Stopaquila.Org v. City of Peculiar

• Decision Date: 19 December 2006
• Docket Number: No. SC 87302.,SC 87302.
• Parties: STOPAQUILA.ORG, et al., Appellants, v. CITY OF PECULIAR, Missouri, Respondent.
• Court: Missouri Supreme Court

208 S.W.3d 895

STOPAQUILA.ORG, et al., Appellants, v. CITY OF PECULIAR, Missouri, Respondent.

No. SC 87302.

Supreme Court of Missouri, En Banc.

December 19, 2006.

COPYRIGHT MATERIAL OMITTED

Gerard D. Eftink, Raymore, for Appellants.

Stanley D. Davis, John C. Dods, III, Joseph M. Rebein, Elizabeth C. Burke, E. Sid Douglas III, David W. Bushek, Kansas City, James E. Thompson, Jr., Harrisonville, for Respondent.

Eric Cunningham, Cape Girardeau City Atty., Cape Girardeau, Morley Swingle, Cape Girardeau County Prosecuting Atty., Jackson, Stanley J. Wallach, City of Fenton Assistant City Atty., The Wallach Law Firm, St. Louis, C. Todd Ahrens, Hannibal City atty., Ahrens, Hale & Lemon, LLC, Hannibal, B. Allen Garner, City Counselor, Independence, Nathan M. Nickolaus, City Atty., Jefferson City, William D. Geary, Assistant City Atty., Kansas City, Daniel Wichmer, City Atty., Springfield, Lisa M. Robertson, City Atty., St. Joseph, James B. Lowery, David M. Kurtz, Smith, Lewis, LLP, Columbia, Thomas M. Byrne, General Counsel, St. Louis, for Amicus Curiae.

LAURA DENVIR STITH, Judge.

Appellants sued the City of Peculiar, arguing that Peculiar's board of aldermen acted beyond its constitutional authority in authorizing the issuance of $140 million in 30-year revenue bonds for construction of a power plant to be leased by Peculiar to Aquila, a private power company. Appellants argue that article VI, section 27 of the Missouri Constitution requires voter approval for issuance of bonds to build a power plant. The trial court rejected this argument, finding that the Missouri Constitution authorized the bonds to issue through the approval of a majority of the Peculiar board.

This Court agrees. While article VI, section 27 authorizes issuance of revenue bonds only upon voter approval, here Peculiar relied on article VI, section 27(b). That section specifically authorizes the issuance of revenue bonds upon approval by a majority of the governing body of a municipality for a facility that, as here, is not to be operated by the municipality for revenue-producing purposes but is to be leased to and operated by a private corporation for a commercial purpose. The judgment of the trial court is affirmed.

I. FACTUAL AND PROCEDURAL BACKGROUND

The relevant facts are not in dispute. Aquila, a utility company, owns land in Cass County near Peculiar. Aquila sought authority from Cass County and from Peculiar to undertake the following projects: (1) construction of electric power generating facilities on property located two miles south of Peculiar in an unincorporated section of Cass County; (2) construction of a transmission substation facility in an unincorporated section of Cass County northwest of Peculiar; and (3) improvement of certain transmission lines in Cass County and Peculiar. The parties concede that the revenue bonds were to be issued for construction of a power plant by Aquila.

Peculiar and Aquila drafted an "Economic Development Agreement" that, if approved, would dictate the terms of the project's construction, financing, maintenance and operation. Under the Agreement: (1) Peculiar would issue $140 million in 30-year revenue bonds to finance the project; (2) Aquila would convey title to the land and facilities to Peculiar along with $700,000 in exchange for the bonds, thereby making Aquila the bondholder; (3) Peculiar would lease the land and facilities back to Aquila during the term of the bonds and use the revenue from the lease to retire the bonds; (4) Aquila would retain any revenue from the sale of electricity generated by the power plant; and (5) Aquila would have an option to purchase the power plant for $1,000 upon retirement of the bonds.

At all times, Aquila would be solely responsible for customer billings, construction, operation, insurance, and maintenance of the facilities. The Agreement also provided that Aquila would be free from tax liability for the duration of the lease,¹ but it would make payments in lieu of taxes ("PILOTs") to Cass County, the Raymore-Peculiar School District, the Cass County Library District, and the West Peculiar Fire Protection District during the lease term. The basic terms of the Agreement were presented to the Peculiar board on December 7, 2004, and it gave its preliminary approval by a 4-2 vote.

Before the Peculiar board approved the project, StopAquila.org and individual plaintiffs who either live in Peculiar or near to the proposed construction site (hereinafter "StopAquila" or "Appellants") filed a petition seeking to enjoin the project and a declaration that the bond issue violated article VI, sections 27 and 27(a) of the Missouri Constitution. The petition alleges that sections 27 and 27(a) require that issuance of bonds for a power plant be submitted to a public vote and that plaintiffs would be damaged in several respects by the project, including erosion of property values and a loss of tax revenue from the tax abatement.² Peculiar filed a counter-claim seeking a declaration that article VI, section 27(b) of the Missouri Constitution authorizes the issuance of the bonds upon approval by its board.

On December 27, 2004, the trial court ruled that the Peculiar board was authorized under article VI, section 27(b) to approve issuance of the revenue bonds. Peculiar issued the bonds on or about December 31, 2004. During the pendency of this appeal, Aquila constructed the power plant, which is now operational.³

II. STANDARD OF REVIEW

This Court reviews the trial court's interpretation of the Missouri Constitution de novo. State v. Beine, 162 S.W.3d 483, 490 (Mo. banc 2005). 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. State ex inf. Ashcroft ex rel. Bell v. City of Fulton, 642 S.W.2d 617, 620 (Mo. banc 1982). "[C]onstitutional provisions are to be construed as mandatory unless, by express provision or by necessary implication, a different intention is manifest." State ex inf. Dalton v. Dearing, 364 Mo. 475, 263 S.W.2d 381, 385 (Mo. banc 1954). Here, this Court must decide whether sections 27, 27(a), or 27(b) of article VI of Missouri's Constitution authorized Peculiar's approval of issuance of the revenue bonds at issue. "Statutory cities, acting without a constitutional home rule charter, cannot act without specific grants of power." Cape Motor Lodge, Inc. v. City of Cape Girardeau, 706 S.W.2d 208, 212 (Mo. banc 1986), citing State ex rel. Mitchell v. City of Sikeston, 555 S.W.2d 281 (Mo. banc 1977).

III. ANALYSIS

A. Historical Authorization for Issuance of Revenue Bonds.

For almost as long as municipalities have sought to issue revenue bonds, the propriety of the bond issue has been the subject of litigation. See, e.g., State ex rel. Lexington & St. Louis R.R. Co. v. Saline County Court, 45 Mo. 242 (Mo. banc 1870) (railroad sought to compel issuance of bonds where authorized by vote); Cass County v. Green, 66 Mo. 498 (Mo. banc 1877) (injunction to cancel Cass County bonds). Prior to the adoption of the Missouri Constitution of 1945, courts had to undertake complex efforts at statutory interpretation to determine whether a municipality had authority to issue particular types of revenue bonds without voter approval.⁴

The 1945 Missouri Constitution authorized municipalities to issue revenue bonds for municipally owned and operated "revenue producing water, gas or electric light works, heating or power plants, or airports" upon approval of four-sevenths of the voters. Mo. Const. art. VI, sec. 27, RSMo 1949.⁵ State ex rel. City of Fulton v. Smith, 355 Mo. 27, 194 S.W.2d 302, 304-05 (banc 1946), held this provision to be self-executing.

In 1960, the voters amended section 27 to grant cities additional power to issue revenue bonds for "plants to be leased to private persons or corporations for manufacturing and industrial development purposes" with approval of four-sevenths of the voters.⁶ Unlike the provision for municipally owned and operated power plants, which was self-executing, this Court found "this innovation by way of municipal financing of industrial projects" to be "so new and untried, its possibilities so sweeping, and its operation and potentialities so utterly uncertain (and great) as to imperatively require statutory charting of its course." In re Monroe City, 359 S.W.2d 706, 711 (Mo. banc 1962).⁷

B. 1978 Amendments to Article VI Added Current Section 27 and Sections 27(a), (b) and (c).

In 1978, members of each house of the General Assembly introduced similar but separate proposed amendments to article VI that repealed the pre-1978 version of section 27 and proposed a new constitutional section or sections addressing issuance of revenue bonds by municipalities. These proposed amendments were ultimately submitted to the voters at the November 1978 general election as constitutional amendments 6 and 7. Ashcroft, 642 S.W.2d at 618-19.

The House proposal, amendment 7, was approved by the voters and is now article VI, section 27 of the Missouri Constitution. Ashcroft, 642 S.W.2d at 619, 621; Mo. Const. art. VI, sec. 27, RSMo 2000.⁸ It requires approval by a majority of voters before a municipality or a joint board of cooperating municipalities may issue revenue bonds for utility plants to be owned and operated by the municipality or for manufacturing or industrial development plants to be leased or disposed of by the municipality. Mo. Const. art. VI, sec. 27.⁹

The Senate proposal, amendment 6, was also approved and is now article VI, sections 27(a), 27(b) and 27(c) of the Missouri Constitution. Ashcroft, 642 S.W.2d at 618-19, 621. Section 27(a) requires voter approval before a municipality can issue bonds for municipally owned and operated revenue producing power plants, but section 27(b) authorizes a municipality's governing body to approve issuance of revenue bonds for a facility to...