53 N.E.2d 896 | Ohio | 1944
Lead Opinion
The sole question here is whether the real property of the appellant is entitled to exemption from taxation, under favor of Section 5351, General Code, on the ground that it is public property used for a public purpose.
A brief statement of the authority under which the appellant was organized and of its authority to hold and operate, and its method of operating, the propertier, in question will be helpful in giving answer to this question. The Dayton Metropolitan Housing Authority was organized in 1934 pursuant to the Ohio Housing Authority Law (Sections 1078-29 to 1078-41, inclusive, General Code, 115 Ohio Laws, pt. 2, 56), later several times amended and supplemented in 1937 and 1938 (117 Ohio Laws, 324, 334, 337, 799 and 915) before the properties in question were purchased.
In 1932, the General Assembly enacted the State Housing Law (Sections 1078-1 to 1078-28, General Code, 114 Ohio Laws, pt. 2, 78), by which there was created a State Board of Housing consisting of seven members, three of whom should be directors of certain departments of the state government, and the remaining four of whom should be appointed by the Governor. This board was clothed with general authority over all housing companies authorized to be organized under this act, and approval by the board was required as to the selection of a housing authority area.
By the amendments and supplements of 1937 and 1938 the authority of the housing board and the scope of the housing act were greatly enlarged for the purpose, of permitting the municipalities of the state to take advantage of the provisions of the "United States Housing Act of 1937" as amended (Title 42, Sections 1401 to 1430, U.S. Code), which created the United States Housing Authority as agent of the federal government to carry out its declared purpose of granting *14 loans and thus aiding municipalities in clearing slum areas and in constructing low rent housing for the occupancy by persons of low income.
If the State Board of Housing determines that a need exists for a local housing authority it issues a certificate to that effect, whereupon there is appointed a local housing authority consisting of five members, one appointed by the Common Pleas Court, one by the Probate Court, one by the county commissioners of the county and two by the mayor of the most populous city in the territory included in the housing district.
Section 1078-34, General Code, provides that such local authority created under the act "shall constitute a body corporate and politic," and shall have, among other powers, the authority to acquire property by gift, purchase, or by eminent domain, and to construct and operate tenement houses thereon; to comply with any conditions which the federal government may attach to its financial aid to the project; to borrow money on its notes or bonds and to secure the same by mortgages upon the property held by it or the revenues arising therefrom; and to enter into all kinds of contracts relative to the property.
On default upon any of its obligations a receiver may be appointed by the court to operate the property and liquidate the indebtedness of the authority. Section 1078-36, General Code, declares that all such property, both personal and real, held by an authority, shall "be deemed public property for public use," while Section, 1078-44, General Code, provides that the bonds of an authority shall not be a debt of the county, the state or any subdivision thereof, and neither shall be liable thereon, nor in any event shall such bonds or obligations be payable out of any funds or properties other than those of such authority, and that the bonds shall not constitute an indebtedness within the meaning *15 of any constitutional or statutory debt limitation or restriction.
Section 1078-49a, General Code, enacted July 1, 1938, provides that "a housing authority created under this act shall constitute a political subdivision of the state of Ohio within the meaning of Section 5546-2 of the General Code," which means nothing more than that the authority is exempt as a consumer from the Ohio sales tax. Significantly, however, the General Assembly did not, in this act, specially exempt the real estate of the authority from ordinary real estate taxes.
The emergency clause attached to the supplemental enactment of August 1933 gives some real insight into the purposes of the law and the reasons for its enactment. The General Assembly declared (115 Ohio Laws, pt. 2, 61), as follows:
"The necessity for the immediate effective date of this act lies in the fact that, whereas there is a demand in congested sections of Ohio for housing of families of low income and for the reconstruction of slum areas, and whereas no existing laws of the state of Ohio provide for the organization and operation of public housing authorities as contemplated in the national recovery act which would enable Ohio to secure grants and loans from the United States government for the purpose of providing housing for families of low income, and whereas such laws are in existence in other states, or such legislation is under consideration in other states, which will enable such states to obtain a grant and borrow money from the United States government, and whereas such funds secured from the United States government by public housing authorities will make possible the beginning immediately of building projects which will furnish employment to Ohio citizens. Therefore, this act shall come into effect immediately.
Within the meaning of the general tax exemption *16
statutes of this state as authorized by Section 2, Article XII of the Constitution, public property to be exempt must be public property used exclusively for a public purpose. The General Assembly has declared all property owned by housing authorities organized under and by virtue of the state housing act to be for a public use, but while such a declaration is entitled to great respect it is by no means conclusive.Block v. Hirsh,
Whether a use is public is always ultimately a question for judicial determination. McQuillen v. Hatton,
Public property, within the meaning of that term as used in state constitutions or in statutes exempting such property from taxation, embraces only such property as is owned by the state or some political subdivision thereof, and title to which is vested directly in the state or one of its political subdivisions, or some person holding exclusively for the benefit of the state. Board of Trustees of Gate City Guard v.City of Atlanta,
"Real or personal property belonging exclusively to the stateor United States, and public property used for a publicpurpose" (Section 5351, General Code) "buildings belonging to counties and used for holding courts, and for jails or county offices, with the ground, not exceeding ten acres in any county, on which such buildings are erected, shall be exempt from taxation" (Section 5352, General Code). (Italics ours.)
The philosophy or reason for the tax exemption of public property, as described in the statute, is that inasmuch as it is purchased and maintained by public revenues derived from taxation, its taxation would not inure to any public advantage. In such case, the tax debtor is also the tax creditor. The exemption of such property from taxation avoids the burden of the collection of tax revenues from and their disbursement to the same public entity of tax revenues arising from and devoted to the same property. The product of one tax should not be made the subject of another.
This reason for exemption does not obtain in the case of the property in question. The state or public, as such, has no investment in the property, makes no use of it for governmental purposes, and is under no obligation for its upkeep or the bonds. Its taxation results in an obligation of the authority, the real owner of the property, to the state or municipality in the form of taxes which Would compensate the state or municipality for the additional governmental burden imposed by the project, including such items as water service, fire and police protection, and support of public schools, which burden, in proper proportion, should be borne by this property. This obligation is no different from other obligations of the authority incurred *18 in connection with the operation of the property. After all, it is the privilege of the state to say what aid, if any, it will give to such enterprises, and this must be done in unmistakable terms.
To entitle the appellant's property to exemption from taxation it must not only be public property, but property devoted exclusively to a public use. Section 2, Article XII of the Constitution; Pfeiffer et al., Trustees, v. Jenkins et al.,Bd. of Tax Appeals,
A public use of the property is essential, a public benefit is not sufficient. The term "public use" is a broad and flexible one. The courts, therefore, have found it impossible to frame, as well as inadvisable to attempt to frame, a definition of "Public use" which would absolutely indicate its limits by including everything therein which constitutes a public use and excluding everything which does not. 50 Corpus Juris, 864. Section 93.
There are two views as to what constitutes a public use. One is that a use of property to be public, must be a use or right of use on the part of the public or some limited portion thereof (Fountain Park Co v. Hensler,
In 54 A. L. R., 1, 7, the case of Ferguson v. Illinois *20 Central Rd. Co., supra, is annotated upon the question of the right to acquire by eminent domain property for a public use. After citing cases from many state and federal jurisdictions, the editor says: "It may be stated at the outset that the trend of authority is away from any general definition of the term 'public use' as synonymous with public benefit, and to restrict it, except in certain rather well-defined fields, to the meaning of use by the public. * * *
"The weight of authority supports the general proposition that the term 'public use' under the law of eminent domain is not the equivalent of public benefit, public convenience or welfare, but that, in order to make the use a public one for which the power of eminent domain may be exercised, there must be a right on the part of the public, or some portion of it, or some public or quasi-public agency on behalf of the public, to use the property after it is condemned."
In the case of Lowell v. City of Boston,
If the property cannot be purchased or maintained through a tax levy on all property of the taxing district, it may not be exempted from taxation, since this would indirectly impose an additional and discriminating tax burden on other property in the taxing district.
In Opinion of the Justices,
The same court in the case of Allydonn Realty Corp. v.Holyoke Housing Authority,
The court, in sustaining the constitutionality of the Massachusetts Housing Authority, considered the case ofLowell v. Boston, supra, and reviewed Opinion of the Justices, above cited, and distinguished it from the Allydonn case in that in the former case there was no provision for the eradication of sources of disease and danger; and there was no slum clearance and no provisions for the elimination of unsafe or unsanitary dwellings; whereas, under the present housing act of Massachusetts there is provision "for the elimination in each instance of unsafe or unsanitary buildings containing *23 dwelling units substantially equal in number to the newly constructed dwelling units provided by the project," and the real purpose of the Massachusetts statute is "the elimination of slums and unsafe and unsanitary dwelling, and the provision by public funds of low-rent housing is only a means by which the main object is to be accomplished." Later on, in the course of this opinion, the character of the Ohio State Housing Act, in this respect, will be examined and considered.
The case of United States v. Certain Lands in City ofLouisville,
"The term 'public use,' as applied to the federal government's power of eminent domain, is not susceptible of precise definition under the Supreme Court decisions. It includes, of course, property needed for use by the public through its officers and agents in performing *24
their governmental duties. Chappell v. United States, supra
[
"Thus in these and other cases involving state action the court dealt with the subject of public use as it pertained to the powers of the sovereign claiming the right to take. It must be similarly dealt with in the case at bar. As so considered with reference to the federal government, it does not, in our opinion, include the relief of unemployment as an end in itself or the construction of sanitary houses to sell or lease to low-salaried workers or residents of slum districts. The tearing down of the old buildings and the construction of new ones on the land here sought to be taken would create, it is true, a new resource for the employment of labor and capital. It is likewise true that the erection of new sanitary dwellings upon the property and the leasing or the selling of them at low prices would enable many residents of the community to improve their living conditions. It may be, too, that these group benefits so far as they might affect the general public, would be beneficial. If, however, such a result thus attained is to be considered a public use for which the government may condemn private property, there would seem to be no reason why it could not condemn any private property which it could employ to an advantage to the public. There are perhaps many properties that the government could use for the benefit of selected groups. It might be, indeed, that by acquiring large sections of the farming parts of the country and leasing the land or selling it at low prices *26 it could advance the interest of many citizens of the country, or that it could take over factories and other businesses and operate them upon plans more beneficial to the employees or the public, or even operate or sell them at a profit to the government to the relief of the taxpayers. The public interest that would thus be be served, however, cannot, we think, be held to be a public use for which the government, in the exercise of its governmental functions, can take private property. The taking of one citizen's property for the purpose of improving it and selling or leasing it to another, or for the purpose of reducing unemployment, is not, in our opinion, within the scope of the powers of the federal government."
The case above cited and quoted from was appealed to the Supreme Court of the United States, but after pending there for some time it was dismissed by the government because the lands in question had, in the meantime, been acquired by purchase.
At this point it is pertinent to observe that the state of Ohio has not, either by constitutional permission or by statutory enactment, embarked on any policy authorizing the taking of private property at the expense of the public revenues for any purpose which constitutes merely a public benefit as distinguished from a public and governmental use.
In recent years, there have been enacted in not less than 39 states of the union, state housing acts more or less similar to the Ohio act. Questions relating to the exercise of the power of eminent domain to secure real estate for the projects organized under these acts, and the right of exemption of such property from taxation, have been before the courts of last resort of many of these states on frequent occasions. A partial list of such cases will be found in the opinion of the court in the case of Humphrey v. City of Phoenix,
In fact, in some of the state housing acts, slum clearance is definitely required either by the location of the project where it will eliminate a slum area or by a stipulation that for each housing unit constructed a corresponding slum unit shall be destroyed. Allydonn Realty Corp. v. Holyoke Housing Authority,supra. Some of the courts have held that the elimination of slums as a feature of the housing project is the element which gives the newly constructed property a public quality or a public use. Dornan v. Philadelphia Housing Authority,
It is significant that there is no such provision or requirement for slum clearance in the housing act of this state. In some of the states above referred to the courts hold that private enterprises may be carried on by governmental subsidies as a public use, such as gasoline filling stations and ice plants. Holton v. City of Camilla,
On the contrary, it has been the constitutional, legislative and judicial policy of this state to prevent the use of public funds in any function which is not governmental in character, or which does not constitute a use for strictly public purposes. City of Cincinnati v. Lewis, Aud.,
The question now before the court is in all material respects the same as that considered by this court in the case ofColumbus Metropolitan Housing Authority v. Thatcher, Aud.,
Furthermore, this court is not alone in its position on this matter. In the case of State, ex rel. Ferguson, Housing Admr., v. Donnell,
In the case of State, ex rel. Burbridge, v. St. John,Assessor,
In the course of its opinion, at page 553, the court says:
"If this housing project property was owned by the city of Jacksonville, it might possibly be contended with more plausibility that it should be held exempt on the ground that it was used for a public purpose. But where, as here, the property is not owned by the city, the title and control of same being vested in the Housing Authority, a distinct entity, the authorities above cited require us to hold that the property here involved is not exempt from taxation under the quoted provisions of our Constitution. The Constitution expressly designates what property of corporations shall be exempt from taxation and of course the Legislature is not empowered to add to or subtract from the clear and positive provisions of Section 16 of Article XVI of the Constitution.
"The cases above cited are not in conflict with those cases which hold that the ownership and operation by a municipality of public libraries, public parks and playgrounds, public golf courses, and swimming pools, *31 the benefits of which are to be enjoyed by the public generally, may constitute a legitimate municipal purpose within the meaning of the Constitution, but here we are dealing with a housing project, not owned or operated by the municipality, which is, or is to be built and operated by a corporation for the benefit of a particular class, a low-income group to be selected by the corporation — the Housing Authority — and to whom the houses are to be rented at a reasonable rental price as determined by the Housing Authority."
The property of the appellant, according to the record, is to be leased to occupants for a rental sufficient only to pay costs without profit, and the tax exemption of such property would therefore inure directly to the interest of the tenants who, as a class, would receive a benefit not enjoyed by the public generally.
The removal of slum districts in cities or elsewhere is greatly to be desired. So, also, would the improvement of living conditions of persons who through adverse circumstances live under squalid conditions. There are many homes which lack modern conveniences and modern sanitary facilities. The improvement of these homes and the removal of unsatisfactory living conditions in connection therewith would be most desirable and would be a great public benefit, but it certainly cannot be said that the improvement or rebuilding of such homes would make them buildings "used exclusively for public purpose" as they must be before they are entitled to exemption from taxation under our statutes as authorized by our Constitution. If, as in the case at bar, the legal title to such properties should be vested in some trustee for management, it would not in any way affect the actual use of the property.
It is not contemplated that the houses built by appellant will be used for public purposes, as that term is used in the statute. On the contrary, they are or *32 will be rented to private persons at a rental less than the average market value for such facilities. Each tenant will be assigned to his respective space giving him a private property interest therein and from which he may exclude or eject all other persons, including the public generally. Stripped of all fiction, the appellant was created by the state in the sense that the state gave its permission or license to a private corporation without profit, in that it has no shareholders, to engage in a proprietary business, the primary object of which is the construction and operation of tenements for persons of low income, and as incidental thereto, the indirect reduction of slums insofar as such result may occur through the removal of tenants from slum areas.
The appellant operates wholly on borrowed capital. The state of Ohio has no investment, interest or responsibility in the property or business of the appellant, and retains only a very limited right of supervision and inspection over its affairs. The only incidental interest the state can have in the whole project is limited to the indirect and incidental effect on slum clearance, which is in itself a legitimate function and one in which the state may engage. In this respect it differs from the function of the State Bridge Authority which has to do with the maintenance of bridges as a part of the public highways, and is, therefore, engaged in a public purpose.
In short, this authority is only a device to accept the generosity of the federal government in loaning to such authority 90 per cent of the cost of the new property, which generosity is eagerly sought by communities where the money will be spent, with such incidental benefits as will come to any community where more and better tenements are provided. The appellant is the trustee through which the enterprise is carried on. In so operating, it is acting in a proprietary capacity and *33 should not be granted a special privilege and preference which disrupts the constitutional requirement of equality of tax burden. Section 2, Article XII of the Constitution.
The situation brought about by the tax exemption of such projects becomes more or less alarming when it is considered that there are already similar projects in this state covering large ground areas where not only the value of the former buildings but the value of the ground areas themselves is lost as a source of public revenue.
The private homeowner whose property is located on the opposite side of the street from the property of the appellant authority should not be penalized in the support of his government by increased taxes upon his property to make good the loss of public revenues resulting from the tax exemption of the property of the authority, unless the people of the state, through constitutional or legislative enactment, clearly adopt a policy which makes such discrimination possible. This is a subject for legislative and not judicial action. In the opinion of the court is has not been accomplished by the general tax exemption statutes.
The decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
WEYGANDT, C.J., MATTHIAS, BELL and TURNER, JJ., concur.
ZIMMERMAN and WILLIAMS, JJ., dissent.
Dissenting Opinion
Section
"* * * general laws may be passed to exempt [from taxation] * * * public property used exclusively for any public purpose * * *." *34
Section 5351, General Code, reads:
"Real or personal property belonging exclusively to the state or United States, and public property used for a public purpose, shall be exempt from taxation. * * *"
Section 1078-36, General Code, a part of the State Housing Law, declares:
"All property, both real and personal, acquired, owned, leased, rented or operated by the housing authority shall be deemed public property for public use, * * *."
Section 1078-34, General Code, constitutes a housing authority, created under the housing law, a body corporate and politic, with power to acquire property for housing projects by the exercise of eminent domain.
Section 1078-49a, General Code, recites:
"A housing authority created under this act shall constitute a political subdivision of the state of Ohio within the meaning of Section 5546-2 of the General Code."
From a perusal of the quoted statutes it would seem apparent that the General Assembly has expressed a clear intent to exempt the property of the appellant from taxation.
The principle is well recognized that every reasonable doubt must be indulged in favor of the constitutionality of statutes. So, when the General Assembly declares that a housing authority is a body corporate and politic, with authority to exercise the power of eminent domain and that its property shall be deemed public property for public use and as such exempt from taxation, such declarations must be recognized and respected unless it is plain that they are unalterably opposed to the Constitution. Laret Investment Co. v. Dickmann, Mayor,
In the dissenting opinion in the case of Columbus *35 Metropolitan Housing Authority v. Thatcher, Aud.,
"The slum clearance and low rent housing program is essentially in the public interest, being a cooperative effort on the part of the federal and local authorities to solve a vital social problem. Its underlying objective is to protect and safeguard an entire community by lessening potent causes of disease, immorality and crime.
"The conclusion therefore seems inescapable that the property of the Columbus Metropolitan Housing Authority here involved is 'public property used exclusively for any public purpose' within the contemplation of Section
In the case of Hogue v. Housing Authority of North LittleRock,
"We declare broadly and without reservation that the act creates a public agency or authority to perform necessary public purposes and uses. * * *
"The housing authority is a public agency and its property is public property devoted to a charitable use and as such the Legislature under the Constitution may exempt it from taxation at the hands of the state or any public body thereof."
The overwhelming weight of authority in this country supports the general proposition that the property of a housing authority, like that in the present case, *36
is public property used for a public or charitable purpose and may be absolved from liability for taxes. See 133 A. L. R., 365, annotation; Humphrey v. City of Phoenix,
Furthermore, we are convinced that the majority of the court has given Section 2, Article XII of the Constitution too narrow an interpretation. Several years ago the writer of this dissent said, in the case of State, ex rel. City of Columbus, v.Ketterer,
"Constitutions are not lifeless or static instruments, whose interpretation is confined to the conditions and outlook which prevailed at the time of their adoption. * * * They should be given a flexible interpretation such as will meet new conditions and circumstances as they arise, and which necessity may demand without doing violence to plain language employed or transgressing the clear bounds of reason."
Or as was remarked in the case of Dornan v. PhiladelphiaHousing Authority, supra (
"* * *, views as to what constitutes a public use necessarily vary with changing conceptions of the scope and functions of government, so that today there are familiar examples of such use which formerly would not have been so considered. As governmental activities increase with the growing complexity and *37 integration of society, the concept of 'public use' naturally expands in proportion."
Under such an approach the property of appellant ought to be regarded as public property used exclusively for a public purpose, within the contemplation of our Constitution.
The majority opinion quotes at some length from the case ofUnited States v. Certain Lands in City of Louisville (C.C.A. 6),
As upholding the right of a housing authority to exercise the power of eminent domain in acquiring private property for low cost housing projects, see 130 A. L. R., 1076, annotation;In re Brewster Street Housing Site,
Another reason exists as to why appellant should prevail. The Board of Tax Appeals, created by statute, is an administrative body possessing only quasi-judicial powers, and functions pursuant to laws enacted by the General Assembly. Where, then, the General Assembly has said that the property of a housing authority shall be deemed public property for public use *38 and thus exempt from taxation, what right has the board to override such declaration? Its proper course of procedure was to exempt the property. The action of the board amounted to a nullification of Section 1078-36, General Code, which was beyond its powers.
It is firmly established that the function of passing upon the constitutionality of statutes devolves upon the judiciary alone and an administrative board is therefore precluded from doing so. 8 Ohio Jurisprudence, 277, Section 175.
The majority opinion holds that the property of the appellant is not "public property" within the meaning of the Constitution and Section 5351, General Code. This ignores Section 1078-36, General Code, which specifically designates the property of a housing authority as "public property for public use," and thus places it squarely within the provisions of Section 5351, General Code, exempting property of that character from taxation.
Judge Williams and the writer find themselves in disagreement with their brethren in this case. If the effect of the majority opinion is to pronounce Section 1078-36, General Code, unconstitutional, what becomes of Section 2, Article IV of the Constitution, which provides in part:
"No law shall be held unconstitutional and void by the Supreme Court without the concurrence of at least all but one of the judges, except in the affirmance of a judgment of the Court of Appeals declaring a law unconstitutional and void."
We conclude that the decision of the Board of Tax Appeals herein was both unreasonable and unlawful and should stand reversed.
WILLIAMS, J., concurs in the foregoing dissenting opinion. *39