Levy v. The Acting Governor
| Decision Date | 04 March 2002 |
| Citation | 767 NE 2d 66,436 Mass. 736 |
| Parties | JORDAN LEVY & another v. THE ACTING GOVERNOR & another. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, SOSMAN, & CORDY, JJ.
Paul W. Johnson for Jordan Levy.
Richard J. Hayes for Christy Peter Mihos.
Thomas A. Barnico, Assistant Attorney General (Richard S. Weitzel, Assistant Attorney General, with him) for the Acting Governor.
Following our decision in Levy v. Acting Governor, 435 Mass. 697, 707 (2002), the Governor held a hearing to determine whether Jordan Levy and Christy Peter Mihos should be removed as members of the Massachusetts Turnpike Authority (Authority), for cause, pursuant to G. L. c. 30, § 9. On February 6, 2002, the Governor determined that they should be removed immediately. Levy and Mihos sought review in the nature of certiorari, pursuant to G. L. c. 249, § 4, in the county court. A single justice reserved and reported the matter to the full court. Levy and Mihos contend that (1) the reasons given for their removal are insufficient as matter of law to establish "cause"; (2) the decision to remove them is not supported by "substantial evidence"; (3) the decision to remove them was arbitrary and capricious, and based on bias; (4) they were denied procedural due process at their hearing; and (5) their removal violated principles of free speech under the First Amendment to the United States Constitution.3 We conclude that the dispute involves a difference of opinion over policy that, in the circumstances, does not constitute substantial evidence of cause to remove, and we vacate the order on that basis.
1. Background. In 1995, by St. 1995, c. 102, § 13, St. 1995, c. 273, § 1, the Legislature authorized the transfer of the Ted Williams Tunnel to the Authority, required the first ($100 million) of many financial contributions from it for the purpose of paying the Commonwealth's share of the Central Artery project (project), and directed that the Authority and the Executive Office of Transportation and Construction (EOTC) undertake a joint feasibility study (study) for the purpose of recommending the establishment of a structure to finance and then to operate the extensive network of infrastructure that would exist after the completion of the project. The study was completed in December, 1996. Before its recommendations were finalized, and because of the political volatility of decisions about tolls, the chairman of the Authority met with the Governor and legislative leaders to discuss the need to raise tolls to meet some of the financing requirements of the project. A consensus was reached that the Authority would raise tolls on the newly named metropolitan highway system4 (MHS) tunnels to two dollars in 1997, and, in January, 2002, would raise the toll on the MHS Boston extension from fifty cents to one dollar, and on the MHS tunnels from two dollars to three dollars. It was also anticipated that the Ted Williams Tunnel connection to the Boston extension of the turnpike would be completed by 2002, thus permitting turnpike travelers direct passage to Logan Airport.
The study led directly to the passage of St. 1997, c. 3, which created a new enabling statute for the Authority (G. L. c. 81A). St. 1997, c. 3, § 6. The changes to the Authority embodied in c. 81A were significant. Its highway assets were divided between the western Massachusetts turnpike and the MHS. The Authority was authorized to take possession of the project's facilities when they were completed, to incorporate them into the MHS, and to enter into an agreement with the Commonwealth assuming management responsibility for the construction of the project. A management agreement was executed in July, 1997, and among the many responsibilities assumed by the Authority was the responsibility for preparing and filing an annual "Finance Plan" with the Federal Highway Administration (FHA), setting forth the sources of revenue on which the Commonwealth was relying to pay its projected share of the increasing costs of the project.
In 1997, following the recommendations of the study, the Legislature required the Authority to pay $700 million toward the cost of the project. St. 1997, c. 11, § 61 (b). To make this payment, the Authority sold its first MHA bonds (1997 offering). In 1998, the Legislature amended G. L. c. 81A, § 12, to authorize the Authority and the Executive Office of Administration and Finance (EOAF) to enter into a long-term funding agreement for the operation and maintenance of the project's facilities once they were transferred to the Authority. The agreement, executed in February, 1999, provided for the payment of up to $1 billion by the Commonwealth to the Authority for these purposes, over a forty-year period. On the execution of this agreement, the Authority entered into a revised memorandum of understanding with the EOAF and the EOTC in which the Authority agreed to pay an additional $555 million toward the project's costs. To make this payment, the Authority sold additional MHS bonds (1999 offering). This additional contribution of Authority funds was necessary to meet the financial commitments contained in the finance plan for the project, which the Authority had submitted to the FHA in October, 1998.
As the project's costs continued to spiral upward through the year 2000, the Legislature required the Authority to pay $200 million into an infrastructure fund for the purpose of meeting these rising costs. St. 2000, c. 87, § 11. In addition, the Authority identified other sources of its own funds and assets that would be available to pay the Commonwealth's share of these costs in the finance plan which it submitted to the FHA in September, 2000, and August, 2001. Specifically, the Authority committed to using $185 million from the sale of its "Allston Landing" properties to Harvard University, $68 million in proceeds from the sale of other parcels, and, more generally, future revenue from the Authority's real estate assets, to meet the increasing costs of the project.
Included in the prospectuses issued for the 1997 and 1999 MHS bond offerings, as well as in the Authority's annual reports (prepared pursuant to its continuing disclosure obligation undertaken at the time of those offerings), were revenue projections based on assumed toll increases including the toll hikes planned in 1996 for January 1, 2002. There is, however, no covenant requiring the Authority to make these toll increases. The January, 2002, hikes were identified as the source of $60 million in annual additional revenue. This additional revenue was described as necessary to cover an increase in the Authority's net debt service costs from $5 million per year in 2001 and 2002 to $76 million5 per year in July, 2003, while maintaining various required debt service to revenue ratios, surpluses, and reserves. Each of the prospectuses included an updated toll study verifying the revenues which were projected to come from the toll increases.
These toll studies were in turn based on a number of stated assumptions, including:
A. The scheduled January, 2002, increase in tolls;
B. The completion of the connection between the Ted Williams Tunnel and the Boston extension of the MHS in 2002; and
C. That "normal economic conditions will prevail in the Boston metropolitan area, Massachusetts and the United States, i.e. there will not occur a severe recession, depression or national emergency."
The last two assumptions failed, the effect of which has been fewer automobiles on the Authority's roadways and therefore less toll revenues than projected. The Ted Williams Tunnel connection is not complete because of construction delays resulting from unforeseen and major water problems; and the economic downturn of the late 1990's was exacerbated by the terrorist attacks of September 11, 2001.
Levy and Mihos, who were appointed members of the Authority in 1998, had voted to approve the issuance of the 1999 MHS bonds, and the related prospectus, and were briefed at that time and on several occasions in 2001 regarding the background to the scheduled toll increases and the challenges faced by the Authority in meeting all of its necessary financial obligations.
In early August, 2001, pursuant to G. L. c. 81A, § 4 (j), the Authority held two public hearings regarding the proposed toll increases for January, 2002. Testimony was presented challenging the need for the toll increases and the inequity of the existing toll structure. Several Massachusetts legislators urged the Authority to defer the toll increases and look for alternative solutions to repay the Authority's debt.
Shortly after the hearings ended, Levy asked members of the Authority's staff for information about alternative revenue sources, including reinstating tolls at interchanges one through six and sixteen, and eliminating resident and volume discount programs. On October 10, 2001, Mihos asked staff members for information concerning the status of the proceeds from the sale of the Allston Landing property, which had been placed in an account the previous year. In addition, Levy and Mihos received the opinion of the Authority's general counsel, as well as independent bond counsel, that the 1997 and 1999 trust agreements and bond prospectuses did not require tolls to be raised on January 1, 2002, and that deferring the toll increase until July 1, 2002, would not have a material adverse impact that would require disclosure under securities laws.
The toll covenant in the trust agreements does not require any specific toll increase. It merely requires the Authority to maintain certain debt coverage ratios. The ratio applicable here is 1.2:1. Bond counsel further advised that the Authority had cash reserves sufficient to avert a deficit until 2004 if there were no increase in tolls. Paul Ladd, the Authority's chief financial officer, advised Levy and Mihos to...
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