State ex rel. Tomasic v. Kansas City
| Decision Date | 21 June 1985 |
| Docket Number | No. 57951,57951 |
| Citation | 701 P.2d 1314,237 Kan. 572 |
| Parties | STATE of Kansas, ex rel., Nick A. TOMASIC, Wyandotte County District Attorney, Kansas City, Kansas, Relator, v. KANSAS CITY, Kansas, a Municipal Corporation Organized and Existing Under the Laws of the State of Kansas, Respondent, and City of Kansas City, Kansas, Wyandotte County Joint Port Authority, a Public Body Corporate and Politic, Respondent. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. Article 11, § 1 of the Kansas Constitution provides for a "uniform and equal rate of assessment and taxation."
2. Property which is subject to taxation is taxed at a uniform and equal rate; however, tax exemptions are constitutionally permissible.
3. The legislature may provide statutory exemptions if such exemptions have a public purpose and promote the general welfare.
4. In determining the constitutionality of statutory exemptions, four elements are considered: (1) Whether the exemption furthers the public welfare; (2) whether the exemption provides a substantial, peculiar benefit; (3) whether the exemption provides for large accumulations of tax-exempt property; and (4) whether the exemption is an improper or preferential classification of property.
5. The legislature itself is the judge of which exemptions are in the public interest. Therefore, the court will exercise a policy of judicial restraint unless it is found that the judgment of the legislature was entirely devoid of any rational basis.
6. By creating a statutory exemption from ad valorem property tax for industrial revenue bond property, the legislature clearly sought to further the "public welfare" purpose of the Economic Development Revenue Bond Act which is stated in K.S.A. 12-1740, and which was found to be constitutionally valid in State, ex rel., v. City of Pittsburg, 188 Kan. 612, 364 P.2d 71 (1961).
7. The State of Kansas receives substantial, peculiar, and direct benefits from commercial property financed with industrial revenue bonds and exempt from taxation under K.S.A. 79-201a Second by attracting new industries into the state, thus creating economic growth and providing a means of livelihood for citizens of the state.
8. The question of whether a statutory tax exemption will result in overly large accumulations of exempt property is one of public policy with which the court will not interfere.
9. The tax exemption found in K.S.A. 79-201a Second is based on the ownership of the property by the municipality or county, not on the basis of what type of entity leases the property. Since, under K.S.A. 12-1740, any entity may become a lessee of industrial revenue bond property as long as the city or county determines the purpose of the act would be served, the tax exemption statute does not constitute an improper or preferential classification of property.
10. Article 2, § 17 of the Kansas Constitution is construed to mean laws of a general nature which affect the people of the state generally must apply with geographical uniformity. Following Stephens v. Snyder Clinic Ass'n, 230 Kan. 115, 631 P.2d 222 (1981).
11. States are subject to the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution in the exercise of their taxing power, but flexibility and variety appropriate to reasonable taxation schemes are permitted. The state taxation scheme must have a rational basis with classification based on differences having a fair and substantial relation to the object of the legislation.
12. The Equal Protection Clause of the Fourteenth Amendment to the United States Constitution finds its counterpart in Sections 1 and 2 of the Bill of Rights of the Kansas Constitution.
13. The uniform and equal rate of assessment and taxation provision of art. 11, § 1 of the Kansas Constitution is, in principle and effect, substantially identical to the principle of equality embodied in the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution.
14. Favorable tax treatment for industrial revenue bond property will promote the development of new industries within the state as well as encourage the retention of old and so bears a rational relation to the otherwise legitimate purpose of the act.
15. Article 2, § 1 of the Kansas Constitution vests legislative power in the legislature.
16. Article 2, § 21 of the Kansas Constitution sanctions delegation of legislative power in limited circumstances. "The legislature may confer powers of local legislation and administration upon political subdivisions." The constitution operates to limit the legislation conferred to matters of local concern with which the city or county may be expected to deal more effectively than the legislature.
17. The questions of whether to impose payments in lieu of taxes and whether a particular project merits funding by industrial revenue bonds are matters of uniquely local concern.
18. Standards to guide the exercise of delegated power may be either general or specific in nature.
19. In delegating powers, the legislature must fix adequate general standards, but may delegate to the local authority the administrative function of "filling in the details."
20. Article 11, § 9 of the Kansas Constitution prohibits the state, as a state, from engaging in works of internal improvement, with limited exceptions.
21. Internal improvements are not prohibited per se. The state may authorize public or private corporations or individuals to construct internal improvements.
22. To determine whether an instrument is a lease, or creates a relation other than that of lessor and lessee, the intention of the parties as ascertained from the instrument itself will govern. Where the owner of land leases it for a period of years at a stipulated rental, and the contract of lease contains a stipulation that the lessee shall have the right, during or at the expiration of the lease, to purchase the premises, if the lessee so elects, at a fixed price, there is no complete sale. The lessee does not acquire an estate in the land beyond the leasehold until the lessee has elected to accept the offer and has paid and tendered the purchase price set out in the contract. Following Misco Industries, Inc. v. Board of Sedgwick County Comm'rs, 235 Kan. 958, 685 P.2d 866 (1984).
23. Taxation of divided interests in real property is not within the scheme of the Kansas taxation statutes.
24. K.S.A. 12-1742 provides that cities may impose payments in lieu of taxes for otherwise exempt industrial revenue bond property. The language of the statute is permissive rather than mandatory.
25. In determining whether there is adequate consideration for transfer of property by the state to a private entity, the entire transaction is to be taken as a whole. Consideration may consist, at least in part, of the public benefit which flows from the transfer.
26. Upon consideration of this quo warranto action, the record is examined and it is held: (1) K.S.A. 79-201a Second does not violate the Kansas Constitution or the United States Constitution in any of the particulars charged by the relator, and (2) the challenged actions taken or proposed to be taken by the respondents are legal. The Wyandotte County District Attorney's writ of quo warranto is denied.
Nick A. Tomasic, Dist. Atty., argued the cause and was on the brief, for relator.
Robert J. Watson, City Atty., and Norman E. Gaar, of Gaar & Bell, Overland Park, argued the cause for respondents, and Jody Boeding, Asst. City Atty., Patricia K. Hirsch, of Gaar & Bell, Overland Park, and John F. Steineger, Jr., Kansas City, were with them on the brief for respondent Kansas City, Kan., and John P. Biscanin, Kansas City, was with them on the brief for respondent City of Kansas City, Kan., Wyandotte County Joint Port Authority.
This is an original action in quo warranto brought by Nick A. Tomasic, Wyandotte County District Attorney, (relator) challenging the constitutionality of K.S.A. 79-201a Second, as amended, and challenging the legality of certain actions taken or proposed to be taken by the City of Kansas City, Kansas and the City of Kansas City, Kansas--Wyandotte County Joint Port Authority (respondents) under an Inducement Agreement with General Motors Corporation (GM).
Due to the urgency of the matter and public interest involved, this action was given a preferential setting in our court. This case has been briefed thoroughly by the parties and was argued on April 2, 1985. This opinion supplements our brief opinion announcing the decision of the court on April 22, 1985, in State ex rel. Tomasic v. City of Kansas City, 237 Kan. 164, 698 P.2d 382.
The Inducement Agreement between GM and the City and Port Authority relates to the acquisition and development of an industrial plant for the assembly and manufacture of vehicles and automotive components in the Fairfax District of Kansas City, Kansas. Under the agreement the plant would be leased to GM and financed through the issuance by the City of Kansas City, Kansas of industrial revenue bonds (IRB's).
The project site, consisting of approximately 568 acres of land, is presently owned in part by the City of Kansas City, Kansas and in part by the Joint Port Authority. That portion owned by the City is presently used for airport purposes and is operated by the Port Authority under a lease agreement with the City. That portion owned by the Port Authority is the site of a proposed industrial park. The Port Authority acquired its interest in the project site for nominal consideration pursuant to a conveyance from the City in 1979. To provide the project site, the City and Port Authority propose to close the airport, and the Port Authority proposes to convey its interest in the site to the City for nominal consideration.
In furtherance of its plans for development, the City of Kansas City, Kansas, has adopted a resolution of intent to issue approximately $775...
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