City of Fairbanks. v. Fairbanks Convention & Visitors Bureau
(10/11/91), 818 P 2d 1153
Notice: This is subject to formal correction before publication in
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THE
SUPREME COURT OF THE STATE OF ALASKA
CITY OF
FAIRBANKS,
Appellant,
v.
FAIRBANKS
CONVENTION
AND VISITORS BUREAU,
an Alaskan Non-Profit Corporation
Appellee. |
Supreme Court No. S-3663
4FA-89-1478 Civil
O P I N I O
N
[No. 3760 - October 11, 1991] |
Appeal from the Superior Court of the State of Alaska, Fourth
Judicial District, Fairbanks
Mary E. Greene, Judge.
Appearances:
Herbert P. Kuss, City Attorney, Fairbanks, for Appellant. James D.
DeWitt, Guess & Rudd, Fairbanks, for Appellee.
Before: Matthews,
Chief Justice, Rabinowitz, Burke, Compton and Moore, Justices.
COMPTON, Justice.
In 1979 the City of Fairbanks (city) enacted a
motel and hotel tax (bed tax) as part of its municipal code.1 Up to
seventy percent of the revenues from this tax supports the Fairbanks
Convention and Visitors Bureau (FCVB). In 1989 the city certified
for inclusion on the general election ballot a voter initiative to
create a new arrangement for allocating the bed tax revenues. FCVB
sought declaratory and injunctive relief against the initiative in
superior court, and was granted a preliminary injunction barring the
initiative from appearing on the ballot. The court then declared the
proposed initiative unconstitutional, concluding it repealed an
appropriation, and issued a permanent injunction. The city appeals.
We reverse.
I. FACTUAL AND PROCEDURAL BACKGROUND
Under Fairbanks
General Code Ordinance (FGCO) 5.402 (1988),2 up to seventy percent
of the revenues from the city's bed tax go to the FCVB unless the
city council votes otherwise. There is no evidence in the record of
any occasion when the council has voted to give the FCVB less than
seventy percent. The FCVB received approximately $750,000 from the
bed tax during 1989; this was about eighty-five percent of its total
budget.
In the summer of 1989 the Interior Taxpayers Association
(ITA), a citizens' group, proposed an initiative for the October 3rd
general election ballot. The proposed initiative would substantially
change FGCO 5.402.3 It would expand the purposes for which bed tax
revenues can be used, not limiting funding to tourist and
entertainment activities. In addition, it would delete the maximum
percentage level of funding specified for FCVB and other groups,
leaving FCVB to compete for tax revenues. FCVB would no longer
automatically receive a particular share, or any share at all.4 As
the superior court noted, "[t]he current Section 5.402 operates
to tie the City Council's hands in the spending of revenue generated
from the hotel/motel bed tax and earmarks funds for specific
purposes. The initiative would remove almost all of those
restrictions." Fairbanks Convention & Visitors Bureau v.
Roberson, No. 4FA-89- 1478 Civ., mem. decision and order at 6
(Alaska Super. Sept. 18, 1989). On August 29, 1989, the city clerk
certified the initiative for placement on the ballot.
FCVB filed
suit on September 1, seeking declaratory and injunctive relief. FCVB
argued that the initiative was an unconstitutional attempt to
appropriate money, dedicate tax revenues to a specific purpose, and
repeal an existing appropriation. The city responded that the
initiative did not make or repeal an appropriation, or dedicate
funds. Alternatively, the city argued that if the court determined
that the initiative dedicated funds unconstitutionally, the court
could cure the initiative by severing any unconstitutional portions.
The court concluded that the proposed initiative repealed an
existing appropriation. It did not reach the other issues. It
granted FCVB's motion for summary judgment and issued a permanent
injunction.
There are no genuine issues of material fact in this
case. The parties do not dispute that the Fairbanks City Council has
the power to enact a municipal ordinance identical to the proposed
initiative. This appeal is not about whether the city council could
do what the initiative petition seeks; rather, the issue is whether
this goal can be attained through an initiative.
II. DISCUSSION
The
usual rule applied by this court is to construe voter initiatives
broadly so as to preserve them whenever possible. Thomas v. Bailey,
595 P.2d 1, 3 (Alaska 1979). However, initiatives touching upon the
allocation of public revenues and assets require careful
consideration because the constitutional right of direct legislation
is limited by the Alaska Constitution. Article XI, section 7 of the
Alaska Constitution states in part:
The initiative shall not be used
to dedicate revenues, make or repeal appropriations, create courts,
define the jurisdiction of courts or prescribe their rules or enact
local or special legislation.
The City of Fairbanks is a home-rule
municipality, and the initiative limitation has been extended by
statute to home-rule municipalities. AS 29.10.030(c).5 Therefore,
the proposed initiative is illegal if it makes or repeals an
appropriation or dedicates funds.
By its own language, the
initiative repeals FGCO 5.402.6 Therefore, to decide whether the
initiative violates the Alaska Constitution, we must first determine
whether FGCO 5.402 is an appropriation. The superior court concluded
that FGCO 5.402 is an appropriation, and that the proposed
initiative is an unconstitutional attempt to repeal this
appropriation. We disagree, for reasons hereafter stated.
Since we
conclude that the initiative does not repeal an appropriation, we
must consider whether it makes an appropriation or dedicates funds.
These issues were not considered by the superior court but have been
raised by FCVB as alternative grounds for affirming the judgment.
This is procedurally proper as, "[t]his court may affirm a
judgment of the superior court on different grounds than those
advanced by the superior court and even on grounds not raised by the
parties in the superior court." Sisters of Providence v.
Municipality of Anchorage, 672 P.2d 446, 448 n.2 (Alaska 1983). On
questions of law, we "adopt the rule of law that is most
persuasive in light of precedent, reason, and policy." Guin v.
Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979). We conclude that the
initiative neither makes an appropriation nor dedicates funds.
A.
Does the initiative repeal an appropriation?
Our prior cases
defining "appropriation" in the context of article XI,
section 7 have concentrated on the two parallel purposes for
preventing the making of appropriations through the initiative
process. First, initiatives should not be "used to enact
give-away programs, which have an inherent popular appeal, that
would endanger the state treasury." Thomas v. Bailey, 595 P.2d
1, 7 (Alaska 1979). This is because "[i]nitiatives for the
purpose of requiring appropriations were thought to pose a special
danger of 'rash, discriminatory, and irresponsible acts.'" Id.
(quoting V. Fischer, Alaska's Constitutional Convention 80-81
(1975)). The second "reason for prohibiting appropriations by
initiative is to ensure that the legislature, and only the
legislature, retains control over the allocation of state assets
among competing needs." McAlpine v. Univ. of Alaska, 762 P.2d
81, 88 (Alaska 1988).
In the context of an initiative that would
repeal an appropriation, only the second of these purposes --
retention of control of the appropriation process in the legislative
body -- is relevant. We have ruled on a number of cases involving
initiatives which arguably made appropriations. In those cases we
construed the term "appropriations" broadly so that the
intent of our constitutional framers in prohibiting appropriations
by initiative would be fully met. Thus, in Thomas v. Bailey, 595
P.2d 1, 7 (Alaska 1979), we extended the definition of appropriation
to include transfers of non-monetary assets such as land. In Alaska
Conservative Political Action Committee v. Municipality of
Anchorage, 745 P.2d 936, 938 (Alaska 1987), we held that an
appropriation need not involve public revenues if it compelled
transfer of a government asset. Most recently, in McAlpine v.
University of Alaska, 762 P.2d 81, 89 (Alaska 1988), we concluded
that the prohibition against appropriations by initiative applied to
initiatives which "simply designate[d] the use of assets."
In a broad sense, FGCO 5.402 is arguably an appropri ation because
it designates bed tax revenues for the purpose of tourist and
entertainment facilities and other economic development.
However,
the purposes of the constitution are not met by construing the term
"appropriations" broadly in the context of an initiative
which arguably repeals an appropriation. The purpose of the
prohibition on repeal of appropriations by initiative is to ensure
that the legislative body remains in control of and responsible for
the budget. A broad construction of "appropriations" is
not necessary to accomplish this purpose. Repealing a particular law
that is an appropriation in a broad sense, because, for example, it
permanently designates assets for a special purpose, does not
disempower the legislative body from making annual spending
decisions. It follows that the general rule that the initiative
power will be construed broadly should control in the repeal
context, and result in a more narrow construction of the term
"appropriations." In our view, in the context of the
prohibition on repealing "appropriations," the term should
be used in the same sense as the legislature has used it in the
municipal code, AS 29.35.100, that is as an act which accompanies
the approval of the annual budget or is supplemental to that act:
The governing body shall establish the manner for the preparation
and submission of the budget and capital program. After a public
hearing, the governing body may approve the budget with or without
amendments and shall appropriate the money required for the approved
budget. (b) The governing body may make supplemental and emergency
appropri ations. Payment may not be authorized or made and an
obligation may not be incurred except in accordance with
appropriations.
FGCO 5.402 is not an appropriation in the sense of
the term used in AS 29.35.100 because it does not reflect an action
taken by the governing body after annual approval of the budget, nor
can it be construed in any sense to be a supplemental or emergency
act of the governing body.
B. Does the initiative itself make an
appropriation?
The FCVB argues that even if the initiative does not
repeal an existing appropriation in FGCO 5.402, it itself makes an
appropriation. It claims that the setting aside of bed tax revenues
for deposit in a city council discretionary fund meets the
"classic definition" of appropriation, comparing this use
of funds to the attempt to convey state property to a new community
college in McAlpine and the attempt to convey state utilities in
ACPAC. The city, on the other hand, argues that the initiative would
not allocate funds specifically any more than the present FGCO 5.402
does, but rather broadens the city council's authority to
appropriate bed tax funds.
We find the city's argument persuasive.
Applying the same test to the initiative as we did to the existing
ordinance, we must ask whether the initiative would set aside a
certain specified amount of money or property for a specific purpose
or object in such a manner that is executable, mandatory, and
reasonably definite with no further legislative action. The
initiative does not meet these requirements.
Under the terms of the
initiative, any public or private organization or any person can
apply to the city council for funding from the discretionary fund
for a particular fiscal year. These applications are to be reviewed
by a committee appointed by the mayor with council concurrence, and
then voted on by the council before any funds are distributed. The
initiative specifies no sums that must be distributed, no specific
purpose that must be funded, and no mandatory process that must be
followed.
A reference to the dual purposes behind the prohibition of
initiatives which make appropriations is instructive. First, the
initiative is not a give-away program. No particular group or person
or entity is targeted to receive state money or property, nor is
there any indication that by passing this initiative, the voters
would be voting themselves money. Second, this initiative does not
reduce the council's control over the appropriations process.
Instead, the initiative allows the council greater discretion in
appropriating funds than does the current law. It is axiomatic that
if FGCO 5.402 does not make an appropriation, then the initiative,
which affords greater legislative discretion and is not a give-away
program, cannot make an appropriation.
C. Does the initiative
dedicate revenues?
The city concedes that FGCO 5.402 as currently
written is a dedicated fund.7 The question is whether the
initiative, which would repeal and reenact that ordinance, itself
dedicates revenues. We have not had occasion to review the clause in
article IX, section 7 of the Alaska Constitution prohibiting
initiatives which dedicate revenues. However, we have reviewed a
similar provision in article IX, section 7, which prohibits the
dedication of the proceeds of any state tax or license to any
special purpose. Because the language of these two provisions is
similar, we adopt a similar analysis of the meaning of each
provision and the purposes behind them.
This court has considered
the meaning of dedicated revenues only once before. In State v.
Alex, 646 P.2d 203 (Alaska 1982), we held that a mandatory tax on
the sale of salmon, the proceeds of which were to be allocated to
regional associations for enhancement of salmon production, was an
unconstitutional dedication of revenues. In reaching that
conclusion, we relied on the fact that the allocation of revenues to
the regional associations was mandatory, leaving no discretion to
the legislature to spend the money in any other way. We also noted
that other provisions of the statute entitled the regional
associations to rely on the receipt of the salmon tax funds as
collateral for state loans or as evidence of their ability to
establish sufficient equity in their hatcheries. As we said, "[t]hese
provisions are nonsensical if the assessments are not earmarked in
some way so that the association has a `right' to them." Alex,
646 P.2d at 208.
The questioned initiative would not create any
similar "right" for any person or group. It would not
earmark any funds for any particular organizations. Nor does it
create any mandatory expenditures. In the context of the current
law, it actually broadens, rather than limits, the council's
discretion to spend money for the benefit of the city. FCVB
nevertheless argues that the initiative would require the dedication
of revenues to a specific purpose. We disagree. The initiative's
statement of purpose cannot be characterized as a dedication.
Indeed, the phrase used in the initiative, "for the purpose of
funding city facilities and services for the general public,"
is so broad as to include any city expenditures.
Analysis of the
purposes behind the prohibition of dedicated revenues confirms our
conclusion. In Alex, 646 P.2d at 209-10, we cited the Alaska
Statehood Commission's studies on dedicated revenues as the
motivation for the inclusion of article IX, section 7 in the Alaska
Constitution:
Even those persons or interests who seek the
dedication of revenues for their own projects will admit that the
earmarking of taxes or fees for other interests is a fiscal evil.
But if allocation is permitted for one interest the denial of it to
another is difficult, and the more special funds are set up the more
difficult it becomes to deny other requests until the point is
reached where neither the governor nor the legislature has any real
control over the finances of the state.
3. Alaska Statehood
Commission, Constitutional Studies pt. IX, at 111 (1955). Thus the
two main motivations behind the ban on dedicated revenues were to
maintain the potential of flexibility in budgeting and to ensure
that the legislature did not abdicate responsibility for the budget.
In the initiative context, only the former motivation is relevant.
The initiative in this case does not infringe on flexibility in the
budget process. Indeed, it removes existing restraints on the city
council's flexibility. Under the current law, the city council is
encouraged, if not obligated, to appropriate certain percentages of
the city's bed tax revenues to certain groups. In addition, all
appropriations of bed tax revenues must be "for the purpose of
and shall be limited to the funding of tourist and entertainment
facilities." The initiative eliminates each of these
dedications. Under the initiative, bed tax revenues could be used to
fund any city facility or service, not just tourist and
entertainment facilities, and there is no organization
"entitled" to receive funds simply upon approval of its
budget. By no means would the initiative restrict the power of the
city council in distributing the bed tax revenues. The initiative
might be better described as an "undedication" than a
dedication.
III. CONCLUSION
For the above reasons, we hold that the
initiative is constitutional, and should be placed on the ballot.
The decision of the superior court granting summary judgment for
FCVB and a permanent injunction against the initiative is REVERSED
and the case REMANDED with directions to enter judgment on behalf of
the city and to dismiss FCVB's complaint.
_______________________________
1Fairbanks General Code Ordinance (FGCO)
5.401 (1979). 2FGCO 5.402 states:
(a) The tax on the daily rental of
hotel and motel rooms levied by this article is for the purpose of
and shall be limited to the funding of tourist and entertainment
facilities for the general public and to promote the tourist
industry and other economic development of the city. It is
recognized that various public and private businesses and
organizations in the community, including but not limited to the
chamber of commerce, the Fairbanks Convention and Visitors Bureau
and other bureaus, organizations and commissions organized and
existing for these same purposes, may be areawide in scope and the
promotion and economic development of the greater Fairbanks area,
whether within or without the corporate limits of the city, has a
direct and major impact on the city itself.
(b) Revenues collected
under this article in the (12) month period ending October 31st of
the calendar year shall be available for appropriation for the next
calendar year as follows:
(1) Ten percent (10%) for the funding of
the Fairbanks Industrial Development Corporation;
(2) Seventy
percent (70%) for the funding of the Fairbanks Convention and
Visitors Bureau;
(3) Fifteen percent (15%) for the discretionary
funding of proposals which clearly demonstrate a direct relationship
to the purposes and objectives set forth in this section; three
percent (3%) of this amount shall be dedicated to the funding of
beautification and littering projects;
(4) Five percent (5%) for
forward funding of this tax account;
(5) All residual funds shall be
made available for the council's discretionary funding.
(6) Any and
all overhead costs relating to auditing and tax collection, as
determined by the finance department, shall be subtracted from the
gross amount of tax collected before disbursement as provided above.
(c) The Fairbanks Industrial Development Corporation and the
Fairbanks Convention and Visitors Bureau shall submit their annual
and maximum operating budget to the council for approval no later
than October 31st of the current calendar year. The council shall
review these budgets no later than December 1st of the current
calendar year and, if approved, may appropriate revenues in
accordance with the scheduled and maximum percentages. In the event
the council fails to review these budgets by December 1st, the
budgets shall be deemed approved and the scheduled percentages shall
be appropriated to them.
In addition, in their budget submissions
the Fairbanks Industrial Development Corporation and the Fairbanks
Convention and Visitors Bureau shall provide the council with a
financial statement including both income and expenditures for the
current calendar year.
(d) Any organization, public or private, or
any person may submit an application and proposal, if any, to the
council prior to October 31st of the current calendar year which
seeks funding from the capital project fund or the discretionary
fund. The council shall establish the criteria for selection and
publish the same no later than August 1st of the current calendar
year. A committee shall be appointed by the mayor to review
proposals and make recommendations to the council. Two (2) members
of the visitor industry (Fairbanks Convention and Visitors Bureau or
Alaska Visitors Association) shall sit on this committee. Nothing in
this subsection shall require the council to fund any proposal.
3. The
ITA - sponsored initiative provides:
Shall FGCO sec. 5.402 which
limits the use of the hotel/motel tax . . . be repealed and
reenacted as follows: Sec. 5.402. Purpose and limitation.
(a) The
tax on the daily rental of hotel and motel rooms levied by this
article is for the purpose of funding city facilities and services
for the general public and to promote the tourist industry and other
economic development of the city.
(b) Any organization, public or
private, or any person may submit an application and proposal, if
any, to the council no later than two (2) months prior to the
expiration of the current fiscal year which seeks funding from the
discretionary fund for the following fiscal year. The council shall
establish standards and criteria for selection and publish the same
for a reasonable period before the applications are to be submitted.
A committee shall be appointed by the mayor with council concurrence
to review the proposals and make recommendations to the council.
4. The initiative may also affect what organizations can obtain the
revenues. Under the existing ordinance, tourist organizations and
other organizations which promote economic development in Fairbanks
but operate outside the corporate limits of the city can be funded
from bed tax revenues. The proposed initiative is silent on whether
such organizations could be funded, but the deletion of the language
in the first paragraph of the existing ordinance indicates that the
proponents of the initiative intend to change the way organizations
operating outside the city limits are to be treated.
5. AS
29.10.030(c) reads: "A charter may not permit the initiative
and referendum to be used for a purpose prohibited by art. XI, sec.
7 of the state constitution."
6. The city argues that even if the
ordinance is an appropriation, the initiative merely amends it and
does not repeal it, despite its use of the term "repeal and
reenactment." Amending an appropriation through an initiative,
the city argues, is not unconstitutional.
We do not find this
argument persuasive. The language of the initiative includes the
word "repeal," not "amend," and this language
determines the intent of the initiative. A comparison of the
ordinance and the initiative section by section demonstrates that
the initiative effectively replaces most of the existing ordinance.
As this court has noted previously, "[a]n amendment of an act
operates as a repeal of its provisions to the extent that they are
materially changed by, and rendered repugnant to, the amendatory
act." Warren v. Thomas, 568 P.2d 400, 402 (Alaska 1977)
(quoting Meyers v. Bd. of Supervisors, 243 P.2d 38, 42 (Cal. App.
1952)). It would be unreasonable to consider the initiative to be a
continuation of the existing ordinance when it so completely
emasculates that ordinance.
7. We note that neither party addressed
the issue of whether the ordinance itself violates article IX,
section 7 of the Alaska Constitution, prohibiting dedicated
revenues. Our decision today should not be read as expressing any
opinion on that question.
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