Common Cause v. State

• Citation: 455 A.2d 1
• Court: Supreme Judicial Court of Maine (US)
• Decision Date: 07 January 1983
• Parties: COMMON CAUSE et al. * v. STATE of Maine et al. **

Page 1

455 A.2d 1

COMMON CAUSE et al. ^* v. STATE of Maine et al. ^**

Supreme Judicial Court of Maine.

Argued Sept. 21, 1982.

Decided Jan. 7, 1983.

Joseph Steinberger (orally), Augusta, for plaintiffs.

Orlando E. Delogu (orally), University of Maine School of Law, pro se.

James E. Tierney, Atty. Gen., Rufus E. Brown, Deputy Atty. Gen. (orally), Paul Stern, Robert Frank, Asst. Attys. Gen., Augusta for State of Maine, David Lourie, Corp. Counsel, City of Portland (orally), Bernstein, Shur, Sawyer & Nelson, John M.R. Paterson (orally), Leonard M. Nelson, Linda A. Monica, Andrew J. Bernstein, Portland, for Bath Iron Works; Wilkie, Farr and Gallagher, New York City, of counsel.

Before GODFREY, NICHOLS, ROBERTS, CARTER, VIOLETTE and WATHEN, JJ., and DUFRESNE, A.R.J.

GODFREY, Justice.

Early in 1981, Bath Iron Works Corporation (BIW), a subsidiary of Congoleum Corporation, was negotiating with officials of the city of Boston to lease parts of the Boston Navy Yard. BIW wanted to expand its business by undertaking the repair and overhaul of large ocean-going vessels, work that could not be carried out in the confines of BIW's location on the river in Bath, Maine. The facilities at Boston, which were complete and immediately available, included a permanent dry dock capable of handling the largest ships, extensive pier, warehouse and manufacturing facilities, and living quarters for seamen from ships under repair.

Officials of the city of Portland learned of the negotiations and sought out BIW to inquire whether it would entertain a competing proposal from Portland. On obtaining a favorable response, the city solicited and obtained the state's participation in making a proposal. There followed a series of meetings of state, city and BIW officials, out of which evolved a joint proposal from the state and city to BIW under which the state and city would create in Portland harbor a comprehensive facility for ship repairs to be operated by BIW. Portland and the state had been engaged for several years in efforts to restore the vitality of the port, and the officials concerned regarded the creation of a major ship repair and overhaul facility as consistent with the already identified goals of improving the harbor, attracting more marine commerce, and, in general, redeveloping the economic potential of the Portland waterfront.

In July, 1981, officers of BIW, the state and the city executed a "Memorandum of Intent" outlining their tentative tripartite agreement for development of a dry dock facility at the Maine State Pier in Portland. On August 1, 1981, they entered into a further set of related agreements: namely, a "Comprehensive Commitment," a dry dock lease, and a pier lease--all contingent on approval by the Legislature and Maine electorate of the state's commitment to the project, by the city council and electorate of Portland for the participation of the city, and by the boards of directors of BIW and Congoleum Corporation.

In broad outline, the Memorandum of Intent called for the following acts to be done: (1) the state was to obtain title to a large floating dry dock meeting certain specifications. It was expected that the acquisition would be effected by a gratuitous transfer from the federal government to the state of Maine of such a dry dock, an "AFDB-3", having an adjusted capacity of 81,000 tons. ¹ (2) The state was to transfer its title in the Maine State Pier to the city of Portland for $4.6 million dollars. (3) The state and BIW were to share the cost of acquiring and rehabilitating the floating dry dock, the first $9 million dollars of that cost to be borne equally by BIW and the state, the next $15.1 million to be borne by the state alone, using for this purpose the $4.6 million paid by the city for the pier. All costs of rehabilitating the dry dock in excess of $24.1 million dollars were to be borne by BIW. (4) The state was to provide an additional $.5 million dollars to defray miscellaneous costs in initial planning, acquisition of land and issuance of bonds. (5) The state of Maine was to retain title to the dry dock, which was to be leased to BIW for 20 years, with an option in BIW to purchase it under certain conditions. No dollar amount of rent for the dock was provided for. (6) BIW was to install equipment and operate the dry dock at its own expense in accordance with the agreement, subject to United States Navy regulations. (7) The city was to acquire certain land adjacent to the pier property and lease it, with the pier itself, to BIW for stated amounts of annual rent, funding the improvement of the pier and adjacent submerged lands and shoreland with the $10.4 million remaining after purchase of the pier. (8) The city was to improve and lease to BIW the city hospital to provide suitable dormitory quarters for the berthing of seamen, the rental to be determined according to actual use by crew members. (9) The state's costs under the project, aside from $.5 million for start-up costs and the $4.6 million received from the city for transfer of the pier, were to be met by the issuance of general obligation bonds of the state; the city's costs were to be met by issuance of general obligation bonds of the city of Portland.

The Governor called a special session of the Legislature for August 3, 1981, to consider legislation authorizing the issuance of bonds to implement the state's participation. Before the special session, the state provided each member of the Legislature with explanatory materials, describing the project and appending a copy of the Memorandum of Intent.

The Governor proposed that, instead of enacting a wholly new and separate bond authorization, the Legislature amend an already existing authorization for an economic development bond issue enacted by 1981 Private and Special Laws, chapter 65, which had been scheduled for referendum in November. Chapter 65 authorized a referendum on bond issues for a central feed grain terminal, central potato packing facilities, cargo piers and airports in the total amount of $28 million dollars, $10 million of which was intended to be used to construct a cargo pier in Portland. The proposed amendment to carry out the Portland project provided for adding $5 million dollars in bonding authority, for a total of $33 million, and included among the authorized economic development projects "port facilities", defined by the amendment to include, among other things, dry docks and ship repair facilities. The proposal was discussed in public hearings before the transportation committee of the Legislature and reported favorably by that committee. After debate in both houses, the amendment was passed as 1981 Private and Special Laws, chapter 75, and the question of the issuance of $33 million dollars' worth of economic development bonds was put to referendum pursuant to article IX, section 14 of the Maine Constitution.

After the Legislature enacted authorization for the bond issue, the project and the desirability of issuing general obligation bonds to aid in carrying it out were the subject of debate in the newspapers and on television and radio, including a televised debate by the counsel for Common Cause and the president of BIW. On November 3, 1981, the bond issues were approved by the voters of the state and city.

On January 18, 1982, the parties entered into agreements in final form: a dry dock operating agreement between the state and BIW; a sale and purchase agreement between the city and the state concerning the Maine State Pier; a lease of the Maine State Pier from the city to BIW; and a "Comprehensive Commitment." The financing provisions of the January, 1982, agreements resemble closely those described in the July, 1981, Memorandum of Intent and the August, 1981, Comprehensive Commitment. ² In addition, BIW agrees to invest working capital, to buy all necessary capital equipment to operate the dock, to waive any state-jobs credit it might become entitled to on its state income tax arising from its investment in completing the dry dock, and to pay the operating costs of the dry dock until the agreement terminates, including utilities, taxes, maintenance, repair, and insurance.

BIW has the exclusive right to use the dry dock for up to forty years, without rent and without obligation to repay any of the money spent by the state for renovation of the dock. Although it has no general option to purchase, BIW has a right of first refusal for a three-year period after the forty-year term, whereby it may acquire the dry dock for $1,667,000 if the state decides to sell the dry dock during that period. BIW has the right to terminate the agreement at the end of certain years, beginning as early as 1986, upon at least thirty days' notice to the state. If BIW so terminates, it must pay maintenance costs for the six months following the termination. The state may terminate the agreement without cause at stated times beginning as early as 2006, upon six months' notice to BIW. If the state so terminates, BIW has a 90-day option to purchase the dry dock for $1,667,000. The agreement provides for sharing of proceeds of transfer of the dock by the state in the event of expiration or termination of the agreement under certain conditions. The agreement provides for audit of BIW's expenditures in renovating the dock and contains remedies for the state and city in the event of default by BIW in its performance under the dock agreement or the pier lease.

The dry dock has an estimated current salvage value of about $875,000. Yearly maintenance costs are projected roughly at $720,000. It has a useful life of between forty and fifty years, and perhaps longer if well-maintained. At the end of forty years, the dry dock, if well-maintained and modernized, will be worth between five percent and thirty percent of its value after renovation in accordance with the terms of the agreements.

On April 19, 1982, the plaintiffs began this action in Superior Court, ...