Nebraska Public Power Dist. v. Hershey School Dist.

• Decision Date: 05 December 1980
• Docket Number: No. 42965,42965
• Court: Nebraska Supreme Court
• Parties: NEBRASKA PUBLIC POWER DISTRICT, a public corporation, Appellee, v. HERSHEY SCHOOL DISTRICT et al., Appellants.

Page 514

299 N.W.2d 514

207 Neb. 412

NEBRASKA PUBLIC POWER DISTRICT, a public corporation, Appellee, v. HERSHEY SCHOOL DISTRICT et al., Appellants.

No. 42965.

Supreme Court of Nebraska.

Dec. 5, 1980.

Syllabus by the Court

1. Public Utilities: Taxation: Constitutional Law. A public power district is a governmental subdivision of the state within the meaning of Neb.Const. art. VIII, § 2, and all of its property is exempt from taxation except as otherwise provided by the Constitution.

2. Taxation: Constitutional Law. The provisions of the Constitution in relation to taxation are not grants of power but are limitations on the taxing power of the state.

3. Legislature: Constitutional Law. The Legislature cannot circumvent an express provision of the Constitution by doing indirectly what it may not do directly.

4. Constitutional Law: Statutes. Constitutional provisions should receive a broader and more liberal construction than statutes, and constitutions are not subject to the rules of strict construction.

5. Public Utilities: Statutes: Constitutional Law. Neb.Rev.Stat. § 79-1370 (Cum.Supp.1980), by requiring public electric entities to make specific mandatory payments to school districts, violates the provisions of Neb.Const. art. VIII, § 11.

John P. Murphy, of Ruff & Murphy, North Platte, for appellants Hershey School Dist. et al.

Thomas M. Shanahan, of McGinley, Lane, Mueller, Shanahan & McQuillan, Ogallala, for appellant Ogallala School Dist.

John R. McPhail, Columbus, and Barlow, Johnson, DeMars & Flodman, Lincoln, for appellee.

Heard before KRIVOSHA, C. J., and BOSLAUGH, McCOWN, CLINTON, BRODKEY, WHITE, and HASTINGS, JJ.

McCOWN, Justice.

The plaintiff, Nebraska Public Power District, a public corporation, brought this action against the defendant school districts seeking a declaratory judgment that Neb.Rev.Stat. § 79-1370 (Cum.Supp.1980) is unconstitutional. The District Court for Lincoln County, Nebraska, found that § 79-1370 was unconstitutional and in violation of Neb.Const. art. VIII, § 11. The defendant school districts have appealed.

The plaintiff power district is a public corporation and a political subdivision of the State of Nebraska, and operates electrical generation and distribution systems within the State of Nebraska. Its property is exempt from taxation under Neb.Const. art. VIII, § 2.

In 1972, the plaintiff commenced construction of an electrical generation facility located near Sutherland, Nebraska. Construction of the facility continued over a period of years and involved some 1,500 construction workers. Many of their children were enrolled in various schools in the area. In 1978, the Legislature enacted § 79-1370 which became effective on March 16, 1978. That section provides: "In any year when the parents of at least ten per cent of the students or thirty-five students, whichever is less, attending public schools in any school district are employed in the construction of any electric generating facility, the public power district, municipality, electric cooperative, electric membership corporation, or other entity constructing and owning such facility shall pay to such school district one half of the amount derived by taking the total operating expense of such school district for the preceding year less any federal funds received and any state funds received under Chapter 79, article 13, divided by the average daily attendance of resident and nonresident students in such school district for the preceding school year, multiplied by the number of children of such employees attending such school district."

During the summer and fall of 1978, the school boards of the defendant school districts submitted their claims under the statute to the plaintiff. In December 1978, the plaintiff filed its petition seeking a declaratory judgment as to the constitutionality of § 79-1370. The action was tried in the District Court for Lincoln County, Nebraska, on July 3, 1979, and on August 1, 1979, the District Court issued its memorandum opinion finding that § 79-1370 is in violation of Neb.Const. art. VIII, § 11, and is unconstitutional. The defendant school districts have appealed.

Some historical background is appropriate. The original enabling act providing for the creation and operation of public power districts in Nebraska was enacted in 1933. Thereafter, protests arose over the loss of tax revenue which would be sustained by the state and its various governmental subdivisions if tax exempt public power districts acquired the taxable properties of privately owned electrical facilities. The Legislature then enacted statutes which required any public power district which acquired property of an existing privately owned utility to make payments "in lieu of taxes" to the various taxing entities in amounts equal to those paid by the private utility in the year immediately preceding the purchase or acquisition. Payments in lieu of taxes on real property purchased from other than a private utility were required on the same basis for the year of acquisition, but for subsequent years the appropriate county board of equalization was to determine the amount to be paid in lieu of taxes on such real estate "as equity and justice may require." See Neb.Rev.Stat. §§ 70-651 and 652 (Reissue 1958) (repealed 1959).

In the years that followed, case law in Nebraska and elsewhere raised substantial questions as to whether mandatory payments in lieu of taxes constituted an indirect attempt to tax public property which was otherwise exempt from taxation under the Constitution. In order to settle the issues, an amendment to the Constitution was proposed and adopted in 1958. That is the amendment involved here. Neb.Const. art. VIII, § 11, provides: "Every public corporation and political subdivision organized primarily to provide electricity or irrigation and electricity shall annually make the same payments in lieu of taxes as it made in 1957, which payments shall be allocated in the same proportion to the same public bodies or their successors as they were in 1957.

"The legislature may require each such public corporation to pay to the treasurer of any county in which may be located any incorporated city or village, within the limits of which such public corporation sells electricity at retail, a sum equivalent to five (5) per cent of the annual gross revenue of such public corporation derived from retail sales of electricity within such city or village, less an amount equivalent to the 1957 payments in lieu of taxes made by such public corporation with respect to property or operations in any such city or village. The payments in lieu of tax as made in 1957, together with any payments made as authorized in this section shall be in lieu of all other taxes, payments in lieu of taxes, franchise payments, occupation and excise taxes, but shall not be in lieu of motor vehicle licenses and wheel taxes, permit fees, gasoline tax and other such excise taxes or general sales taxes levied against the public generally.

"So much of such five (5) per cent as is in excess of an amount equivalent to the amount paid by such public corporation in lieu of taxes in 1957 shall be distributed in each year to the city or village, the school districts located in such city or village, the county in which such city or village is located, and the State of Nebraska, in the proportion that their respective property tax mill levies in each such year bear to the total of such mill levies."

In 1959, the Legislature implemented the constitutional amendment and provided that every public power district owning property with respect to which it made payments in lieu of taxes in 1957 shall continue to pay annually the same amounts in the same manner so long as it continues to own such property. See Neb.Rev.Stat. § 70-651.01 (Reissue 1976). Former §§ 70-651 and 652 were repealed.

The appellant school districts contend that the Legislature has plenary power over a public corporation and that the provisions of § 79-1370 constitute only a statutory directive for the use of public funds held by a public power district and do not constitute a tax or a payment in lieu of taxes. The school districts argue that the obligation imposed upon a public power district by § 79-1370 should be called an impact charge for services rendered for the benefit of school children whose presence in the area was caused by and was for the benefit of the power districts.

The school districts contend that the provisions of the statute are comparable to the provisions of federal law which provide impact funds to local schools to offset the increased costs and burden caused by the attendance of children whose parents are involved in federal governmental activity. The obvious distinction between the federal law and § 79-1370 is that the federal legislation simply appropriates federal funds subject to the control of Congress.

In effect, the appellant school districts contend that because the state has plenary power over a public corporation, the state can require a public corporation to expend its funds for a public purpose, subject only to the same constitutional limitations, as though it were directing the appropriation and disposition of general funds of the state. We disagree.

Neb.Const. art. VIII, § 11, provides that the in lieu of tax payments authorized by the section shall be in lieu of all other taxes and payments in lieu of taxes with specified exceptions. The amendment specifies not only which taxes and payments may not be assessed, but those which may be.

The critical issue here is whether the payments imposed on a public power district under the provisions of § 79-1370 are taxes or payments in lieu of taxes in violation of art. VIII, § 11.

Neb.Const. art. VIII, § 2, is also relevant here. It provides, in part: "The property of the state and its governmental subdivisions shall be exempt from taxation." In Platte Valley Public Power &...