Duckworth v. City of Kansas City, 61421

• Decision Date: 29 April 1988
• Docket Number: No. 61421,61421
• Citation: 758 P.2d 201,243 Kan. 386
• Parties: Bill L. DUCKWORTH and Chemold Systems, Inc., Appellants, v. The CITY OF KANSAS CITY, Kansas, Appellee.
• Court: Kansas Supreme Court

Page 201

758 P.2d 201

243 Kan. 386

Bill L. DUCKWORTH and Chemold Systems, Inc., Appellants, v. The CITY OF KANSAS CITY, Kansas, Appellee.

No. 61421.

Supreme Court of Kansas.

April 29, 1988.

Syllabus by the Court

1. As a general rule, a municipality may authorize by ordinance the appropriation of public money for private individuals as long as the appropriation is for a public purpose and promotes the public welfare.

2. While a trial court considering a motion to dismiss must accept the factual allegations contained in the petition as true, it is not required to treat the legal conclusions contained within the petition as also being true.

3. The requirement that an administrative agency, in exercising delegated powers, must comply with articulated standards does not apply to legislative bodies.

4. Upon consideration of a declaratory judgment action, the record is examined and it is held that loans and grants to revitalize and rehabilitate the downtown Kansas City business area do not violate the Kansas Constitution nor United States Constitution in any of the particulars asserted by the plaintiffs.

Edward H. Powers, Sr., Kansas City, argued the cause and was on the brief for appellants.

Jody Boeding, Asst. City Atty., argued the cause and was on the brief for appellee.

ALLEGRUCCI, Justice.

The plaintiffs, Bill Duckworth and Chemold Systems, Inc., filed the present action seeking declaratory relief against the City of Kansas City, Kansas. The plaintiffs' petition alleged that development loans authorized by the City of Kansas City were illegal and unconstitutional. The plaintiffs appeal the order of the district court granting the City's motion for dismissal.

For the purpose of this appeal, the facts as stated in the plaintiffs' petition are accepted as true. In 1986, the plaintiffs remodeled property located at 846 State Avenue in Kansas City, Kansas, at a cost of $600,000. The plaintiffs financed their improvements of the property by obtaining private financing at 12% interest. On April 28, 1987, the plaintiffs applied for $150,000 in municipal community development funds from the City in order to make their property barrier-free for the purpose of hiring handicapped persons. The plaintiffs were informed on June 5, 1987, that their request would not be approved. The City did not assign any reason for its refusal other than a statement that other projects had priority.

The plaintiffs' petition also contends that, at approximately the same time, the City had decided to approve a loan of $2,000,000 to Robert G. Cotitta to remodel a building in downtown Kansas City. The petition states that the loan to Cotitta provided for 8% interest and deferred any substantial payments upon the loan for the first five years. Cotitta is a "bad credit risk" according to the plaintiffs' petition, which alleges that Cotitta had defaulted on a prior $200,000 loan from the City. The plaintiffs' petition also challenges the City's issuance of grants and loans of approximately $250,000 to the Granada Theatre in downtown Kansas City, Kansas. The plaintiffs allege that the recipients of these development funds from the City "will have a competitive advantage over the plaintiffs" because they will be able to rent their facilities "for less than the plaintiffs because of the lower interest rate and deferred payments agreed to by the City." The plaintiffs contend that the issuance of the loans by the City was made without appropriate standards and is unjust, discriminatory, and unconstitutional. In addition, plaintiffs contend that the method by which the loans were budgeted violates K.S.A. 79-2927 and K.S.A. 79-2934.

The plaintiffs first challenge the constitutionality of the municipal development loans by the City both on due process and equal protection grounds. A review of our decisions relating to the constitutional authority of governmental agencies to issue economic assistance requires us to reject plaintiffs' contention. In Ullrich v. Board of Thomas County Comm'rs, 234 Kan. 782, 676 P.2d 127 (1984), this court recognized that, as a general rule, the state legislature may appropriate public money for private individuals so long as the appropriation promotes the public welfare. In Ullrich, this court stressed that the wisdom of a particular public policy could not be decided by the courts, but must be resolved by the legislature.

"What is for the public good or what are public purposes for which appropriations may be made are questions which the legislature must in the first instance decide. In determining those questions, a state legislature is vested with a broad discretion, which cannot be controlled by the courts, except when its action is clearly evasive or violative of a constitutional provision. It has been said that a strict formula to determine public purposes for all times cannot be formulated, since the concept expands with the population, economy, scientific knowledge, and changing conditions. As people are brought closer together in congested areas, the public welfare requires governmental operation of facilities which were once considered exclusively private enterprises, and necessitates the expenditure of tax funds for purposes which were not classified as public. What is a public purpose for which public funds may be expended is not a matter of exact definition, and the line of demarcation is not immutable or incapable of adjustment to changing social and economic conditions that are properly of public and governmental concern." 234 Kan. at 789, 676 P.2d 127.

Although the issue in Ullrich was the constitutionality of transferring assets from the county hospital to a private nonprofit hospital, the rationale for our decision is applicable to the present case:

"The question then is presented whether the transfer of county assets to the Thomas County hospital in this case was for a public purpose. We agree with the trial court that the operation of the hospital by TCHA in this case is for a public purpose. We think it obvious that promoting the public health is within the power of the legislature, and that hospitals promote the public health. If private enterprise can be used to eradicate urban blight or if cities can issue industrial revenue bonds to promote private industry, it should reasonably follow that private enterprise may be used in an attempt to promote the health of the citizens of Thomas County." 234 Kan. at 790, 676 P.2d 127.

In State ex rel. Ferguson v. City of Pittsburg, 188 Kan. 612, 364 P.2d 71 (1961), and State ex rel. Tomasic v. City of Kansas City, 237 Kan. 572, 701 P.2d 1314 (1985), this court upheld the constitutionality of governmental assistance of private economic development for the purpose of promoting the overall economic welfare of the general public. Although both cases involve the grants of industrial revenue bonds rather than the issuance of loans by a city, the analysis for constitutional purposes is identical.

In State ex rel., v. City of Pittsburg, this court upheld the constitutionality of the issuance of revenue bonds, stressing the limited ability of the courts to review the wisdom of a particular legislative enactment as long as the enactment was designed to serve a public purpose. We said:

"From a purely legal standpoint, the rule in this state, as elsewhere, is that courts are concerned only with the power to enact statutes and cannot concern themselves with the wisdom of legislative acts. Courts neither approve nor condemn legislative policy, and their sole function is to determine the validity of a challenged act when measured by applicable constitutional provisions. [Citations omitted.] For the removal of unwise laws from the statute books, appeal lies not to the courts but to the ballot and to the processes of democratic government." 188 Kan. at 623, 364 P.2d 71.

We adopted the same view later in State ex rel. Tomasic v. City of Kansas City. As long as a governmental action is designed to fulfill a public purpose, the wisdom of the governmental action generally is not subject to review by the courts. We said:

"As a general rule of constitutional law, courts have been reluctant to rule on public policy matters since these involve legislative deliberation and judgment. This court stated in Gunkle v. Killingsworth, 118 Kan. 154, 157, 233 Pac. 803 (1925), '[w]ithin the scope of legislative power, the legislature itself is the judge of what exemptions are in the public interest and will conduce to the public welfare.' Therefore, in determining whether K.S.A. 79-201a Second was designed to promote the public welfare, we must follow a policy of judicial restraint unless we find the judgment of the legislature was 'entirely devoid of a rational basis.' State, ex rel., v. Board of Regents, 167 Kan. [587, 207 P.2d 373 (1949) ] at 596 ." 237 Kan. at 579, 701 P.2d 1314.

The standards for review of the constitutionality of the challenged governmental actions in the context of the equal protection clause is also directed at the existence of a rational basis for the governmental actions. In Manhattan Buildings, Inc. v. Hurley, 231 Kan. 20, 643 P.2d 87 (1982), the court reviewed the rules relating to such cases.

" 'Our next concern is whether the statute offends the equal protection clause. When considering this question we must first determine the proper test. Traditionally, the yardstick for measuring equal protection arguments has been the "reasonable basis" test. The standard was...