Kitchell v. Franklin

• Decision Date: 13 November 2013
• Docket Number: No. 09S00–1307–PL–476.,09S00–1307–PL–476.
• Parties: Julie KITCHELL, Appellant (Plaintiff below), v. Ted FRANKLIN, as The Mayor of the City of Logansport, and the Common Council of the City of Logansport, Appellees (Defendants below).
• Court: Indiana Supreme Court

997 N.E.2d 1020

Julie KITCHELL, Appellant (Plaintiff below),

v.Ted FRANKLIN, as The Mayor of the City of Logansport, and the Common Council of the City of Logansport, Appellees (Defendants below).

No. 09S00–1307–PL–476.

Supreme Court of Indiana.

Nov. 13, 2013.

Jim Brugh, Logansport, IN, Attorney for Appellant.

Mark J. Crandley, Barnes & Thornburg, LLP, Indianapolis, IN, Attorney for Appellee Ted Franklin, as Mayor of the City of Logansport.

John R. Molitor, Indianapolis, IN, Attorney for Appellee Common Council of the City of Logansport.

In the Indiana Court of Appeals, No. 09A02–1305–CT–414

On Emergency Transfer Pursuant to Indiana Appellate Rule 56(A)

RUCKER, Justice.

In this case we address whether Indiana's Public–Private Agreements statute requires a local legislative body to first adopt the statute before it may issue a request for proposals or begin contract negotiations as provided for under the statute. We hold it does not.

Background

In the first half of the nineteenth century a number of federal, state, and local governmental entities entered into ventures with private businesses to build railroads and canals in an effort to promote economic growth. The public entities raised money to invest in private companies, not only by issuing bonds but by extending credit and guaranteeing loans with insufficient collateral as security. Many of these projects failed. When they did, the public entities suffered severe financial difficulties. In response, they adopted limitations on debt and restrictions on extensions of credit to private parties. Accordingly, public entities were no longer allowed to incur debt unless it was authorized by law with an annual tax sufficient to pay the interest on the debt as it fell due, to be paid off within a specified number of years. See generally Clayton P. Gillette, Constitutional and Statutory Aspects of Municipal Debt Finance: Recent Developments, Practicing Law Institute, Tenth Annual Institute on Municipal Finance: Financing State and Local Governments in the 1990's, 377 PLI/REAL 9 (1991); Stewart E. Sterk and Elizabeth S. Goldman, Controlling Legislative Shortsightedness: The Effectiveness of Constitutional Debt Limitations, 1991 Wis. L.Rev. 1301 (1991).

Indeed Indiana's second constitutional convention was partially a product of the overwhelming debt the State had incurred under its “internal improvement system,” which included the construction of canals, turnpikes, and railroads. N. Ind. Bank & Trust Co. v. State Bd. of Fin., 457 N.E.2d 527, 529 (Ind.1983). See also David J. Bodenhamer and Randall T. Shepard, The Narratives and Counternarratives of Indiana Legal History, in The History of Indiana Law 7, 9 (David J. Bodenhamer and Randall T. Shepard, eds., 2006). In consequence the 1850 convention passed, and the voters later ratified, a constitutional debt limit which provides in relevant part, “No political or municipal corporation in this State shall ever become indebted, in any manner or for any purpose, to an amount, in the aggregate, exceeding two per centum on the value of the taxable property within such corporation....” SeeInd. Const. art. 13, § 1. A constitutional debt limit “place[s] constraints on governmental borrowing power to protect present and future taxpayers from the excesses of legislative fiscal irresponsibility.” Reuven Mark Bisk, Note, State and Municipal Lease–Purchase Agreements: A Reassessment 7 Harv. J.L. & Pub. Pol'y 521, 521 (1984). This means that government entities must struggle both to “fulfill their governmental responsibilities and avoid violating debt limitations.” Id.

The Indiana General Assembly has enacted various statutes that provide creative mechanisms allowing municipal corporations and political subdivisions to finance public projects in a manner that does not violate Indiana's constitutional debt limitations. See Adolph H. Zwerner, Indiana Municipal Revenue Bond Financing, 12 Ind. L.J. 266, 274–78 (1937) (enumerating legislative enactments); cf. Bisk, supra, at 522 (recognizing lease-purchase agreements as a common mechanism employed by elected officials). One of these Indiana mechanisms is commonly referred to as the Public–Private Agreements Act (the “Act”). SeeInd.Code §§ 5–23–1–1 through 5–23–7–2. Among other things the Act “permits agreements between a governmental body and a private operator to construct, operate, and maintain a public facility.” City of Gary Common Council v. White River Envtl. P'ship—Gary, 713 N.E.2d 893, 894 (Ind.Ct.App.1999).

First enacted in 1995 ¹ the Act authorizes and provides guidelines for the implementation of what are known as “public-private partnerships” which can be described as:

“Contractual agreement[s] formed between public and private sector partners, which allow[ ] more private sector participation than is traditional. The agreements usually involve a government agency contracting with a private company to renovate, construct, operate, maintain, and/or manage a facility or system.” [Public-private partnerships or “PPPs”] cover as many as a dozen types of innovative contracting, project delivery and financing arrangements between public and private sector partners. In PPPs, the private sector performs functions normally undertaken by the government, but the public sector remains ultimately accountable for the facility and the overall service to the public.

Jaime Rall, et al., Nat'l Conference of State Legislatures, Public–Private Partnerships for Transportation: A Toolkit for Legislators 1 (2010) (quoting U.S. Dep't of Transp., Report to Congress on Public–Private Partnerships (2004)). Despite their name, public-private partnerships rarely take the legal form of a partnership but rather function as government procurement agreements. Dominique Custos & John Reitz, Public–Private Partnerships, 58 Am. J. Comp. L. Supp. 555, 559–60 (2010) (footnote omitted). These arrangements are attractive to governmental entities because they enable the entities to “shift much of the financing, maintenance, and/or operating costs for public infrastructure to private contractors, who may then be allowed to recoup their costs through tolls or other user payments, thus enabling the government to use the market to accomplish its purposes and to relieve public budgets of the financial burden associated with infrastructure upgrading and maintenance.” Id. at 555.

In relevant part, Indiana's Public–Private Agreements Act “applies to” among other entities “[a] political subdivision in a county where ... the legislative body of the political subdivision ... adopts the provisions of this article by resolution or ordinance.” I.C. § 5–23–1–1(3). The Act requires “the governmental body to request proposals under this chapter before entering into the public-private agreement,” I.C. § 5–23–5–1, and after receiving proposals to “negotiate the best and final offers of responsible offerors who submit proposals that are determined to be reasonably susceptible of being selected for a public-private agreement.” I.C. § 5–23–5–7. The Act further provides in pertinent part:

If a recommendation to award the public-private agreement is made to the board, the board shall schedule a public hearing on the recommendation and publish notice of the hearing one (1) time in accordance with IC 5–3–1 at least seven (7) days before the hearing. The notice shall include the following:

(1) The date, time, and place of the hearing.

(2) The subject matter of the hearing.

(3) A description of the public-private agreement to be awarded.

(4) The recommendation that has been made to award the public-private agreement to an identified offeror or offerors.

(5) The address and telephone number of the board.

(6) A statement indicating that the proposals and an explanation of the basis upon which the recommendation is being made are available for public inspection and copying at the principal office of the board during regular business hours.

I.C. § 5–23–5–9. Finally, the Act provides “[a]fter the procedures required in this chapter have been completed, the board shall make a determination as to the most appropriate response to the request for proposals and may award the public-private agreement to the successful offeror or offerors.” I.C. § 5–23–5–11.

Facts ² and Procedural History

The City of Logansport is exploring a means to replace an existing coal powered electric facility with one that will generate electricity primarily through refuse-derived fuels. This process uses recycled solid waste to produce energy. The replacement plant will also use natural gas as a backup fuel source. This modernized power plant will be more environmentally sound, provide more capacity to generate electricity, allow for potentially lower rates to the City's ratepayers, and aid in economic development by providing affordable energy to potential new employers.

To determine how to employ this technology in the most cost-effective manner, the City studied the possibility of entering a public-private partnership with an entity that could construct, operate, and maintain a public facility and transfer it back to City at a future date. On November 28, 2012 the City—through its Utility Service Board (the “Board”)—issued a request for proposals (“RFP”) seeking:

[A] provider to enter into a public-private agreement ... with the City of Logansport ... through its Utility Service Board ... under the provisions of I.C. 5–23 ... for the purpose of design, construction, financing, maintenance and transfer to the City, [a project to] consist of ... converting the two existing coal-fired steam turbine generators ... to utilize refuse derived fuel pellets ... as their primary fuel, with natural gas backup.

App. at 12. The project also called for the expansion of the utility's generating capacity. Id. After reviewing proposals submitted by six vendors in response to the RFP and after discussing and negotiating with the offerors, at a public hearing the Board...