Appeal of Torbik

• Decision Date: 17 June 1997
• Citation: 548 Pa. 230,696 A.2d 1141
• Court: Pennsylvania Supreme Court
• Parties: Appeal of Thomas TORBIK, t/d/b/a Wilkes-Barre Inn; Ken Pollock, t/d/b/a Intercoastal Management, Inc.; Brian Maloney, t/d/b/a Dunmore Airport Associates, L.P., Appellees. GUS GENETTI HOTEL & RESTAURANT, INC., d/b/a Best Western Genetti Motor Lodge, and West Hazleton Associates LP d/b/a Comfort Inn, Appellants, v. LUZERNE COUNTY, Luzerne County Board of Commissioners, Frank P. Crossin; Joseph Jones; and Thomas Makowski, in their capacity as Luzerne County Board of Commissioners, and Luzerne County Convention Center Authority, Appellees.

Page 1141

696 A.2d 1141

548 Pa. 230

Appeal of Thomas TORBIK, t/d/b/a Wilkes-Barre Inn; Ken

Pollock, t/d/b/a Intercoastal Management, Inc.;

Brian Maloney, t/d/b/a Dunmore Airport

Associates, L.P., Appellees.

GUS GENETTI HOTEL & RESTAURANT, INC., d/b/a Best Western

Genetti Motor Lodge, and West Hazleton Associates

LP d/b/a Comfort Inn, Appellants, v. LUZERNE COUNTY, Luzerne County Board of Commissioners, Frank

P. Crossin; Joseph Jones; and Thomas Makowski, in their

capacity as Luzerne County Board of Commissioners, and

Luzerne County Convention Center Authority, Appellees.

Supreme Court of Pennsylvania.

Submitted March 19, 1997.

Decided April 11, 1997.

Opinion Supporting Decision

June 17, 1997.

Barbara W. Mather, Philadelphia, Brian P. Downey, Harrisburg, Anthony B. Panaway, Richard M. Goldberg, Solicitor-Luzerne County, John P. Moses, Wilkes Barre, and John B. Dougherty, East Petersburg, for Luzerne County, et al.

John C. Aciukewicz, Wilkes Barre, for Luzerne County and Luzerne County Board of Commissioners.

Joseph M. Cosgrove, Forty Fort, for Torbik, et al.

Stephen A. More, Elizabeth A. Dougherty, Helen L. Gemmill, Harrisburg, for Gus Genetti Hotel, et al.

Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO and NEWMAN, JJ.

ORDER

PER CURIAM.

AND NOW, this 11th day of April, 1997, the Order of the Court of Common Pleas of Luzerne County dated June 28, 1996 is affirmed. Opinion to follow.

OPINION

NEWMAN, Justice.

This Opinion is written in support of our Order dated April 11, 1997 in which we affirmed the decision of the Court of Common Pleas of Luzerne County (trial court), which held that the Third Class County Convention Center Authority Act (Act), 16 P.S. § 13101, et seq., and specifically, the Hotel Room Tax, Section 23 of the Act, 16 P.S. § 13123, as well as Luzerne County Ordinance 052296, are constitutional.

The Commissioners of Luzerne County, on September 7, 1994, authorized the formation of the Luzerne County Convention Center Authority ("Authority"). The Authority intends to build the Northeast Pennsylvania Civic Arena and Convention Center in Wilkes-Barre, a facility with 42,000 square feet of arena floor and 18,000 square feet of conference and convention center rooms.

On December 27, 1994, the Pennsylvania legislature adopted the Act, which provides for creation of authorities for the purpose of owning and operating convention centers. The Act also recognizes that certain counties may have already had convention center authorities as of December 27, 1994. Section 2(c)(3), 16 P.S. § 13102(c)(3), states that the only provision of the Act that applies to such counties is Section 23, 16 P.S. § 13123, which provides that the county in which a convention center is located may impose a hotel room rental tax not to exceed 5 per cent. Pursuant to this statute, the Luzerne County Board of Commissioners enacted an Ordinance on May 22, 1996, imposing a 5 per cent tax on all hotel rooms in Luzerne County.

Two days later, on May 24, 1996, Thomas Torbik, t/d/b/a Wilkes-Barre Inn, Ken Pollack, t/d/b/a Intercoastal Management, Inc., and Brian Maloney, t/d/b/a Dunmore Airport Associates, LP (the Torbik Plaintiffs), filed a complaint in the trial court seeking a determination of the constitutionality of the Ordinance. The Torbik Plaintiffs own and operate hotels in three different portions of Luzerne County: Wilkes-Barre, Dupont and West Hazleton.

Gus Genetti Hotel & Restaurant, Inc. d/b/a Best Western Genetti Motor Lodge, and West Hazleton Associates, L.P., d/b/a Comfort Inn (the Genetti Plaintiffs) filed a separate action on May 30, 1996, seeking a declaration that the Ordinance and the Act were unconstitutional. They also sought to intervene in the action brought by the Torbik Plaintiffs. On May 31, 1996, the trial court consolidated the actions.

The trial court held hearings on June 21, 1996 and June 24, 1996. Eight fact witnesses testified, including representatives of hotels, and four expert witnesses. The court issued an Order on June 28, 1996 holding that (1) the Act and the Ordinance were constitutional; (2) the Authority was properly incorporated and legally entitled to construct and operate a convention center; and (3) the proposed center meets the criteria of a convention center as set forth in the Act.

The Genetti Plaintiffs filed motions for post-trial relief, which the trial court denied on September 23, 1996. They filed a timely notice of appeal to the Commonwealth Court on October 18, 1996. ¹ However, because the Commonwealth Court did not issue a briefing or argument schedule, the County Defendants and the Torbik Plaintiffs filed an Application for Extraordinary Jurisdiction with this Court on November 8, 1996. The Application contains the following averments:

5. Construction of the Convention Center will be financed, in part, by a $19.2 million grant given by the Commonwealth of Pennsylvania on July 1, 1994. This grant will expire if the County Defendants are unable to utilize it to begin construction of the Convention Center.

6. Construction of the Convention Center also will be financed, in part, by the issuance of a series of bonds by the Authority. The revenue generated by the tax will finance debt service on the bonds. The bonds cannot be issued if these constitutional questions are not resolved immediately.

7. Construction on the Convention Center cannot begin until the insurance and the bonds are issued and construction will take 18 months to complete. Therefore, the 18-month construction process cannot begin until after the constitutional questions are resolved.

8. The economic viability of the Convention Center is premised, in part, on the presence of an anchor tenant, an American Hockey League Franchise team, which requires that the Convention Center be completed by Autumn, 1998. If the Convention Center is not completed by that date, the anchor tenant, and, therefore, the Convention Center, will be lost. The economic viability of the entire Convention Center project is dependent upon a final resolution of the constitutional issues by this Court at the earliest possible date.

Application for Extraordinary Jurisdiction, November 8, 1996 at 2 -3. We granted the request for Extraordinary Jurisdiction on January 14, 1997.

On appeal, the Genetti Plaintiffs raise the following six issues:

1. Whether the trial court erred in finding that the Third-Class County Convention Center Authority Act, 16 P.S. § 13101 et seq. and the hotel tax ordinance enacted by Luzerne County pursuant to it, did not violate the due process and equal protection clauses of the United States Constitution and the Uniformity Clause of the Pennsylvania Constitution.

2. Whether the trial court erred in finding that the Third-Class County Convention Center Authority Act, 16 P.S. § 13101 et seq. did not constitute special legislation in violation of the Pennsylvania Constitution.

3. Whether the trial court erred in finding that construction and/or operation of a convention center in Luzerne County did not violate the Municipality Authorities Act of 1945, 53 P.S. § 301 et seq., since it will compete in part with existing enterprises in the area.

4. Whether the trial court erred in finding that the Luzerne County Convention Center Authority, was an existing authority, as defined in the Act, incorporated for the purpose of operating a convention center.

5. Whether the trial court erred in finding that the facility to be constructed in Luzerne County constitutes a convention center as defined by the Act.

6. Whether the trial court erred in finding that the Luzerne County Convention Center Authority possesses the power under the Municipality Authorities Act to construct or operate an arena.

This court has twice had the opportunity to consider the constitutionality of a hotel room rental tax. On December 27, 1977, Allegheny County enacted a 1 per cent tax on hotel rooms for the purpose of funding a convention center in downtown Pittsburgh pursuant to Section 4970.2 of the Second Class County Code, 16 P.S. § 4970.2. In Allegheny County v. Monzo, 509 Pa. 26, 500 A.2d 1096 (1985), the owner of a hotel located in the Borough of Monroeville, an Allegheny County municipality fifteen miles from downtown Pittsburgh, and close to Westmoreland County, challenged the constitutionality of the tax. The trial court found that the imposition of the tax caused hotels outside Pittsburgh to finance their competitors in Pittsburgh, and that the convention center actually took patrons away from hotels outside the city. The trial court declared the statute and ordinance invalid under the Fourteenth Amendment to the United States Constitution and Article VIII, Section 1 of the Pennsylvania Constitution. This Court affirmed, noting that "[a]n examination of the incidence of this tax and its effects establishes that a substantial portion (perhaps a majority) of the class taxed are afforded no benefits whatsoever, while being significantly burdened." Id. at 42, 500 A.2d at 1104.

On October 24, 1986, the City of Philadelphia enacted a hotel room tax to support construction of a convention center pursuant to the Pennsylvania Convention Center Authority Act, 53 P.S. § 16201, et seq. In Leventhal v. City of Philadelphia, 518 Pa. 233, 542 A.2d 1328 (1988), the owner of a hotel located approximately seven miles from Center City Philadelphia, near Philadelphia International Airport, challenged the constitutionality of the tax. The trial court distinguished the case from Monzo, noting that the hotel owner failed to establish that the tax or the convention center would harm its business. We affirmed the trial court.

The legislature has wide discretion in the exercise of its taxing power. Aldine Apartments v. Commonwealth, 493 Pa. 480, 426 A.2d 1118 (1981). Tax enactments are presumed to be constitutionally valid, and parties challenging them have the burden of establishing their invalidity. Leventhal. The Genetti Pla...