Conrad v. City of Pittsburgh

• Decision Date: 22 April 1966
• Citation: 421 Pa. 492,218 A.2d 906
• Parties: Robert K. CONRAD, a Citizen, Resident and Taxpayer of the City of Pittsburgh, in his own Right and on Behalf of all other Citizens, Residents and Taxpayers of the City of Pittsburgh, v. CITY OF PITTSBURGH, a City of the Second Class et al.
• Court: Pennsylvania Supreme Court

Page 906

218 A.2d 906

421 Pa. 492

Robert K. CONRAD, a Citizen, Resident and Taxpayer of the

City of Pittsburgh, in his own Right and on Behalf

of all other Citizens, Residents and Taxpayers of the City of Pittsburgh, v. CITY OF PITTSBURGH, a City of the Second Class et al.

Supreme Court of Pennsylvania.

April 22, 1966.

David Stahl, City Sol., Thomas S. White, Asst. City Sol., for City of Pittsburgh.

George E. Flinn, C. Holmes Wolfe, Jr., Moorhead & Knox, Pittsburgh, for Stadium Authority of City of Pittsburgh.

John B. Nicklas, Jr., McCrady & Nicklas, Pittsburgh, for Robert K. conrad.

Kennedy Smith, Kline & Smith, Pittsburgh, for Western Pennsylvania Chapter of Americans for Constitutional Action, amici curiae.

Before BELL, C.J., and MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.

ROBERTS, Justice.

On October 29, 1965, plaintiff, a resident and taxpayer of the City of Pittsburgh, Allegheny County, Pennsylvania, instituted an action in the Court of Common Pleas of Allegheny County to restrain defendants, the City of Pittsburgh and the Stadmium Authority of the City of Pittsburgh, ¹ from proceeding with a contemplated construction of a multi-purpose public stadium. Plaintiff also sought to have adjudged illegal and void a contract entered into between defendants for the purpose of carrying out said project.

Defendants, on November 8, 1965, filed a preliminary objection in the nature of a demurrer to plaintiff's complaint. On the same date, defendants petitioned this Court to assume original jurisdiction of the cause. In view of the exigency which exists in the matter to which the suit relates, on November 22, 1965, we directed the issuance of a special certiorari to the court below removing the record in the proceedings for consideration and action by this Court. ² Such is the present posture of the litigation. ³

Due to the nature of the action and the issues presented, it is necessary that the factual background of the litigation, as established by the averments of plaintiff's complaint and the exhibits annexed to defendants' preliminary objection, and thereby made part of the record of the case, ⁴ be set forth.

The City of Pittsburgh, desiring to provide its residents with a facility for civic and athletic events of interest to the community, organized the Stadium Authority of the City of Pittsburgh. The Authority was formed pursuant to the Public Auditorium Authorities Law (herein referred to as the 'enabling act'), Act of July 29, 1953, P.L. 1034, 53 P.S. §§ 23841--23857, for the purpose of constructing a public stadium facility. ⁵ In order to facilitate the project, the City proposed to provide the site upon which the stadium was to be constructed and to loan certain sums to the Authority for the purpose of initiating the endeavor.

Acting with the approval of the City and in accordance with powers granted under the enabling act, the Authority adopted a plan whereby it would finance and construct a multi-purpose stadium to be leased to private parties for operation as an Authority facility. ⁶ In furtherance of that plan, the Authority entered into negotiations with various parties for the construction, financing and letting of the proposed facility.

As a result of these negotiations, agreement was reached with the Pittstad Management Corporation, subject to the execution of formal instruments, under which Pittstad would enter into a lease of the stadium for a forty year term at an annual rental of $860,000. Pittstad, in turn, proposed to sublet the facility for a like term to the Pittsburgh Athletic Co., Inc. and the Pittsburgh Steelers Football Club, Inc. at an aggregate annual rental of $421,000.

At the same time, tentative agreement was also reached with the Public Parking Authority of the City of Pittsburgh, a public corporation organized pursuant to the Act of June 5, 1947, P.L. 458, 53 P.S. §§ 341--356, for a lease of the parking facilities to be constructed in connection with the stadium. It is contemplated that these facilities would in turn be sub-let to the Alco Parking Corporation for a term of forty-years at an annual rental of $500,000.

On June 30, 1965, the Stadium Authority, proceeding under powers granted by the enabling act, Act of June 29, 1953, P.L. 1034, § 5, 53 P.S. § 23845, subd. B(i), entered into a loan agreement with various banks under which interim financing in the amount of $28,000,000 was obtained to pay construction and other costs of the project pending the sale of Authority bonds. Concurrently with the execution of the above mentioned agreement, the City and the Stadium Authority entered into the agreement which is the principal subject of the present suit.

Section 10(B) of the enabling act provides as follows:

'Any municipality may and it (sic) is hereby authority to make annual grants from current revenues to the Authority to assist in defraying the costs of operation, maintenance and debt service of the project and to enter into long term agreements providing for the payment of the same.'

Act of July 29, 1953, P.L. 1034, 53 P.S. § 23850(B).

Acting pursuant to this provision, the City and the Stadium Authority entered into an agreement whereunder the City agreed to make an annual grant to the Authority in the event and to the extent of any deficiency between the income to be derived from the tenants of the stadium and the amount required by the Authority to service its debt and maintain the facility. Specifically, the agreement provides that the City shall appropriate and pay to the Authority from 'current revenues' a sum equal to 'the amount * * * by which the total funds * * * available in * * * (each) calendar year to pay the costs to the Authority of the operation and maintenance of the Project and debt service on the Bonds are less than the costs to the Authority of such operation, maintenance and debt service. * * *' The agreement, to remain in force for the duration of any outstanding indebtedness of the Authority on its bonds, further provides that 'in the event that any annual grant is not paid in full when due, the deficiency is to be paid out of the current revenues of the City in the subsequent year or years. . . .'

Plaintiff, attacking the agreement, contends that the provision therein contained providing for annual grants by the City in the event of an operating deficiency by the Authority constitutes a debt incurred in violation of Sections 8 and 10 of Article IX of the Constitution of this Commonwealth.

Article IX, Section 8 of the Constitution of Pennsylvania provides:

'The debt of any county, city, borough, township, school district, or other municipality or incorporated district * * * shall never exceed seven (7) per centum upon the assessed value of the taxable property therein, nor shall any such county, municipality or district incur any debt, or increase its indebtedness to an amount exceeding two (2) per centum upon such assessed valuation of property, without the consent of the electors thereof at a public election in such manner as shall be provided by law.'

Section 10 of Article IX requires:

'Any county, township, school district or other municipality incurring any indebtedness shall, at or before the time of so doing, provide for the collection of an annual tax sufficient to pay the interest and also the principal thereof within thirty years.'

As of the execution of the agreement, the assessed valuation of taxable property of the City of Pittsburgh was $1,694,897,000. Its outstanding indebtedness was $18,000,000. Thus, the City was free to incur an additional indebtedness of $15,897,000 without the prior approval of the electorate.

It is the position of plaintiff, however, that by reason of its agreement with the Authority, the City has undertaken to guarantee the $28,000,000 obligation of the Authority and has thereby incurred an 'indebtedness' within the meaning of Article IX, Sections 8 and 10, which, when aggregated to its present indebtedness, exceeds 2% Of the assessed valuation of taxable property of the City. Since the City did not submit the issue of the grant to the voters or levy a tax sufficient to amortize the asserted 'debt', plaintiff contends that the obligation sought to be created is invalid and the agreement null and void. We are unable to agree with the proposition urged.

At the outset, we note that the obligation of the City under the agreement with the Authority is both contingent and unliquidated. Performance is required and payment due Only in the event and to the extent that the Authority sustains a deficit between its operating income and its debt service and maintenance costs. This Court has not to date had the occasion to determine whether such an obligation constitutes a 'debt' within the meaning of Article IX, Sections 8 and 10. The decisions of courts of other jurisdictions which have considered the problem in light of restraints on municipal spending similar to those contained in our Constitution have not been uniform. ⁷

However, we find it unnecessary to reach the question of whether a contingent liability is a debt within the meaning of Article IX, Section 8 and 10, since our consideration of the matter compels the conclusion that the decision of this Court in Greenhalgh v. Woolworth, 361 Pa. 543, 64 A.2d 659 (1949), requires the rejection of plaintiff's contention.

In Greenhalgh v. Woolworth, supra, an injunction was sought to restrain the District for a term of thirty years at a Mifflin from entering into a proposed lease agreement with the State Public School Building Authority on the ground that the agreement would work a subterfuge whereby the School District would acquire a capital asset and incur a debt in violation of the Constitution. Under the challenged agreement, the Authority was to construct a school building to be leased to the School district for a term of thirty years at a rental sufficient to pay the interest and principal of the bonds issued...