Neske v. City of St. Louis

• Decision Date: 01 May 2007
• Docket Number: SC 87977.,No. SC 87976,SC 87976
• Parties: Thomas NESKE, et al., Respondents, v. CITY OF ST. LOUIS, et al., Appellants. Firemen's Retirement System, et al., Respondents, v. City of St. Louis, et al., Appellants.
• Court: Missouri Supreme Court

218 S.W.3d 417

Thomas NESKE, et al., Respondents, v. CITY OF ST. LOUIS, et al., Appellants.

Firemen's Retirement System, et al., Respondents, v. City of St. Louis, et al., Appellants.

Nos. SC 87976, SC 87977.

Supreme Court of Missouri, En Banc.

March 13, 2007.

Rehearing Denied May 1, 2007.

COPYRIGHT MATERIAL OMITTED

Jay A. Summerville, Jeffery T. McPherson, Deanna M. Wendler Modde, Armstrong Teasdale, LLP, St. Louis, for Appellants in cause nos. SC 87976 & SC 87977.

James C. Owen, Katherine S. Walsh, Chesterville, for Respondents in cause no. SC 87976.

Daniel G. Tobben, David R. Bohm, Jeffrey R. Schmitt, St. Louis, for Respondents in cause no. SC 87977.

MARY R. RUSSELL, Judge.

The City of St. Louis¹ appeals the trial court's determination that it was required to pay the entire amount certified by the City's Police Retirement System ("PRS") and its Firemen's Retirement System ("FRS") in past fiscal years. The trial court's decision is affirmed, as there is no Hancock Amendment violation in that there is no new or increased activity required of the City, there is no conflict with Mo. Const. art. VI, section 26(a), and the City is required to pay the entire amount certified.

Background

The PRS and the FRS are created and governed by statute.² The PRS and the FRS are administered by separate boards of trustees. The boards of trustees hire an actuary to conduct a valuation of the retirement systems' assets and to calculate the City's contributions. On the basis of the actuarial evaluation, the boards of trustees submit the contribution amounts to the City's Board of Estimate and Apportionment ("E & A"). E & A is tasked with reviewing and revising the City's yearly proposed budget and with submitting the budget for the approval of the City's Board of Aldermen. Section 5.14.030, City Code. This litigation arose after E & A failed to approve the full contribution amount that the PRS and the FRS trustees certified as the City's payment. This opinion jointly addresses the City's appeals in both the PRS the FRS cases because the issues are similar.

Facts Relating to the PRS

The PRS trustees certified to E & A that the City's payable amount for fiscal year 2003-2004 was $9,575,892. E & A's proposed budget allocated $4,115,600 as the City's contribution to the PRS, and that amount was adopted by the Board of Aldermen.

The PRS trustees then sued the City, seeking declaratory and injunctive relief and damages, alleging that the City was required by section 86.344 to pay the amount certified.³ The parties all moved for summary judgment. The trial court found in the PRS's favor, holding that the City was required to pay the entire amount certified. It also concluded that the City lacked standing to assert its Hancock Amendment argument, and rejected its other arguments. The City appeals.

Facts Relating to the FRS

The FRS trustees certified to E & A that the City's payable amount for fiscal year 2003-2004 was $8,913,102, and for fiscal year 2004-2005 was $13,765,477. E & A's proposed budget for fiscal year 2003-2004 allocated $1,884,356 as the City's contribution to the FRS and $193,799 as the City Airport Commission's contribution to the FRS. Those amounts were adopted by the Board of Aldermen. E & A's proposed budget for fiscal year 2004-2005 allocated $1,862,061 as the City's contribution to the FRS, and that amount was adopted by the Board of Aldermen.

The FRS and individual members of the FRS trustees then sued the City, seeking declaratory and injunctive relief and damages, alleging that the City was required by section 87.355 and Chapter 4.18, City Code to pay the amount certified. The parties all moved for summary judgment. The trial court found in the FRS's favor, finding that the City was required to pay the entire amount certified. The court rejected the City's contention that the FRS's claims were barred by the Hancock Amendment. The court found that the City waived its ability to raise the Hancock Amendment by not pleading it as an affirmative defense and because it lacked standing to assert a challenge based on the Hancock Amendment. The City appeals.

Jurisdiction

These cases were transferred to this Court by the court of appeals pursuant to Rule 83.02, as the cases present issues of general interest and importance. This Court has jurisdiction pursuant to Mo. Const. art. V, section 10.

Standards of Review

Appellate review of summary judgment is de novo, and the decision may be affirmed on different grounds than those relied on by the trial court. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 387-88 (Mo. banc 1993).

In general, constitutional provisions are subject to the same rules of construction as other laws, except that constitutional provisions are given a broader construction due to their more permanent character. StopAquila.org v. City of Peculiar, 208 S.W.3d 895, 899 (Mo. banc 2006). This Court is required to give due regard to the primary objectives of the constitutional provision under scrutiny, as viewed in harmony with all related provisions. State ex rel. Upchurch v. Blunt, 810 S.W.2d 515, 516 (Mo. banc 1991).

Hancock Amendment Claims

The City argues that the trial court erred in entering judgment in favor of the PRS and the FRS because requiring the City to pay the entire amounts certified violates Missouri's Hancock Amendment.⁴

In relevant part, the Hancock Amendment states:

The state is hereby prohibited from reducing the state financed proportion of the costs of any existing activity or service required of counties or other political subdivisions. A new activity or service or an increase in the level of any activity or service beyond that required by existing law shall not be required by the General Assembly or any state agency of counties or other political subdivisions, unless a state appropriation is made and disbursed to pay the county or other political subdivision for any increased costs.

Mo. Const. art. X, section 21.

Mo. Const. art. X, section 21 prevents the State from requiring local governments to begin a new mandated activity, or to increase the level of a previously mandated activity beyond its 1980-1981 level, without appropriation of sufficient state monies to finance the costs of the new or increased activity. Fort Zumwalt Sch. Dist. v. State, 896 S.W.2d 918, 921 (Mo. banc 1995). This portion of the Hancock Amendment is violated if both (1) the State requires a new or increased activity or service of a political subdivision and (2) the political subdivision experiences increased costs in performing that activity or service without funding from the State. Miller v. Dir. of Revenue, 719 S.W.2d 787, 788-89 (Mo. banc 1986).

The City argues that the Hancock Amendment is violated if the City is required to pay the entire amounts certified by the PRS and the FRS for the years at issue because those amounts exceed the amount the City paid in 1981.⁵ This argument fails because despite the fact that the dollar amounts certified for the City to contribute to the PRS and the FRS are greater than the dollar amounts certified for the 1980-1981 fiscal year, the City's requirements to pay are unchanged—the City is still required to pay the entire amounts certified by the PRS and the FRS boards of trustees. There is no new or increased activity.

The Hancock Amendment is aimed at limiting taxes by controlling and limiting governmental revenue and expenditure increases. See Boone County Court v. State of Mo., 631 S.W.2d 321, 325 (Mo. banc 1982).⁶ The amendment's official ballot title stated that it prohibited "state expansion of local responsibility without state funding." Id. The increased cost of funding the PRS and the FRS is not an expansion of the City's long-existing responsibility.

The City has been required to fund the PRS and the FRS pursuant to an actuarial formula that has not changed since Hancock's adoption in 1981. The City does not challenge the actuarial formula used to calculate the City's payments. Inevitably, the amount required by the formula fluctuates, yielding varying dollar figures at any given actuarial assessment as more police and firemen are employed, as more retire, as wages are altered, and as a function of inflation. Hancock's mission to control taxes is not thwarted if the actuarial formula yields increased certified amounts payable to the PRS and the FRS. The change in the certified amount derived from the actuarial calculations is not the measure of whether Hancock is violated. The question is whether the City has been mandated to bear new responsibilities in relation to this activity. It has not.

The City argues that State ex rel. Sayad v. Zych, 642 S.W.2d 907,⁷ controls the PRS and the FRS cases. Zych is distinguishable insofar as the arguments in Zych focused on the actual dollar amount appropriated in 1980-1981.⁸ In the PRS and the FRS cases, the focus is not on whether the dollar amounts requested of the City have increased, but rather on whether there has been any alteration to the long-used actuarial formula that produces the dollar amounts at issue.

Where there is no mandate that the City take on a new responsibility, but only a continued responsibility for it to fund an existing activity according to a previously-existing formula, there is no Hancock violation. See State ex rel. Pub. Defender Comm'n v. County Court of Greene County, 667 S.W.2d 409, 414 (Mo. banc 1984) (finding there was no new or increased activity in violation of Hancock where the county's existing statutory obligation was not changed by the challenged action).

No Conflict with Mo. Const. art. VI, section 26(a)

The City also argues that it should not be required to pay the entire amounts certified for the years at issue to the PRS and the FRS because paying those amounts would violate Mo. Const. art. VI, section 26(a)⁹ by forcing the City to become indebted beyond its income. The City contends that paying the amounts...