Alan v. Wayne County

Citation388 Mich. 210,200 N.W.2d 628
Decision Date30 August 1972
Docket NumberNo. 10,10
Parties, 67 A.L.R.3d 1079 Marc ALAN et al., Plaintiffs, v. COUNTY OF WAYNE, and Wayne County Stadium Authority, Defendants.
CourtSupreme Court of Michigan

Page 628

200 N.W.2d 628
388 Mich. 210, 67 A.L.R.3d 1079
Marc ALAN et al., Plaintiffs,
COUNTY OF WAYNE, and Wayne County Stadium Authority, Defendants.
No. 10.
Supreme Court of Michigan.
Aug. 30, 1972.

[388 Mich. 233]

Page 638

Ronald J. Prebenda, Petroit, for plaintiffs Marc Alan and William roskelly.

B. Ward Smith, Cozadd, Shangle & Smith, Detroit, for plaintiffs, Royce Smith and the City of Belleville.

William L. Cahalan, Wayne County Pros. Atty., W. Leo Cahalan, Detroit, Aloysius J. Suchy, Corp. Counsel, County of Wayne, Lawrence O. Hinkle, Asst. Corp. Counsel, Detroit, for defendant County of Wayne.

Fred W. Freeman, Dickinson, Wright, McKean & Cudlip, Detroit, Gilbert E. Gove, Miller, Canfield, Paddock & Stone,

Page 639

Detroit, for Wayne County Stadium Authority.

Foster, Lindemer, Swift & Collins, by Theodore W. Swift, Lansing, for Michigan Education Assn., amicus curiae.

Before the Entire Bench.

WILLIAMS, Justice.

Defendant sought approval for their stadium bonds which could eventually cost the County $371,000,000 on the legal theory

That Wayne County not the Tigers will be the actual user of the new stadium 1

That Wayne County can go ahead and build the new stadium even though neither the Tigers nor any one else will ever play there 2

That Wayne County has to pay rent for the stadium for fifty years even though there was a [388 Mich. 234] 'failure to complete the stadium' or the 'destruction of any part of All of the stadium' 3

That tax bonds are called revenue bonds 4

That Wayne County can issue tax bonds without a vote of the people 5

That there is no limit as to the millage Wayne County can raise 'to provide the funds necessary to pay said annual rental in anticipation of which these bonds are issued' nor is there any limit to the amount of debt Wayne County can incur in taxing to raise such funds. 6

This Court finds these propositions to be untenable in regard to revenue bonds under Acts 31 and 94. We have been referred to no court in this country which has approved 'revenue bonds' on similar facts under similar law on the basis of such a theory. In fact, Defendants' own expert, who helped put together many other stadiums around the country, testified the financing plan here is unique in the entire country. 7 This Court is asked to hold that the County can tax without millage or debt limitations and without a vote of the people, based on a legal theory that justifies Wayne County building a stadium whether or not there [388 Mich. 235] are any paying customers to use and pay for it. This we cannot do under law.

This is another chapter in the efforts of civic and governmental leaders in pursuit of a worthy goal to avoid constitutional and statutory taxpayer protections in the form of spending and debt limitations in order to undertake new projects. The law was pushed not to, but beyond the breaking point. The Municipal Finance Commission as the agency of government created to examine the ability of local government

Page 640

to carry its financial load, for the security of the bond buyer and for the rights of the taxpayer, confused by a novel and ambiguous problem, momentarily stood up to the challenge, then gave way to the rush for what they thought desirable ends at any cost.

The confusion in this bond structure is evident throughout this case. The Stadium Authority advertised the stadium bonds to the taxpayers and public of Michigan as Revenue Bonds but advertised them to the bond buyers as bonds backed by the obligations of Wayne County to tax without limit. 8

Even the bonds themselves on the one hand read:

'Each Bond of said series is a self-liquidating revenue Bond, is not a general obligation of said Authority or of said County, and does not constitute an indebtedness of said Authority or of said County . . .' 9

But on the other hand read:

'. . . the obligation to pay said annual rental is a general obligation of the said County of Wayne which is authorized and obligated by law to levy an ad valorem [388 Mich. 236] tax on all taxable property within the said County, without limitation as to rate or amount, to provide the funds necessary to pay said annual rental in anticipation of which these Bonds are issued.' 10

The schizophrenic structure of this bond issue was so confusing, not only to the public but to lawyers and judges in this case, that the Plaintiffs argued the case, and the trial judge based his first decision on the theory that since the bonds were revenue bonds the Tigers contract should but didn't bear its fair share of the costs of amortizing and operating the stadium, 11 but the Defendants said 'Gentlemen, sorry, but you just don't understand, these bonds can be perfectly good without the Tigers or any other stadium user paying a red cent, because the County wants to use the stadium all by itself and has agreed unconditionally to pay the fixed rental which pays the $371,000,000 principal and interest 12 to liquidate the bonds.'

This effort to treat tax bonds as revenue bonds has raised a number of serious and important technical issues. Some of these issues involve areas [388 Mich. 237] relatively untouched even by previous pentrating judicial review. The principal issues involved are:

1. Do Acts 31 13 and 94 14 singly or jointly authorize stadium bonds as

Page 641

revenue bonds or otherwise where the non-user County covenants to permit bondholders to enforce directly the County's full faith and credit tax obligation to the Authority to pay a 'rental' equivalent to the principal and interest on the bonds and where the revenue and revenue producing capacity of the one actual and other potential users are claimed to be of no legal consequence? (Parts II, p. 645, III, pp. 645--649, IV, pp. 649--656).

2. What is the impact of Const.1963, art. 4, § 25 requiring sections of acts altered or amended to be re-enacted and republished at length on portions of Act 31 that may alter or amend Act 94 or other Acts? (Part V, pp. 656--666).

3. Do constitutional and statutory debt limitations affect the just described stadium bonds or true revenue bonds in any way? (Part VI, pp. 666--679).

4. Do constitutional and statutory millage limitations affect the just described stadium bonds or true revenue bonds in any way? (Part VII, p. 679).

5. Does the stadium bond issue relate to a 'public purpose?' (Part VIII, pp. 680--683).

6. Would the stadium bond issue violate Const.1963, art. 9, § 18 'The credit of the state shall not be granted to, nor in aid of any person, association or corporation, public or private, except as authorized in this constitution', if the Tigers, as alleged, [388 Mich. 238] paid less than they should have for their sublease? (Part IX, pp. 683--687).

7. Were the notices given constitutionally sufficient? (Part X, pp. 687--699).

8. Other issues. (Part XI, p. 699).


Wayne County on August 20, 1970, established a Stadium Authority under Act 31 to construct a stadium. On September 23, 1971, the County approved a lease 15 of the proposed stadium from the Authority to the County. In that lease the County made three significant covenants. First, credit to pay a 'Fixed Rental' to the Stadium credit to pay a 'Fixed Rental' to the Stadium Authority for the stadium equivalent to the debt service of $371,000,000 on a bond issue which the Authority was to issue. 16 Second, the County covenanted that the bondholders should have the power to enforce the covenants in the lease, including the County's covenant of its full faith and credit to pay the fixed Rental equivalent to the debt service. 17 Third, the County unconditionally covenanted to pay that fixed rental whether the stadium was completed, destroyed, or whatever. 18

The County thereupon delegated the operation of the stadium to the Stadium Authority with the duty to sublease. 19 After instituting, but before [388 Mich. 239] closing bond negotiations, he Stadium Authority for itself and the County arranged a sublease with the Tigers for the use of the stadium. 20 The County and the Stadium Authority approved this lease March 2, 1972. The

Page 642

proceeds from the Tiger lease were to be payable to the Stadium Authority. 21

On March 28, 1972 the Wayne County Stadium Authority Lease, the Bond Ordinance issued pursuant thereto, the Tiger sublease, data supporting the financial feasibility of the stadium because of Tiger baseball games, other events, concessions, etc., were acted on by the Municipal Finance Commission which after hearing its staff and others voted approval for the stadium bond issue under Acts 31 and 94. 22

In opening that meeting, the Chairman of the Municipal Finance Commission called on the staff for comment. James F. Marling, Director, Municipal Finance Division, replied:

'. . . I am not ready to recommend approval of this item. . . . I think the two problems deal primarily with the potential revenues from the baseball and the potential revenues from the other events as outlined in my [388 Mich. 240] memorandum. I see nothing that changes that. It is a drain on the County's general fund, the drain is very real.' (Emphasis added) 23

Subsequently, an Assistant Attorney General assigned to the project made the following comments among others.

'. . . The effort of the staff has been to develop a basis upon which the commission may approve this project if it sees fit to do so despite the formative legal problems which center around the potential drain upon the Wayne County general fund which a the moment is in a deficit position according to out files and people who spoke on it last week . . . With respect to the more serious legal objection this I think relates to the potential drain on County general funds and the duty of the MFC to make sure that debt service on this issue as it is approved will not unduly burden the underlying community. We have obtained from bond counsel their Consent to take out of the form of the bond the reference contained therein of which in our...

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