceable claim.
It is generally held that the state is not compelled to recognize moral
obligations, but it is free, through appropriate legislation, to satisfy that
which it recognizes as its moral debt."
Nusbaum, 59 Wis. 2d at 430.
In Nusbaum, the court
upheld a law challenged under Wis. Const. art. VIII, § 3, saying:
The
express negation of the Authority's power to incur debt on behalf of the state
or to pledge the state's credit protects the enactment from the alleged
violation of sec. 3, art. VIII, Wis. Const.
There is no violation of such constitutional provision unless the giving
of credit results in a legally enforceable obligation against the state.
Id. at 432.
This reasoning applies with
equal force to the Stadium Act. The
"moral obligation" in the Stadium Act does not create state debt nor
pledge state credit, it merely expresses the legislature's intention that if
ever called upon to do so, it will make appropriations to further the purposes
and objectives of the legislation being challenged.
We conclude that because the
District and state are not legally identical, and because the "moral
obligation" pledge is not legally enforceable, the Libertarian Party's
claim that the Stadium Act violates Wis. Const. art. VIII, § 3 must fail.
CONCLUSION
The purpose of the Stadium
Act is to promote the welfare and prosperity of this state by maintaining and
increasing the career and job opportunities of its citizens and by protecting
and enhancing the tax base on which state and local governments depend upon. It is clear that the community as a whole
will benefit from the expenditures of these public funds. Creation of new jobs is of vital importance
to the State of Wisconsin and economic development is a proper function of our
government.
Therefore, after considering
all of the arguments appropriately raised and presented by the Libertarian
Party in their briefs and in oral argument, we conclude that such arguments are
without merit. The legislature has
carefully crafted the Stadium Act to conform to the law of this state. Accordingly, we declare 1995 Wisconsin Act
56 to be constitutional and deny the Libertarian Party's request for injunctive
relief.
By the Court—Rights declared.
SHIRLEY S. ABRAHAMSON, J., did not participate.
SUPREME
COURT OF WISCONSIN
Case No.: 95-3114-OA
Complete Title
of Case: Libertarian Party of Wisconsin, Libertarian
Party
of Metropolitan Milwaukee, Fritz Beck, Robert
Collison, Bryan Harwood, Richard Luedtke, Jeffrey H.
Marker, Todd M. Mascaretti, Barbara Pokrandt, Cory
Schultka and James Varley,
Petitioners.
v.
State
of Wisconsin, Tommy G. Thompson, Governor,
James R. Klauser, Secretary of Administration,
Mark D. Bugher, Secretary of Revenue, Fritz Ruf,
Executive Director, Wisconsin Housing and Economic
Development Authority, F. Thomas Ament, County
Executive, County of Milwaukee, John O. Norquist,
Mayor, City of Milwaukee, Southeast Wisconsin
Professional Baseball Park District, A Special
District Created Under Section 229.66, Stats.,
Robert Trunzo, Chairperson of the Board of that
District, Steve Agostini, Lorraine Blaubach,
Frank Busalacchi, Frederick Gierach, Elaine Kraut,
Mickey Lehman, Craig Leipold, Karen Makoutz,
Ulice Payne, Jr., Douglas Stansil, Members of the
Board of that District and Milwaukee Brewers
Baseball Club, a Wisconsin Limited Partnership,
Respondents.
______________________________________________
ORIGINAL ACTION
Opinion Filed: April 9, 1996
Submitted on Briefs:
Oral Argument: January
11, 1996
Source of APPEAL
COURT:
COUNTY:
JUDGE:
JUSTICES:
Concurred:
Dissented:
Not Participating: ABRAHAMSON,
J., did not participate
95-3114-OA Libertarian Party v. Governor Tommy
Thompson
ATTORNEYS: For the Petitioners there were briefs by Gaar
W. Steiner, Douglas H. Bartley, Patricia S. Matusiak and Steiner &
Schoenfeld, Milwaukee and oral argument by Douglas H. Bartley.
For the
respondents there was a joint brief by F. Thomas Creeron, III, assistant
attorney general and James E. Doyle, attorney general; James T.
McClutchy, Jr., deputy corporation counsel and Robert G. Ott, corporation
counsel; Patrick B. McDonnell, special deputy city attorney and Grant
F. Langley, Milwaukee city attorney; Jon P. Axelrod, William E.
McCardell, Joseph A. Ranney and DeWitt Ross & Stevens, S.C.,
Madison; and Thomas L. Shriner, Jr., Richard M. Esenberg and Foley
& Lardner, Milwaukee and oral argument by F. Thomas Creeron, III
and Jon P. Axelrod.
[2] We will refer to the Southeast Wisconsin Professional Baseball District as "the District" throughout the remaining text of the opinion.
[3] The
Libertarian Party subsequently filed a brief that was 111 pages long. In addition to exceeding the 50-page
limitation specified in Wis. Stat. § 809.19(8), that brief and appendix failed
to comply with other appellate rule requirements. As a consequence, on December 12, 1995, this court issued an
order directing that the Libertarian Party file a new brief and appendix fully
complying with all the requirements.
In response to this order, the Libertarian Party filed a purported "Notice of Dismissal" asserting that they dismissed the case pursuant to Wis. Stat. § 805.04. This court rejected the notice of dismissal. Subsequently, the Libertarian Party submitted what they denominated as a "special appearance" brief.
[4] Wisconsin Const. art. IV, § 31 entitled "Special and Private Laws Prohibited" prohibits the legislature from enacting special or private laws in nine different classes of situations. Subsection 6 prohibits such laws for "assessment or collection of taxes." While § 31 provides substantive prohibitions, its companion section, § 32, provides the methods by which laws in the nine subject areas enumerated in § 31 may be passed, i.e., any legislative enactments must be "general laws" and operate uniformly throughout the state. See City of Brookfield v. Milwaukee Metropolitan Sewerage District, 144 Wis. 2d 896, 905, 426 N.W.2d 591 (1988).
[5] In every case considering the issue except two--Brandes v. Deerfield Beach, 186 So. 2d 6 (Fla. 1966), and In Re Opinion of Justices, 250 N.E.2d 547 (Mass. 1969), it has been held that the acquisition or construction of a stadium to be used in part by one or more professional sports teams constitutes a public purpose for which public expenditures could be legally undertaken. See City of Los Angeles v. Superior Court, 333 P.2d 745 (Ca. 1959); Ginsberg v. Denver, 436 P.2d 685 (Co. 1968); Alan v. County of Wayne, 200 N.W. 2d 628 (Mich. 1972); Bazell v. Cincinnati, 233 N.E.2d 864, cert. denied and appeal dismissed, 391 U.S. 601 (1968); Meyer v. Cleveland, 171 N.E. 606 (Ohio 1930); Martin v. Philadelphia, 215 A.2d 894 (Pa. 1966).