DENHAM SPRINGS v. All Taxpayers

• Decision Date: 04 February 2005
• Docket Number: No. 2004-C-1674.,2004-C-1674.
• Citation: 894 So.2d 325
• Parties: DENHAM SPRINGS ECONOMIC DEVELOPMENT DISTRICT v. ALL TAXPAYERS, PROPERTY OWNERS, et al.
• Court: Louisiana Supreme Court

894 So.2d 325

DENHAM SPRINGS ECONOMIC DEVELOPMENT DISTRICT v. ALL TAXPAYERS, PROPERTY OWNERS, et al.

No. 2004-C-1674.

Supreme Court of Louisiana.

February 4, 2005.

Liskow & Lewis, Robert S. Angelico, Cheryl Mollere Kornick, New Orleans, and Kenneth Todd Wallace, counsel for appellant.

Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Fred Lee Chevalier, Harry Simms Hardin, III, New Orleans, James Conner Percy, Baton Rouge, Michael Herbert, David Matthew Kerth, Rainer, Anding & McLindon, Robert R. Rainer, Harris and Pugh, L.L.C., Denham

Springs, Jay Jones Harris, counsel for respondents.

D. Blayne Honeycutt, New Orleans, counsel for amici curiae Denham Springs Chamber of Commerce, Livingston Parish Council, and Livingston Parish Tourist Commission.

John David Allen, counsel for amici curiae Denham Springs Downtown Merchants & . . .

Richard Allen Curry, Michael H. Rubin, Andrew Jackson Harrison, Jr., Baton Rouge, counsel for amicus curiae Fa-Kouri Construction, Inc.

Carmack Morgan Blackmon, Baton Rouge, counsel for amicus curiae Livingston Economic Development counsel.

John Paul LeBlanc, counsel for amicus curiae Louisiana Association of Business & Ind.

John Andrew Gallagher, Baton Rouge, counsel for amicus curiae Louisiana Municipal Association.

Richard David Bankston, Baton Rouge, counsel for amicus curiae P and R Enterprises Partnership.

Eric L. Pittman, Denham Springs, counsel for amicus curiae Sheriff Willie Graves for Livingston Parish.

Walter Richard House, Jr., amicus curiae counsel for Louisiana Department of Economic Development.

Joshua Simon Force, Timothy Benedict Francis, James Michael Garner, New Orleans, counsel for amicus curiae World Trade Center of New Orleans, Inc.

Gary J. Elkins, Jordan Barro Monsour, Richard Louis Traina, New Orleans, counsel for amicus curiae World Trade Center Taxing District.

Kenneth Michael Carter, Soren Erik Gisleson, Russ Michael Herman, Steven J. Lane, New Orleans, counsel for amicus curiae World Trade Center Development, LP.

Angela Whitaker Adolph, Stephanie Bienveni Laborde, Baton Rouge, counsel for amicus curiae Louisiana Marine and Motorcycle Trade.

TRAYLOR, J.

The issue presented in this case is whether a taxing authority may use dedicated funds, previously dedicated to a specified purpose by a vote of the people, for a purpose other than their dedicated use, to fund a new economic development project. After a review of the record and the applicable law, we find the court of appeal erred in affirming the trial court's judgment. Accordingly, for reasons set forth herein, we reverse the judgments of the lower courts.

FACTS AND PROCEDURAL HISTORY

The underlying facts of this case concern the funding structure of a proposed project known as the Bass Pro Project ("Project"). In 2003, the Denham Springs Economic Development District ("District") was created pursuant to La. R.S. 33:9038.2 to facilitate economic growth in the area. The District, which is composed of seventy-five (75) acres of vacant property, is contained within the City of Denham Springs in Livingston Parish. The Project envisions the creation of a twenty-seven acre retail outlet, including a restaurant, related infrastructures and public improvements, and the location of a Bass Pro Shops retail outlet.

The Project is to be funded through the issuance of revenue bonds secured by the pledge of local government sales tax increments in accordance with La. R.S. 33:9038.1 et seq. After payment of the revenue bonds in full, Bass Pro Shops could have the option of purchasing the retail facility for a nominal fee.

In order to aid in the implementation of the Project, the District drafted a cooperative endeavor agreement ("Agreement") with the following parties participating: the District; the Parish of Livingston ("Parish"); the City of Denham Springs ("City"); the Law Enforcement District of the Parish of Livingston ("Law Enforcement"); the Livingston Parish School Board ("School Board"); Special Tax District No. 1 of the Parish of Livingston; the Denham Springs Economic Development Corporation; and the State of Louisiana through the Secretary of the Department of Revenue. The agreement provided that each party pledge to contribute sales tax increments toward funding the Project.

On March 25, 2004, the District filed a "Motion for Judgment," seeking validation of the bond proposal. Therein, the District alleged that it was created pursuant to La. R.S. 33:9038.2, as an economic development district authorized to collect the "sales tax increment[s]" used to secure the issuance of bonds for the financing of economic development projects. The District further alleged its intent to issue bonds amounting to approximately $50,000,000, to be used to fund the Project. The motion further provided that said bonds would be secured by the pledge of collected sales tax increments by the participating tax recipient entities listed above.

On April 8, 2004, A. Ponder Jones, a taxpayer, property owner and resident of Livingston Parish filed an answer, exceptions, and defenses to the suit, contending the proposed bond issuance was improper. Also on April 8, 2004, the School Board filed an answer requesting the trial court rule on the issue of whether the School Board could pledge sales and use tax revenues for the Project in light of La. Const. Art. VII, § 14 and whether the tax increment financing statute ("TIF") authorizes participation of school boards in "TIF" financing where school board revenues are "expressly dedicated to specific purposes."

After a hearing, the trial court rendered judgment declaring legal and valid: (1) the bonds; (2) the actions and proceedings taken and contemplated by the District in connection with the bond issuance; (3) the Act and its authorization of the Agreement; (4) the participation of the entities to the Agreements; (5) the contemplated transaction granting an option to Bass Pro Shops to purchase the Project for nominal consideration; (6) the purchase and contemplated lease of the twenty-seven acre tract; and (7) the means provided for payment of the bonds, including the pledge of sales tax revenues, lease and mortgage of the land. The trial court further declared in its judgment that all legal requirements concerning publication, notice, and receipt of the motion for judgment had been met and decreed the conclusiveness of the judgment in accordance with the Bond Validation Act, and that the judgment constituted a permanent injunction against further proceedings on the issues decided.

The Court of Appeal, First Circuit, affirmed the trial court's judgment.¹ Defendant filed an emergency writ in this Court, which was granted to review the correctness of the lower courts' rulings.²

DISCUSSION

La. R.S. 33:9038.4(A) authorizes the District to issue bonds to fund economic development projects. The District's authority is set forth in detail in the statute and provides:

A local governmental subdivision or entity authorized pursuant to this Part may issue revenue bonds payable from revenues generated by economic development projects with a pledge and dedication of up to the full amount of sales tax increments annually to be used as a guaranty of any shortfall, or at the option of the local governmental subdivision or tax recipient entity, payable directly from an irrevocable pledge and dedication of up to the full amount of sales tax increments, in an amount to be determined by the local governmental subdivision or tax recipient entity, to finance or refinance all or any part of an economic development project as described in this Section and R.S. 33:9038.6.

The proposed fifty million dollar bonds will be secured by money derived from the pledged proceeds of the tax recipient entities and the statute allows the District and the tax recipient entities to dedicate "up to the full amount of sales tax increments."³ Sales tax increments are defined in La. R.S. 33:9038.4(A)(2) as:

that portion of the designated sales tax . . . collected each year on the sale at retail, the use, the lease or rental, the consumption and storage for use or consumption of tangible personal property, and on sales of services, all as defined in R.S. 47:301 et seq., or any other appropriate provision or provisions of law as amended, and may include hotel occupancy taxes, occupancy taxes, or similar taxes, or any combination of such taxes, levied upon the use or occupancy of hotel rooms if so designated by the local governmental subdivision or tax recipient entity, from taxpayers located within an economic development district which exceeds the designated sales tax revenues and hotel occupancy taxes, occupancy taxes, or similar taxes so designated that were collected in the year immediately prior to the year in which the district was established.

The District is currently undeveloped land and is located within the Parish of Livingston, City of Denham Springs. Currently, the only tax generated within the District is property tax. As there are no retail outlets on the land, no sales tax is being generated at this time. Thus, under the formula in La. R.S. 33:9038.4(A)(2), 72.2% of all sales tax generated within the District from this Project will be considered "sales tax increments" and will be dedicated to pay the bonds pursuant to the Agreement.⁴

The testimony presented at the hearing reveals that the District's economy is depressed. The District contends that the Project will attract additional businesses and promote economic growth in the area and that this financial incentive will lure new business to the area. However, the record reflects that the actual amount of revenues proposed to be received is not yet concrete. Moreover, no analysis was presented regarding the impact of this project on similar local business, who would not be afforded the financing assistance this project is being provided. We recognize that economic development is a role which has been increasingly assumed...