Maready v. City of Winston-Salem, WINSTON-SALEM

Citation342 N.C. 708, 467 S.E.2d 615
Case DateMarch 08, 1996
CourtUnited States State Supreme Court of North Carolina

P. Eugene Price, Jr., Forsyth County Attorney; Ronald G. Seeber, Winston-Salem City Attorney; and Petree Stockton, L.L.P. by J. Robert Elster and Julia C. Archer, Winston-Salem, for Winston-Salem Business, Inc., defendant-appellants and -appellees.

Michael F. Easley, Attorney General; John R. McArthur, Chief Counsel; Andrew A. Vanore, Jr., Chief Deputy Attorney General; and W. Wallace Finlator, Jr., and Jane T. Friedensen, Assistant Attorneys General, Raleigh, for defendant-intervenor-appellant and -appellee.

Andrew L. Romanet, Jr., General Counsel, and Gregory F. Schwitzgebel III, Assistant General Counsel, Raleigh, for the North Carolina League of Municipalities.

James B. Blackburn III, General Counsel, and Kimberly M. Grantham, Assistant General Counsel, Raleigh, for the North Carolina Association of County Commissioners, amici curiae.

Everett Gaskins Hancock & Stevens by Hugh Stevens and C. Amanda Martin, Raleigh, for Piedmont Publishing Company and The North Carolina Press Association, amici curiae.

Harry Pavilak & Associates by David C. Harr, Myrtle Beach, SC, for Southeastern Legal Foundation, amicus curiae.

The Sanford Law Firm, P.L.L.C. by Ernest C. Pearson, Robert M. Jessup, Jr., and Ellen D. Andrews, Raleigh, for The North Carolina Economic Developers Association, amicus curiae.

Poyner & Spruill, L.L.P. by S. Ellis Hankins, Raleigh, for ElectriCities of North Carolina, Inc., amicus curiae.

Stam, Fordham & Danchi, P.A. by Paul Stam, Jr., Apex, for John Locke Foundation, Inc., amicus curiae.

Kary L. Moss, Detroit, MI, for The Corporation for Enterprise Development, The Calumet Project for Industrial Jobs, Share the Wealth, The Grass Roots Policy Project, The Maurice and Jane Sugar Law Center for Economic and Social Justice, and The Federation for Industrial Retention and Renewal, amici curiae.

WHICHARD, Justice.

Plaintiff-appellant, William F. Maready, instituted this action against the City of Winston-Salem, its Board of Aldermen, Forsyth County, its Board of Commissioners, and Winston-Salem Business, Inc. Plaintiff contends that N.C.G.S. § 158-7.1, which authorizes local governments to make economic development incentive grants to private corporations, is unconstitutional because it violates the public purpose clause of the North Carolina Constitution and because it is impermissibly vague, ambiguous, and without reasonably objective standards. Plaintiff also argues that the local governing bodies violated the State's Open Meetings Law by voting on and deciding grant matters in closed sessions.

Following a three-day evidentiary hearing and oral argument, the trial court found N.C.G.S. § 158-7.1 unconstitutional, enjoined defendants from making further incentive grants or otherwise committing public funds pursuant to that statute, denied plaintiff's motion for a mandatory injunction to require the City and County to recover incentive grants from recipients thereof, and dismissed the claim that defendants violated the Open Meetings Law. All parties appealed, and on 2 November 1995 this Court granted defendant-appellants' petition for discretionary review prior to a determination by the Court of Appeals.

Plaintiff is a citizen and resident of Winston-Salem and Forsyth County. He owns real and personal property upon which Winston-Salem and Forsyth County levy property taxes. Defendants are the City of Winston-Salem, its Board of Alderman, Forsyth County, and its Board of County Commissioners. Winston-Salem Business, Inc. ("WSBI"), also a defendant, is the name under which the Forsyth County Development Corporation does business. It is a not-for-profit corporation formed by private individuals in Forsyth County and is an arm of the Winston-Salem Chamber of Commerce. The State of North Carolina, ex rel. Michael F. Easley, Attorney General, is a party defendant by way of voluntary intervention as a matter of right pursuant to Rule 24(a)(1) of the North Carolina Rules of Civil Procedure and N.C.G.S. § 1-260, in that the action seeks to have an act of the General Assembly of the State of North Carolina declared unconstitutional.

This action challenges twenty-four economic development incentive projects entered into by the City or County pursuant to N.C.G.S. § 158-7.1. The projected investment by the City and County in these projects totals approximately $13,200,000. The primary source of these funds has been taxes levied by the City and County on property owners in Winston-Salem and Forsyth County. City and County officials estimate an increase in the local tax base of $238,593,000 and a projected creation of over 5,500 new jobs as a result of these economic development incentive programs. They expect to recoup the full amount of their investment within three to seven years. The source of the return will be revenues generated by the additional property taxes paid by participating corporations. To date, all but one project has met or exceeded its goal.

The typical procedures the City and County observe in deciding to make an economic development incentive expenditure are as follows: A determination is made that participation by local government is necessary to cause a project to go forward in the community. Officials then apply a formula set out in written guidelines to determine the maximum amount of assistance that can be given to the receiving corporation. The amounts actually committed are usually much less than the maximum. The expenditures are in the form of reimbursement to the recipient for purposes such as on-the-job training, site preparation, facility upgrading, and parking. If a proposal satisfies the guidelines as well as community needs, it is submitted to the appropriate governing body for final approval at a regularly scheduled public meeting. If a project is formally approved, it is administered pursuant to a written contract and to the applicable provisions and limitations of N.C.G.S. § 158-7.1.

Article V, Section 2(1) of the North Carolina Constitution provides that "[t]he power of taxation shall be exercised in a just and equitable manner, for public purposes only." In Mitchell v. North Carolina Indus. Dev. Fin. Auth., 273 N.C. 137, 159 S.E.2d 745 (1968), Justice (later Chief Justice) Sharp, writing for a majority of this Court, stated:

The power to appropriate money from the public treasury is no greater than the power to levy the tax which put the money in the treasury. Both powers are subject to the constitutional proscription that tax revenues may not be used for private individuals or corporations, no matter how benevolent.

Id. at 143, 159 S.E.2d at 749-50.

In determining whether legislation serves a public purpose, the presumption favors constitutionality. State v. Furmage, 250 N.C. 616, 621, 109 S.E.2d 563, 567 (1959). Reasonable doubt must be resolved in favor of the validity of the act. Wells v. Housing Auth. of Wilmington, 213 N.C. 744, 749, 197 S.E. 693, 696 (1938). The Constitution restricts powers, and powers not surrendered inhere in the people to be exercised through their representatives in the General Assembly; therefore, so long as an act is not forbidden, its wisdom and expediency are for legislative, not judicial, decision. McIntyre v. Clarkson, 254 N.C. 510, 515, 119 S.E.2d 888, 891-92 (1961).

In exercising the State's police power, the General Assembly may legislate for the protection of the general health, safety, and welfare of the people. Martin v. North Carolina Hous. Corp., 277 N.C. 29, 45, 175 S.E.2d 665, 674 (1970). It may "experiment with new modes of dealing with old evils, except as prevented by the Constitution." Redevelopment Comm'n of Greensboro v. Security Nat'l Bank of Greensboro, 252 N.C. 595, 612, 114 S.E.2d 688, 700 (1960). The initial responsibility for determining what constitutes a public purpose rests with the legislature, and its determinations are entitled to great weight. In re Housing Bonds, 307 N.C. 52, 57, 296 S.E.2d 281, 285 (1982).

The enactment of N.C.G.S. § 158-7.1 leaves no doubt that the General Assembly considers expenditures of public funds for the promotion of local economic development to serve a public purpose. Under this statute,

[e]ach county and city in this State is authorized to make appropriations for the purposes of aiding and encouraging the location of manufacturing enterprises, making industrial surveys and locating industrial and commercial plants in or near such city or in the county; encouraging the building of railroads or other purposes which, in the discretion of the governing body of the city or of the county commissioners of the county, will increase the population, taxable property, agricultural industries and business prospects of any city or county. These appropriations may be funded by the levy of property taxes pursuant to G.S. 153A-149 and 160A-209 and by the allocation of other revenues whose use is not otherwise restricted by law.

N.C.G.S. § 158-7.1(a) (1994) (emphasis added). When making amendments to chapter 158 and adding other provisions designed to promote economic development, the General Assembly mandated: "This act, being necessary for the prosperity and welfare of the State and its inhabitants, shall be liberally construed to effect these purposes." Act of July 23, 1993, ch. 497, sec. 25, 1993 N.C. Sess. Laws 1932, 1961 (amending the Constitution to permit cities and counties to issue bonds to finance the public portion of economic development projects and to authorize counties and cities to accept as consideration for a conveyance or lease of...

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