City of Pipestone v. Madsen
| Decision Date | 19 June 1970 |
| Docket Number | No. 42314,42314 |
| Citation | 287 Minn. 357,178 N.W.2d 594 |
| Parties | CITY OF PIPESTONE, et al., Respondents, Pawnee Corporation, Respondent, v. Ivan MADSEN, as member of the council and mayor of the City of Pipestone, Appellant. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
1. An act of the legislature will not be declared unconstitutional unless its invalidity appears clearly or unless it is shown beyond a reasonable doubt that it violates some constitutional provision. The power of the court to declare a law unconstitutional is to be exercised only when absolutely necessary in the particular case and then with great caution.
2--3. Under Minn.Const. art. 9, §§ 1 and 10, and art. 4, § 33, public funds derived from taxation may be spent only for a public purpose, and this limitation is safeguarded against indirect erosion by the specific prohibition that the credit of the state shall not be given or loaned in aid of any individual, association, or corporation. In short, public funds shall be used solely for public purposes and shall never be used, or encumbered by pledging the state's credit, in the furtherance of any private purpose or in the aid of any private individual or entity.
If the primary object of an expenditure of municipal funds is to subserve a public purpose, the expenditure is legal, although it may also involve as an incident an expenditure which, standing alone, would not be lawful. It is equally well settled that if the primary object is to promote some private end, the expenditure is illegal, although it may incidentally serve some public purpose also.
4. The purpose of the Municipal Industrial Development Act, as stated by the legislature, is to prevent the emergence of chronic unemployment and future economic deterioration through encouragement of industrial growth. Such expansion increases per capita income by providing additional job opportunities and thus benefits the entire economy by the input of these funds.
5. The concept of public purpose has been steadily expanded in this state. This court has recognized that where municipal industrial financing has been challenged upon the ground of the universally recognized public purpose doctrine, a public purpose has been found whenever the location of industry would serve to alleviate problems of unemployment, inadequate wages, economic depression, or imbalance of agriculture over industry, or would appreciably increase the use of port or harbor facilities.
6. Findings based on studies conducted by the Department of Economic Development for purposes of the industrial revenue 7. We conclude that the Minnesota Municipal Industrial Development Act, construed in the light of conditions existing as of today, clearly permits the expenditures of public funds for a public purpose, as therein provided, and we therefore uphold the constitutionality of the Act.
bond project proposed in the instant case indicate that the area surrounding the city of Pipestone is deteriorating economically. Although the population of Pipestone is increasing, the rural population is decreasing due to a migration of people to metropolitan centers. This population exodus is due in part to a substantially greater average per capita income in metropolitan areas. It is also caused by technological changes in methods of farming, resulting in larger farms operated by fewer people.
Gislason, Alsop, Dosland & Hunter, New Ulm, for appellant.
Rice & Evans, Pipestone, William Hempel, Minneapolis, for City of Pipestone et al.
Scott, Voorhees & Reutter, Pipestone, for Pawnee Corp.
Douglas Head, Atty. Gen., Richard H. Kyle, Sol. Gen., Richard Emerick, Sp. Asst. Atty. Gen., St. Paul, amici curiae.
This case was brought to establish the validity of the action of the city of Pipestone, Minnesota, a municipal corporation, and of members of the city council of said city to effect the sale of $3,000,000 in revenue bonds to finance the purchase of land located near the city and the erection of a meat packing plant thereon. Defendant, the mayor of the city, contends that the statute under which the city council has proceeded, Minn.St. c. 474, the Minnesota Municipal Industrial Development Act, is unconstitutional.
The Municipal Industrial Development Act (hereinafter referred to as Act), passed in 1967 by the Minnesota Legislature, authorizes municipalities and redevelopment agencies to (1) acquire, construct, and hold land, buildings, and improvements thereon deemed necessary to a project to be situated within the state; (2) issue revenue bonds, repayable solely from revenues of such project to finance the acquisition, construction, or improvement of such project; (3) lease such project to any person, firm, or public or private corporation in such a manner that rents from the lease provide revenue sufficient to pay the principal and interest on revenue bonds issued by a municipality; (4) pledge and assign to the holders of such bonds or a trustee therefor the revenues of such project; and (5) mortgage or otherwise encumber such project without obligating itself except with respect to the project. Minn.St. 474.03.
Other provisions of the Act pertinent to the instant case may be summarized as follows:
Section 474.01 delineates the policies and purposes of the Act and provides that the commissioner of economic development shall assist and advise municipalities in furtherance of these purposes. This section will be discussed later in detail.
Section 474.04 provides that the acquisition, construction, or improvement of any project and the issuance of bonds pursuant thereto may be authorized by an ordinance or resolution of the governing body of the municipality.
Section 474.09 lists certain covenants which may be contained in the ordinance or resolution authorizing the issuance of revenue bonds, such as the rents to be charged for use of the properties involved, the creation and maintenance of sinking funds, the insurance to be carried on the project, and procedures for amending the ordinance or resolution.
While § 479.10 was amended by the legislature in 1969, 1 for purposes of this action Minn.St.1967, § 474.10, governs. That section provides that the revenue bonds shall not be payable from nor charged upon any funds other than the revenue pledged to the payment thereof, nor shall the municipality issuing the bonds be subject to any liability thereon. The section further provides that the bonds shall not constitute a charge, lien, or encumbrance upon any property of the municipality except those projects mortgaged or otherwise encumbered under the provisions and for the purposes of the Act. The section also provides that the revenue bonds shall not constitute debts of the municipality within the meaning of any statutory or constitutional limitation.
The facts in this case indicate that on February 17, 1969, in compliance with § 474.01, subd. 7, the city council of the city of Pipestone obtained approval from the commissioner of economic development of a proposed industrial revenue bond project in which a packing plant was to be constructed and leased to plaintiff Pawnee Corporation.
On February 18, 1969, the city council passed a resolution authorizing the acquisition, construction, and leasing of the proposed project and the issuance of industrial development first mortgage revenue bonds in an amount up to $3,000,000 to finance the project. The bonds were to be secured by a pledge and assignment of the revenues of the project and a mortgage of the project to a trustee, all for the purpose of providing an industrial site for the operation by Pawnee Corporation of a meat packing business.
In contemplation of the above resolution, Pawnee Corporation, under authorization of its board of directors, tendered a warranty deed covering the 109 acres of land constituting the project site and a lease to the city of Pipestone for execution. The warranty deed conveyed the project site to the city of Pipestone. The lease between the city and Pawnee Corporation, as tenant, was to run for a period of 20 years, and provided that the basic rentals were to be equal to the sum of the interest and principal due on the then succeeding interest payment date on the industrial development first mortgage revenue bonds issued by the city. The rentals also were to include all taxes and special assessments levied on the project or on the privilege of using the project. The lease is considered an absolute 'net' lease. The bonds are not payable from nor charged upon any funds other than the rentals. The mortgage and indenture of trust to be entered into between the city of Pipestone and First Trust Company of St. Paul, as trustee, pledged the revenues and mortgaged the project site, buildings, and improvements in capital equipment as security for payment of up to $3,000,000 in industrial development first mortgage revenue bonds. The provisions contained in the lease and mortgage and indenture of trust are authorized by and consistent with the provisions of the Act.
The cost of the packing plant is estimated at $2,750,000. The remaining revenue from the bond issue would be used as additional site preparation and placement fees.
When put into operation, the plant will provide employment for approximately 100 persons and will generate a payroll estimated at $710,000. This in turn may create the need for 3 new retail establishments and an additional 65 jobs in service-related industries to accommodate the 100 jobs actually provided by the project. It is expected that the project would cause an estimated 2.8-million-dollar increase to the economy. Based on the 1969 total mill rate, the project is expected to generate over $64,000 in present annual taxes to be divided among the Jasper school district, Aetna Township, and Pipestone County.
Pawnee Corporation asserts that private financing for this project is not available and the board of directors admits that it...
To continue reading
Request your trial
-
Common Cause v. State
...9, 136 A.2d 852 (1957); Poletown Neighborhood Council v. City of Detroit, 410 Mich. 616, 304 N.W.2d 455 (1981); City of Pipestone v. Madsen, 287 Minn. 357, 178 N.W.2d 594 (1970); McKinney v. City of Greenville, 262 S.C. 227, 203 S.E.2d 680 (1974). As the Court of Appeals of Kentucky The con......
-
Minnesota Energy and Economic Development Authority v. Printy
...270 N.W.2d at 754-55; Minnesota Housing Finance Agency v. Hatfield, 297 Minn. at 167, 210 N.W.2d at 305-06; City of Pipestone v. Madsen, 287 Minn. at 364-65, 178 N.W.2d at 599-600; Housing and Redevelopment Authority of St. Paul v. Greenman, 255 Minn. 396, 403-04, 96 N.W.2d 673, 679 (1959).......
-
State ex rel. Hammermill Paper Co. v. La Plante
...in Allardice v. Adams County, supra, 476 P.2d at p. 993; Green v. City of Mt. Pleasant, supra, 131 N.W.2d at p. 25; City of Pipestone v. Madsen, supra, 178 N.W.2d at p. 603; Elliott v. McNair, supra, 156 S.E.2d at p. 432; Reed v. City of Cheyenne, supra, 429 P.2d at p. 72. In Elliott v. McN......
-
People ex rel. City of Salem v. McMackin
...to legislation of the type now before us are Green v. City of Mt. Pleasant (1964), 256 Iowa 1184, 131 N.W.2d 5; City of Pipestone v. Madsen (1970), 287 Minn. 357, 178 N.W.2d 594, and City of Gaylord v. Beckett (1966), 378 Mich. 273, 144 N.W.2d 460, wherein the Supreme Courts of these States......