Neuner v. City of St. Louis, ED 105125

• Citation: 536 S.W.3d 750
• Decision Date: 19 September 2017
• Docket Number: No. ED 105125,ED 105125
• Parties: Thomas J. NEUNER, et al., Appellants, v. CITY OF ST. LOUIS, et al., Respondents.
• Court: Missouri Court of Appeals

536 S.W.3d 750

Thomas J. NEUNER, et al., Appellants,
v.
CITY OF ST. LOUIS, et al., Respondents.

No. ED 105125

Missouri Court of Appeals, Eastern District, DIVISION TWO.

Filed: September 19, 2017
Motion for Rehearing and/or Transfer to Supreme Court Denied November 13, 2017
Application for Transfer Denied January 23, 2018

W. Bevis Schock, Hugh A. Eastwood, Clayton, MO, for appellant.

David H. Luce, Clayton, MO, Mark E. Lawson, St. Louis, MO, for respondent.

Philip M. Hess, Judge

536 S.W.3d 756

Introduction

This case is about the constitutionality of three City of St. Louis ordinances: Ordinance 60737 imposes a payroll tax on employers in the City and Ordinances 68432 and 68642 authorized the City to sign "cooperation agreements" with two employers to reimburse their costs in redeveloping their City offices and relocating approximately 380 employees from outside of the City to those offices. Thomas J. Neuner and General Marine Services, Inc. (collectively "Appellants") filed a petition for declaratory judgment against the City and the City's Collector of Revenue (collectively the "City") challenging the constitutionality of the payroll tax and the ordinances authorizing reimbursement. The trial court found them constitutional.

On appeal, Appellants raise two points. In point I, Appellants contend the trial court erred in finding the City's payroll tax constitutional because the City may only assess taxes authorized by the general assembly and the payroll tax is not authorized by the general assembly. In point II, Appellants assert the trial court erred in upholding the ordinances authorizing the "cooperation agreements" because: (1) the ordinances serve a private and not a public purpose in violation of Article X, Section 3 and Article VI, Section 25;¹ (2) the ordinances are "special laws" lacking open-ended classifications in violation of Article III, Section 40(30); (3) the ordinances are not uniform among all taxpayers in the class of "for-profit businesses" in violation of Article X, Section 3; and (4) the ordinances violate the prohibition on refunding tax receipts to taxpayers in violation of Article III, Section 40(7). We affirm.

Facts and Procedural History

In 1988, the City enacted Ordinance 60737, now codified in Title V, Chapter 5.23 of the St. Louis City Revised Code (the "Payroll Tax Ordinance"). The Payroll Tax Ordinance imposes a one-half of one percent tax on employers who perform work or render services in whole or in part within the City based on the employers' "payroll expense" which generally means the total compensation earned by the employers' employees. The payroll tax is separate from the one percent "earnings tax" the City imposes on the salaries, wages, commissions, and other compensation of people who live or work in the City and on the net profits of businesses conducted in the City or by City residents.

In 2009 and 2010, the City enacted Ordinances 68432 and 68642 that authorized the City to sign "cooperation agreements" with Wellpoint Companies, Inc. ("Wellpoint") and Polsinelli Shughart, PC ("Polsinelli"). Ordinance 68432 provided that Wellpoint would redevelop a commercial building at 1831 Chestnut which was substandard and obsolete, and would hurt the tax base in the City if left in its condition. Wellpoint agreed to spend between $2.7 and $4.5 million on improvements to 1831 Chestnut and on expenses associated with the relocation of approximately 300 employees from outside of the City to 1831 Chestnut. In return, the City agreed, subject to annual appropriation, to use certain tax revenues set forth in the cooperation agreement between the City and Wellpoint for implementing the project.

536 S.W.3d 757

The cooperation agreement established an account for Wellpoint to be held by the City designated and named the "Earnings and Payroll Tax Reimbursement Account—1831 Chestnut Development, St. Louis Missouri." The City agreed to deposit "an amount equal to fifty percent" of the "Incremental Increase" when received by the City. "Incremental Increase" was defined to mean the combined amount of Wellpoint's earnings and payroll tax for the tax year in excess of a combined base tax established by the payroll and earnings tax Wellpoint paid during the period October 1, 2008, through September 30, 2009.

The City agreed, subject to annual appropriation, to reimburse Wellpoint for its "project costs," which were defined to mean the costs and expenses incurred by Wellpoint in the renovation and rehabilitation of the project area and the improvements thereon, including but not limited to the costs of designing, improving, fixturing, equipping and otherwise readying the improvements in the project area for use and occupancy by Wellpoint and its affiliates and their respective employees, and moving and relocation expenses. The City is obligated to only make payments from funds budgeted and appropriated or otherwise legally available during each fiscal year. The agreement ends December 31, 2019, or when the project costs are reimbursed, whichever occurs first.

Similarly, Ordinance 68642 provided that Polsinelli would redevelop all or part of five floors of 100 South Fourth Street at a cost of between $3.2 and $3.6 million and Polsinelli would relocate approximately 80 employees to the City. The project area at 100 South Fourth Street was found to be substandard and obsolete, and if left in its condition, to hurt the tax base in the City. The cooperation agreement established an account for Polsinelli to be held by the City designated and named the "Earnings and Payroll Tax Reimbursement Account—100 South Fourth Street Development, St. Louis Missouri." The agreement provided that the City deposit "an amount equal to fifty percent" of the "Incremental Increase" when received by the City. "Incremental Increase" was defined to mean the combined amount of Polsinelli's earnings and payroll tax for the tax year over a combined adjusted base tax established by the payroll and earnings tax Polsinelli paid during the period January 1, 2009, through December 31, 2009. The City agreed, subject to annual appropriation, to reimburse Polsinelli for its "project costs," which were defined substantially similar to those in the Wellpoint agreement. Like with the Wellpoint agreement, the City is obligated to only make payments from funds budgeted and appropriated or otherwise legally available during each fiscal year. The agreement ends December 31, 2022, or when the project costs are reimbursed, whichever occurs first.

In 2016, Neuner, a resident of the City who operates a sole proprietorship in St. Louis County, and General Marine Services, Inc., a corporation in the City with five employees, filed a five-count petition against the City. The petition sought a declaratory judgment that the payroll tax and the ordinances authorizing reimbursement to Wellpoint and Polsinelli were unconstitutional and injunctive relief as to their enforcement. The City filed a counterclaim seeking a declaratory judgment finding the payroll tax and the reimbursement ordinances constitutional. On cross-motions for summary judgment, the trial court found the payroll tax and the ordinances authorizing reimbursement constitutional. This appeal follows.

Jurisdiction

In every case it is incumbent on the court to determine its jurisdiction before reaching the merits of an appeal.

536 S.W.3d 758

Alumax Foils, Inc. v. City of St. Louis , 939 S.W.2d 907, 910 (Mo. banc 1997). Article V, Section 3 of the Missouri Constitution provides that the Missouri Supreme Court shall have exclusive jurisdiction in all cases involving the construction of the revenue laws of this State, and while the Payroll Tax Ordinance is a revenue law, it is not a revenue law of this State. Accordingly, the Missouri Supreme Court does not have exclusive appellate jurisdiction to hear this case. Id. at 911. Moreover, the claims that the ordinances authorizing reimbursement to Wellpoint and Polsinelli are unconstitutional are also not within the exclusive appellate jurisdiction of the Missouri Supreme Court. Id. at 912 ("Claims that municipal ordinances are constitutionally invalid are not within the exclusive appellate jurisdiction of this Court."). Thus, we have jurisdiction over this case. Id.

Standard of Review

The propriety of summary judgment is solely an issue of law. City of DeSoto v. Nixon , 476 S.W.3d 282, 286 (Mo. banc 2016). Appellate courts review a grant of summary judgment de novo. Id. We review the record in the light most favorable to the party against whom judgment was entered. Id. Summary judgment is appropriate where the moving party has demonstrated a right to judgment as a matter of law and there are no genuine issues of material fact.² Levinson v. City of Kansas City , 43 S.W.3d 312, 316 (Mo. App. W.D. 2001).

The constitutional validity of an ordinance is a question of law reviewed de novo. City of Sullivan v. Sites , 329 S.W.3d 691, 693 (Mo. banc 2010). Ordinances are presumed to be valid and lawful. Coop. Home Care, Inc. v. City of St. Louis , 514 S.W.3d 571, 578 (Mo. banc 2017) (citing McCollum v. Dir. of Revenue , 906 S.W.2d 368, 369 (Mo. banc 1995) ). The...