Union Transportes v. City of Nogales

• Decision Date: 26 August 1999
• Docket Number: No. CV-98-0359-CQ.,CV-98-0359-CQ.
• Citation: 195 Ariz. 166,985 P.2d 1025
• Parties: UNION TRANSPORTES DE NOGALES, Manuel Espinoza, Representative, Central De Minivans, by Jorge Sanchez, its Representative, and A's Shuttles Corp., by Hector Acuna, its Representative, Plaintiffs, v. The CITY OF NOGALES.
• Court: Arizona Supreme Court

985 P.2d 1025

195 Ariz. 166

UNION TRANSPORTES DE NOGALES, Manuel Espinoza, Representative, Central De Minivans, by Jorge Sanchez, its Representative, and A's Shuttles Corp., by Hector Acuna, its Representative, Plaintiffs, v. The CITY OF NOGALES.

No. CV-98-0359-CQ.

Supreme Court of Arizona, En Banc.

August 26, 1999.

Jesus Romo Vejar Tucson and Anthony B. Ching, Tempe, Attorneys for Plaintiffs.

Mesch, Clark & Rothschild, P.C., Tucson, by Scott H. Gan, Alan N. Ariav and Hugh A. Holub, Nogales City Attorney, Nogales Attorneys for The City of Nogales.

OPINION.

JONES, Vice Chief Justice.

¶ 1 We respond to two questions of state law certified by Judge Frank R. Zapata of the United States District Court for the District of Arizona. The questions are:

1. Does the City of Nogales, an Arizona Charter city, have the power to impose taxes or license fees on motor vehicles used in a business within the city based on the number of seat belts in each vehicle?

2. Do Arizona Charter cities have the power to regulate taxis and shuttles which carry people between different Arizona cities?

The court has jurisdiction pursuant to Arizona Revised Statutes §§ 12-1861 through 12-1867 and Rule 27 of the Rules of the Supreme Court.

FACTS

¶ 2 We rely on the certification order as the factual basis for this opinion pursuant to Rule 27(a)(3)(B) and A.R.S. § 12-1863 and on undisputed facts set forth in the briefs submitted by the parties.

¶ 3 The plaintiffs transport passengers intra-city, i.e., from one point to another within the corporate limits of the City of Nogales. Plaintiffs also transport passengers inter-city, i.e., into Nogales from points outside the City and out of Nogales from points within the City.

¶ 4 On December 3, 1997, the City of Nogales, a charter city established under article XIII, section 2 of the Arizona Constitution, exercised emergency legislative powers and passed Ordinance 097-12-05, a local law that imposed a licensing fee on plaintiffs' business operations. The plaintiffs brought this action in the United States District Court challenging the ordinance on various federal and state grounds. We respond to the questions under our rules at the request of the district court.

¶ 5 Pertinent details of the Nogales ordinance should be considered. Section 18-300 states that the purpose of the ordinance is

to regulate the use of City streets and sidewalks by parties furnishing Taxi, minivan, Inter-city Bus, Municipal Bus and/or Shuttle transportation services within the City of Nogales to require such activities to be conducted in an orderly and safe fashion and to afford visitors and citizens of the City of Nogales safe and efficient public transportation services.

Section 18-302 seeks to accomplish this purpose via licensing:

1. Operation. No person shall operate a commercial public transportation service anywhere within the incorporated limits of the City of Nogales without first obtaining the following permits issued by the City of Nogales:

(a) a Public Transportation Vehicle Permit; and

(b) an Individual Operator's Permit....

The Public Transportation Vehicle Permit requires payment of a yearly fee, assessed according to the seating capacity of each vehicle used in transporting passengers within Nogales. The Individual Operator's Permit is obtained by payment of a $10.00 fee per year for each vehicle operator. The ordinance requires that passenger pickup and drop-off occur only at terminal stations that have safe and adequate physical facilities, including restrooms. The remaining provisions of the ordinance address: (1) requirements for transfer, display, and replacement of permits; (2) safety and health requirements in relation to the vehicles used to transport passengers; (3) fare disclosure requirements; and (4) penalties for violation of any of the ordinance's provisions.

¶ 6 The brief filed by the City of Nogales recites the concerns that led to passage of the ordinance. Under an earlier ordinance, which imposed a tax on certain carriers based on gross sales, shuttle operators allegedly did not accurately report sales and were thus evading a substantial part of the tax. Additionally, the City claims that shuttle carriers caused street flow problems, blocked pedestrian access in some instances, and caused health and crime hazards because of a lack of adequate terminal facilities. Plaintiffs concede that these transport activities caused at least some of the City's concerns, though at oral argument in this court plaintiffs denied any intent to evade the prior taxing scheme.

DISCUSSION

¶ 7 Although the certification order characterizes the tax as a "license fee on motor vehicles used in a business within the city," we view the ordinance as an occupational license tax on the business of transporting passengers for a fee. It is occupational rather than vehicular because it is not measured by the vehicle's value, mileage, or revenues. It is a fixed tax on particular business activity within the city.

¶ 8 Both certified questions ask whether a charter city possesses legal power to enact such an ordinance. The City contends the power stems automatically from Arizona's 1982 statutory deregulation which eliminated control of the motor carrier industry by the Arizona Corporation Commission. We disagree. The deregulation provisions of state law granted no power to local government, and no authority suggests the cities may rely on deregulation alone as an independent source of power over local business. Deregulation is irrelevant to our analysis except as it relates to the question of state preemption, discussed hereafter. ¶ 9 For the ordinance to be valid, the City must identify an affirmative and independent source of legislative power. Local government entities possess only that power delegated by state law. See City of Phoenix v. Arizona Sash, Door & Glass Co., 80 Ariz. 100, 102, 293 P.2d 438, 439 (1956)

. Article XIII, section 2 of the state constitution expressly authorizes cities of 3,500 or more inhabitants to "frame a charter for [their] own government...." The charter must be "consistent with and subject to the Constitution and laws of the State." Id.; see also A.R.S. § 9-284(B) (Charter must be "consistent with and subject to ... general laws of the State not relating to cities."). Once approved by a majority vote of the city's electorate and the governor, section 2 states that the charter becomes "the organic law of such city." As the organic law, "the provisions of the charter supersede all laws of the state in conflict with such charter provisions insofar as such laws relate to purely municipal affairs." Strode v. Sullivan, 72 Ariz. 360, 365, 236 P.2d 48, 51 (1951) (emphasis added). Charter cities may thus legislate in areas of local concern, even those which may involve a statewide interest, subject always to the rule that the state may preempt the legislative field either directly or by implication. See Jett v. City of Tucson, 180 Ariz. 115, 121, 882 P.2d 426, 432 (1994) (noting that preemption must be clear and can occur through state passage of a comprehensive regulatory scheme occupying the "field").

¶ 10 Thus, a charter may reserve power to the city over local affairs "not delegated to it by the legislature" because a charter city "is not required to look to legislative authority before exercising a power, but to look to its `organic law.'" Gardenhire v. State, 26 Ariz. 14, 24, 221 P. 228, 231 (1923). See also Kendall v. Malcolm, 98 Ariz. 329, 334, 404 P.2d 414, 418 (1965)

("The charter of a city is its organic law bearing the same relation as the constitution of the state bears to its statutes."); Paddock v. Brisbois, 35 Ariz. 214, 220, 276 P. 325, 327 (1929) (charter city can exercise powers over local matters "delegated to it by the Constitution and the laws of the state and its charter") (emphasis added); Jett, 180 Ariz. at 118,

882 P.2d at 429 ("[A charter city] may exercise all powers granted by its charter, provided that such exercise is not inconsistent with either the constitution or general laws of this state.").

¶ 11 Accordingly, we review the city charter to find authority necessary to enact the ordinance questioned. Both certified questions involve a matter of local concern. See Mayor & Common Council v. Randall, 67 Ariz. 369, 379, 196 P.2d 477, 483 (1948) ("The right to exact an occupational tax is purely a matter of local concern.").

¶ 12 Two charter provisions are of paramount importance. Section 4(l) grants power

[t]o license and regulate ... the carrying on of any and all professions, trades, callings, occupations and kinds of business carried on within the limits of said city and to fix the amount of license tax thereon to be paid by all persons engaged in carrying on such places of amusement and such professions, trades, callings, occupations and kinds of business in said city; and to provide for the manner of enforcing the payment of such license tax....

(Emphasis added). Section 10(27) grants the board of aldermen the power

[t]o license, for the purpose of regulation and revenue, all and every kind of business, profession, calling, trade or occupation ... to be transacted or carried on in the city; to fix the rates of licenses upon the same and provide for the collection thereof by suit or otherwise; to provide penalties for transacting such businesses, professions, callings, trades or occupations without license when the same is fixed and prescribed.

(Emphasis added).

¶ 13 The charter clearly authorizes an ordinance on businesses operating exclusively within the city limits. Pursuant to charter section 4(1), plaintiff-transporters are "carrying on ... [a] profession[ ], trade[ ], calling[ ], occupation[ ] [or] kind[ ] of business ... within the limits" of the City of Nogales. And, the ordinance is "for the purpose of regulation and revenue" pursuant to charter section 10(27). These provisions reserve the necessary power in the municipality to...