Uhls v. State ex rel. City of Cheyenne

• Decision Date: 12 June 1967
• Docket Number: No. 3589,3589
• Citation: 429 P.2d 74
• Parties: Edna V. UHLS, City Clerk, City of Cheyenne, Appellant (Defendant below), v. STATE of Wyoming ex rel. CITY OF CHEYENNE, Appellee (Plaintiff below).
• Court: Wyoming Supreme Court

Page 74

429 P.2d 74

Edna V. UHLS, City Clerk, City of Cheyenne, Appellant (Defendant below), v. STATE of Wyoming ex rel. CITY OF CHEYENNE, Appellee (Plaintiff below).

No. 3589.

Supreme Court of Wyoming.

June 12, 1967.

Paul B. Godfrey, Thomas O. Miller, Ellen Crowley, Cheyenne, for appellant.

Brooke Wunnicke, Cheyenne, for appellee.

Before GRAY, McINTYRE, and PARKER, JJ., and SPANGLER, D. J.

Mr. Justice McINTYRE delivered the opinion of the court.

This is an action to determine the validity of Cheyenne's proposed financing of the $25,000,000 Frontier Refining Project and the constitutionality of the act for industrial development projects, art, 8, ch. 112, S.L. of Wyoming 1965 (§§ 15.1-92-15.1-100, W.S.1957, Compiled 1965). To secure such determination, the state on the relation of the City of Cheyenne brought a mandamus action in the district court against the city clerk, seeking to compel execution of the Asset Purchase Agreement for acquisition of the Frontier Refining Project. In so doing, plaintiff sought a declaration of validity and constitutionality as to: (a) the mentioned act; (b) the Cheyenne ordinances, seeking under the act to authorize the Frontier Refining Project and to finance it by revenue bond sale; (c) the purchase agreement, the lease, and the mortgage; (d) the violation of art. 16, §§ 4, 5, 6, and art. 13, § 3, Wyoming Constitution, by the financing.

Defendant's answer specifically denied the validity and constitutionality of the laws and instruments under which consummation of the project was undertaken and raised other defenses, including additional constitutional challenges.

There was no actual trial but after certain stipulations and interrogatories had been entered and a deposition taken, the court, apparently acting pro forma, entered special findings of fact, reciting generally that under an ordinance passed by the City it proposed to issue revenue bonds for the purpose of acquiring the Frontier Refining Project (which would promote the economic welfare of Cheyenne by increasing employment, stimulating industrial activity, augmenting sources of tax revenues, fostering economic stability, and improving the balance in the City's economy), the land, buildings, machinery, etc., then owned and operated by the refining company, being suitable for the project; that the proceeds from the bond sale would be deposited with the trustee, who would disburse the proceeds as directed by the City under the provisions of the indenture and lease agreement; that the total acquisition figure would be $23,189,495, plus an amount sufficient to defray all expenses in connection with the authorization, sale and issuance of the bonds in the sum of $18,689,495, being the amount to be paid the refining company initially and $4,500,000 to be expended for modernization and expansion of the project, essential to the refinery's continued operation; that the modernization and expansion of the refinery will result in the hiring of additional employees; and that Frontier is the only oil refinery in the City of Cheyenne; that the City would be the owner of a project suitable for operation as a manufacturing or industrial project and lease it to the Frontier Refining Company; that the purchase agreement covered certain realty, personal property, and leaseholds now held by the refinery company; that by the lease agreement that company was to pay rental revenues sufficient to cover all payments of principal and interest on the revenue bonds, all costs, fees, expenses, and premiums incident to the issuance, administration and prior redemption or payment of the revenue bonds, and all taxes, special assessments, insurance, utilities repairs, maintenance and ground rents of the project; and that the indenture of mortgage and deed of trust provided for the establishment of four separate accounts with the trustee, the project acquisition account, the Frontier Project bond principal and interest found, the Frontier Project administration fund and maintenance fund, and that additional series of bonds might be issued subject to prescribed earnings limitations.

From the pleadings, stipulations, and its findings of fact, the court made various conclusions of law, which in summary may be said to have been a holding that all of the steps taken by the City of Cheyenne, Boettcher and Company (who proposes to underwrite the bonds), and the Frontier Refining Company in the consummation of the proposed financing project, had been legal and proper, subject to five constitutional questions which were reserved and sent to this court for answer:

'1. Do the provisions of Chapter 1, Art. 8 of ch. 112, S.L. of Wyoming, 1965 and plaintiff's Ordinances Nos. 1535 and 1538, including the Asset Purchase Agreement, Lease Agreement, and Indenture of Mortgage and Deed of Trust authorized by Ordinance No. 1538, contain delegations of power in contravention of Art. 1, § 7 and Art. 3, § 37, Wyo.Const.?

'2. Is the industrial revenue bond financing authorized by Chapter 1, Art. 8 of ch. 112, S.L. of Wyoming, 1965 and by plaintiff's Ordinances Nos. 1535 and 1538 for a public purpose as required by Art. 13, § 3, Wyo.Const.?

'3. Does the industrial revenue bond financing authorized by Chapter 1, Art. 8 of Ch. 112, S.L. of Wyoming, 1965 and by plaintiff's Ordinances Nos. 1535 and 1538 constitute the lending of public credit for a private purpose in contravention of Art. 16, § 6, Wyo.Const.?

'4. Does the industrial revenue bond financing authorized by Chapter 1, Art. 8 of ch. 112, S.L. of Wyoming, 1965 and by plaintiff's Ordinances Nos. 1535 and 1538 contravene the municipal debt limitations prescribed by Art. 16, § 4 and $ 5, Wyo.Const.?'

'5. Does the industrial revenue bond financing authorized by Chapter 1, Art. 8 of ch. 112 S.L. of Wyoming, 1965 and by plaintiff's Ordinances Nos. 1535 and 1538, by providing for taxation of the project property contravene Art. 15, § 12 Wyo.Const., which exempts municipal property from taxation?'

The defendant appealed from that portion of the findings of fact which held the proposed project would promote the economic welfare of Cheyenne and its residents and from the mentioned conclusions of law.

Question No. 3

Since neither this case nor its companion, Reed v. City of Cheyenne, Wyo., 429 P.2d 69, can be completely and fully disposed of without resort to the constitutional questions presented, we turn immediately to them. In so doing we are impressed with the significance of Question 3, dealing with a suggested violation of art. 16, § 6, Wyoming Constitution, which provides that 'Neither the state nor any county, city, township, town, school district, or any other political sub-division, shall loan or give its credit or make donations to or in aid of any individual, association or corporation'. ¹

The concept by which government should assist private industrial development is by no means new, having once flourished in the railroad bond era of the nineteenth century and been later revived with the Mississippi 'Balance Agriculture with Industry' plan of 1936, from which time the idea has spread throughout the county until in 1965 some form or other of its has been adopted in twenty-three states. ² The Mississippi Act declared the development to be a matter of public policy, provided (1) for a commission to effectuate such policy by investigation and action and (2) for a vote of the people in the community to be affected. In Albritton v. City of Winona, 181 Miss. 75, 178 So. 799, 115 A.L.R. 1436, appeal dismissed 303 U.S. 627, 58 S.Ct. 766, 82 L.Ed. 1088, a case which has been since spotlighted both by criticism and approval, the court held that legislation to be constitutional, emphasizing the right of the legislature to declare a public purpose, especially when it provided the means for effectuating it and distinguishing the situation where the city owned and had control of the property from one wherein there was a lease. The propriety and legality, including constitutionality, of a specific scheme does not lend itself to any easy 'yes or no' answer. This is true first because of the inevitable variance in the constitutional background of each state and the usual difference in either the plan for the proposed development or the statute which is adopted to effectuate it. As a result of the incongruities, there are not many true analogies extant, and although collation is necessary in the consideration of any case such as the one now before us, it is less than conclusive or even satisfactory in many instances. Historically, the validity of bond arrangements for industrial development projects has varied also in the different jurisdictions because of fundamental disimilar, basic concepts of the judicial personnel who consider the case; certain judges interpret controlling constitutional provisions strictly or literally while others are more liberal or indulge in sophistic reasoning, some appearing to be influenced by pragmatic considerations. Illustration of the often ambiguous or ambivalent results will be apparent from our examination of cases, which have dealt more or less directly with the elementary question here: Is financing of this type of project violative of constitutional provisions providing that a city shall not loan or give its credit of make donations to or in aid of any corporation?

Although not directly in point, a corollary problem arose in Ohio where a statute authorizing an agency of the state to issue revenue bonds with the proceeds to be loaned to industries located in the state was held unconstitutional as a lending of the state's credit. State ex rel. Saxbe v. Brand, 176 Ohio St. 44, 197 N.E.2d 328. In Florida, although the legislature has not enacted a statute authorizing industrial development bonds, a number of communities have sought to accomplish financing not unlike that espoused here and the court has consistently rejected any such plan as unconstitutional on the ground, among...