Muskogee Urban Renewal Authority v. Excise Bd. of Muskogee County
| Decision Date | 27 June 1995 |
| Docket Number | No. 74424,74424 |
| Citation | 1995 OK 67,899 P.2d 624 |
| Parties | MUSKOGEE URBAN RENEWAL AUTHORITY and the City of Muskogee, Appellees, v. The EXCISE BOARD OF MUSKOGEE COUNTY, and Muskogee County, Oklahoma, Appellants, and First National Bank & Trust Company, Intervenor. |
| Court | Oklahoma Supreme Court |
On Appeal from the District Court in Muskogee County, Bruce Sewell, District Judge.
The City of Muskogee and the Muskogee Urban Renewal Authority sought declaratory judgment and a writ of mandamus directing the Muskogee County Excise Board to apportion ad valorem tax millage to the City of Muskogee as required by 11 O.S.Supp.1983, § 38-123, for the rehabilitation and improvement of the Severs Hotel Building. The district court concluded that 11 O.S.Supp.1983, §§ 38-120, et seq., are not violative of the Oklahoma Constitution, art. 10, §§ 26 and 27; that 11 O.S.Supp.1983, § 38-123 is not violative of the Oklahoma Constitution, art. 10, § 5; and, that 11 O.S.Supp.1983, § 38-123(4) is not an unconstitutional usurpation of the powers of a county excise board nor is it unconstitutionally vague. The district court issued a writ of mandamus directing the Muskogee County Excise Board to apportion ad valorem tax revenues to the City of Muskogee in accordance with 11 O.S.Supp.1983, §§ 38-120, et seq., and, in lieu of compliance with the writ, granted the Muskogee Urban Renewal Authority a money judgment against Muskogee County and the Muskogee County Excise Board in the amount of $45,141.21, together with post-judgment interest and future amounts of ad valorem tax revenues required to be apportioned to the City of Muskogee for rehabilitation and improvement of the Severs Hotel Building pursuant to 11 O.S.Supp.1983, § 38-123. The Muskogee County Excise Board appealed.
Trial Court Writ of Mandamus is Dissolved; Trial Court Judgment Reversed and Remanded.
John David Luton, Asst. Dist. Atty., Muskogee County, for appellant.
Steve Cousparis and Robert DuPriest, Muskogee, for appellees.
A. Carl Robinson, Robinson, Locke, Gage, Fite & Williams, Muskogee, for intervenor.
The first impression issue presented in this appeal is whether tax increment financing of urban renewal costs violates the state constitution. We hold that the statutory scheme for financing and paying the costs of urban renewal established in 11 O.S.Supp.1983, § 38-115 and § 38-120, et seq., does not in and of itself contravene the provisions of the Oklahoma Constitution. However, such tax increment financing is subject to the provisions of Okla. Const., art. 10, § 26, and any apportionments from ad valorem tax levies may not be used to pay for long-term debts which have not been certified and approved under the provisions of art. 10, § 26.
This controversy arises out of the refusal of the Muskogee County Excise Board to apportion ad valorem tax revenues to the City of Muskogee for payment of a thirty year bond debt of the Muskogee Urban Renewal Authority. The constitutional challenges were submitted to the district court on stipulated facts. In the early 1970's, the Muskogee Urban Renewal Authority was formed; a part of the inner city of Muskogee was determined to be blighted; and an urban renewal plan was approved for the urban renewal area. 1 The eleven-story Severs Hotel is located within the urban renewal area. On June 8, 1987, the urban renewal plan was amended to provide an urban renewal project for the rehabilitation of the Severs Hotel building and clearance and demolition of surrounding property.
On June 26, 1987, the City Council of the City of Muskogee approved a resolution declaring Lots 51 through 60 and Lots 21 through 30 of the Severs Subdivision of Block 10 and Wall Street between State and 5th Streets and 5th Street between Broadway and Court Streets (the Severs Hotel project) to be a "tax increment allocation district" 2 and providing that "any ad valorem tax millage authorized by law shall be appropriated to the City of Muskogee for use by the City of Muskogee or the Urban Renewal Authority" to fund the Severs Hotel project. 3
On July 21, 1987, the City of Muskogee, the Muskogee Urban Renewal Authority, the First National Bank and Trust Co. of Muskogee, and two developers, H. and M. Investments, an Oklahoma limited partnership of Tulsa, Oklahoma, and the Johnson Company of Tulsa, Oklahoma, entered into an agreement for the redevelopment of the Severs Hotel building and surrounding property "for the First National Bank and Trust Co. of Muskogee and other office facilities of approximately 60,000 square feet costing approximately $4,535,800.00." 4 The City of Muskogee agreed to file condemnation proceedings against the owners to assist in the acquisition of the parcel to be redeveloped; "to pay any cost above $780,000.00 for acquisition of the properties of the Owners, removal of asbestos from the Severs Hotel and any required relocation expenses(.)"; 5 and to convey the property to the Muskogee Urban Renewal Authority. The City of Muskogee also agreed that the city or the Muskogee Urban Renewal Authority would remove the asbestos from the Severs Hotel building. The First National Bank agreed to make a loan to the Muskogee Urban Renewal Authority necessary to pay "any and all costs over and above the $780,000.00 incurred by the City to complete acquisition, relocation, asbestos removal and other related expenses ..." which would be repaid within the next thirty years, "in accordance with a proposed Authority Bond...." 6
On August 26, 1987, the Muskogee Urban Renewal Authority became indebted to the First National Bank and Trust Co., Muskogee, Oklahoma, in the amount of $220,000.00 "to provide a portion of the financing for the costs of acquisition of land, relocation and removal of asbestos from the Severs Hotel ..." by the issuance of a single bond. 7 The bond provides that it is not an obligation of the City of Muskogee and that it is payable from the apportionment of millage allocated to the City and pledged to the Authority.
The City notified the county assessor's office of the designated tax increment allocation district. 8 On July 1, 1987, the Muskogee County Assessor certified the "base year net assessed valuation" 9 at $278,421.00 for the Severs Hotel project. On July 1, 1988, the assessed value of the Severs Hotel project was certified at $523,281.00. On June 8, 1989, the assessed value of the Severs Hotel project was certified at $1,491,612.00.
The City of Muskogee included the Severs Hotel project as an item in its estimate of need or budget for fiscal year 1988-1989. On October 12, 1988, the Muskogee County Excise Board refused to apportion ad valorem tax millage to the City of Muskogee for the Severs Hotel project. Again, the City of Muskogee included the Severs Hotel project as an item in its estimate of need for fiscal year 1989-1990. On August 8, 1989, the Muskogee County Excise Board again refused to apportion ad valorem tax millage to the City of Muskogee for the Severs Hotel project.
On June 22, 1989, the Muskogee Urban Renewal Authority and the City of Muskogee filed this action for declaratory judgment and a writ of mandamus directing the Muskogee County Excise Board to apportion ad valorem tax millage to the City of Muskogee as required by 11 O.S.Supp.1983, § 38-123, for the rehabilitation and improvement of the Severs Hotel project. In defense, the Muskogee County Excise Board challenged the constitutionality of 11 O.S.Supp.1983, §§ 38-120, et seq.
The district court concluded that 11 O.S.Supp.1983, §§ 38-120, et seq., authorizing tax increment allocation districts, are not violative of the Oklahoma Constitution, art. 10, §§ 26 and 27; that 11 O.S.Supp.1983, § 38-123, directing apportionment and specifying the formula for calculating the millage to be apportioned to the city in which the tax increment allocation district is located, is not violative of the Oklahoma Constitution, art. 10, § 5; and, that 11 O.S.Supp.1983, § 38-123(4) is not an unconstitutional usurpation of the powers of a county excise board nor is it unconstitutionally vague. The district court issued a writ of mandamus directing the Muskogee County Excise Board to apportion ad valorem tax revenues to the City of Muskogee in accordance with 11 O.S.Supp.1983, §§ 38-120, et seq., and, in lieu of compliance with the writ, granted the Muskogee Urban Renewal Authority a money judgment against Muskogee County and the Muskogee County Excise Board in the amount of $45,141.21, together with post-judgment interest and future amounts of ad valorem tax revenues required to be apportioned to the City of Muskogee for rehabilitation and improvement of the Severs Hotel Building pursuant to 11 O.S.Supp.1983, § 38-123. The Muskogee County Excise Board appealed the district court judgment.
Tax increment financing of the costs of urban renewal was enacted in 1983. 10 Tax increment financing is a statutory mechanism whereby municipalities may dedicate future ad valorem tax revenues for the payment of the costs of undertaking and carrying out urban renewal and urban redevelopment projects. Summarizing the 1983 legislation:
Section 1 amended 11 O.S.1981, § 24-108, which authorizes the Oklahoma Municipal Power Authority to issue bonds, and is not germane to the issues herein.
Section 2 amended 11 O.S.1981, § 38-115, which authorizes an Urban Renewal Authority to issue bonds, leaving intact the provision that notes and bonds of an urban renewal authority are not debts of the state or municipality. The amendment to § 38-115 allows payment of the principal and interest of urban renewal authority bonds from "taxes on incremental property values allocated to a special fund of the city and appropriated by the city to the Urban Renewal Authority."
Section 3, codified at § 38-120, permits the governing body of a municipality to designate an urban renewal area to be a...
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