State ex rel. Brnovich v. City of PhoenixState ex rel. Brnovich v. City of Phoenix
- Reporters:
- , ,
- Before:
- Timmer, Brutinel, Bolick, Gould, Lopez, Beene, Montgomery
SPECIAL ACTION
JURISDICTION ACCEPTED; RELIEF DENIED DECLARING STATUTORY BOND PROVISION UNENFORCEABLE
COUNSEL:
Mark Brnovich, Arizona Attorney General, O. H. Skinner, Solicitor General, Brunn W. Roysden III, Linley Wilson, Keena Patel, Assistant Attorneys General, Phoenix, Attorneys for State of Arizona
Jean-Jacques Cabou, Alexis E. Danneman, Matthew R. Koerner, Margo R. Casselman, Perkins Coie LLP, Phoenix, Attorneys for City of Phoenix
Mary R. O’Grady, Joseph N. Roth, Osborn Maledon, P.A., Phoenix, Attorneys for Amicus Curiae League of Arizona Cities and Towns
Patrick Irvine, Fennemore Craig, P.C., Phoenix, Attorneys for Amicus Curiae Arizona Association of Realtors
Grady Gammage Jr., Cameron C. Artigue, Gammage & Burnham, P.L.C., Phoenix; Daniel Reimer, Daniel S. Reimer LLC, Denver, CO, Attorneys for Amici Curiae Airports Council International-North America, American Association of Airport Executives, Airlines for America
Erin Adele Scharff, Phoenix, Attorney for Amici Curiae Law Professors
Timothy Sandefur, Matthew R. Miller, Scharf-Norton Center for Constitutional Litigation at the Goldwater Institute, Phoenix, Attorneys for Amicus Curiae Ride-Sharing Drivers and Passengers
W. Eric Pilsk, Kaplan Kirsch & Rockwell LLP, Washington, D.C.; Susan M. Freeman, Lewis Roca Rothgerber Christie LLP, Phoenix, Attorneys for Amicus Curiae Phoenix-Mesa Gateway Airport Authority, The Arizona Airports Association
Ian Heath Gershengorn, Devi M. Rao, Noah B. Bokat-Lindell, Jenner & Block LLP, Washington, D.C.; Mark Ogden, Littler Mendelson, Phoenix; Joshua Wilkenfeld, Uber Technologies, Inc., Washington, D.C., Attorneys for Amicus Curiae Rasier, LLC
Mark S. Kokanovich, Daniel A. Arellano, Ian O. Bucon, Ballard Spahr LLP, Phoenix, Attorneys for Amici Curiae Cities of Mesa, Scottsdale, Tempe, Flagstaff, and Sedona
Andrew J. McGuire, Trish Stuhan, Samantha Winter McAlpin, Gust Rosenfeld P.L.C., Phoenix, Attorneys for Amicus Curiae Tucson Airport Authority, Inc.
John “Jack” D. Wilenchik, Joshua C. Offentartz, Wilenchik & Bartness, P.C., Phoenix, Attorneys for Amicus Curiae Phoenix City Councilman Sal Diccicio
VICE CHIEF JUSTICE TIMMER authored the Opinion of the Court, in which CHIEF JUSTICE BRUTINEL, JUSTICES BOLICK, GOULD, LOPEZ, BEENE, and MONTGOMERY joined.
¶1
¶2 This is a special action filed pursuant to
BACKGROUND
¶3 Cities in Arizona are empowered by the Arizona Constitution to engage in business to the same extent as private parties. See
¶4 The City authorizes third-party commercial use of Airport property by lease, permit, or license agreement. See
¶5 Commercial ground transportation providers operating at the Airport must obtain authorization permits from the City’s aviation director. See
¶6 In 2016, the Phoenix City Council amended the Phoenix City Code to require most commercial ground transportation providers, including TNCs, to pay a “trip fee” each time a driver picked up one or more passengers from the Airport. See
¶7 In 2018, Arizona voters passed Proposition 126, “The Protect Arizona Taxpayers Act” initiative, amending the Arizona Constitution to prohibit the state, cities, and other political subdivisions from imposing new taxes on services.
¶8 Section 25’s prohibition applies only to taxes, fees, and other assessments imposed on or after January 1, 2018. See
¶9 In December 2019, the City Council adopted Ordinance G-6650 (“Ordinance“), which is the subject of the dispute before us. The Ordinance revised several Phoenix City Code provisions addressing commercial ground transportation at the Airport. Pertinent here, the Ordinance adjusted passenger pick-up fees and imposed new trip fees for dropping off departing passengers at the Airport. See
¶10 The new fee structure imposed by the Ordinance, which was scheduled to commence on February 1, 2020, treats TNCs differently from non-TNCs. The pick-up and drop-off trip fees for TNCs now start at $4.00, increase annually to $5.00 by 2024, and automatically increase each subsequent year by at least 3%.
¶11 Trip fees apply one of two ways, depending on the trip-tracking technology used by providers at the Airport. See
¶12 Providers using the Airport’s system of radio frequency readers, which identify and track a vehicle’s physical location in the Airport by “reading” an affixed tag, are tracked automatically. See
¶13 The Ordinance dedicates specified linear feet of Airport terminal curb space to TNCs for picking up and dropping off passengers. TNCs were given 30% of available curb space starting January 1, 2020, which annually increases to 50% in 2022.
¶14 Before the Ordinance took effect, an Arizona legislator asked the Attorney General to investigate whether it violates Section 25. The request triggered
¶15 The Attorney General found that the Ordinance may violate Section 25. Thus, he filed a special action asking this Court to resolve the issue. See
¶16 We have jurisdiction pursuant to
DISCUSSION
I. Does the Ordinance violate Section 25?
¶17 We review the constitutionality of the Ordinance de novo as an issue of law. See Saban Rent-a-Car LLC v. Ariz. Dep’t of Revenue, 246 Ariz. 89, 92 ¶ 8 (2019). Because the challenge does not involve fundamental constitutional rights or suspect-classification distinctions, we presume the Ordinance complies with Section 25 “unless it clearly [does] not.” Id. (quoting Cave Creek Unified Sch. Dist. v. Ducey, 233 Ariz. 1, 5 ¶ 11 (2013)).
¶18 Section 25 provides, in relevant part, as follows:
[1] The state, any county, city, town, municipal corporation, or other political subdivision of the state, or any district created by law with authority to impose any tax, fee, stamp requirement, or other assessment, shall not [2] impose or increase [3] any sales tax, transaction privilege tax, luxury tax, excise tax, use tax, or any other transaction-based tax, fee, stamp requirement or assessment [4] on the privilege to
engage in, or the gross receipts of sales or gross income derived from, [5] any service performed in this state.
No language makes these elements disjunctive. Therefore, Section 25 is violated only if all five identified elements exist.
¶19 The parties agree that if the Ordinance violates Section 25 it does so by imposing or increasing a “transaction-based . . . fee” on the privilege of engaging in a service. Deciding whether the trip fees imposed by the Ordinance are “transaction-based,” as that term is used in Section 25, depends on the meaning of “transaction,” which our constitution does not define. The Attorney General argues “transaction” means “any activity involving two or more persons.” He asserts that entering and exiting the Airport is “any activity” engaged in by two or more persons (drivers and passengers), making the trip fees based on entry and exit “transaction-based.”
¶20 The City counters that, read in context, “transaction” refers to “a commercial agreement or an exchange of consideration.” By contrast, because trip fees are not based on the fare paid by passengers to providers, and they apply whether or not a fare is paid, the City argues those fees are not “transaction-based.” The City instead characterizes the trip fees as “user fees” for Airport property, which are not encompassed by Section 25.
¶21 In interpreting Section 25, our primary goal is to effectuate the electorate’s intent in adopting it. See Saban Rent-a-Car LLC, 246 Ariz. at 95 ¶ 21. To determine that intent, we give the words their ordinary meaning, unless the context suggests a different one. See Am. Fed’n of State Cty. & Mun. Emps. AFL-CIO Local 2384 v. City of Phoenix. (AFL-CIO Local 2384), 249 Ariz. 139, 142 ¶ 13 (2020). We will not apply “fine semantic or grammatical distinctions” or “parse sentences,” however, as doing so “may lead us to results quite different from the objectives which the framers intended to accomplish.” See Saban Rent-a-Car LLC, 246 Ariz. at 95 ¶ 21 (quoting United States v. Superior Court, 144 Ariz. 265, 275–76 (1985)). If the provision has only one reasonable interpretation, we apply it. See AFL-CIO Local 2384, 249 Ariz. at 142 ¶ 13. But if more than one reasonable interpretation exists, we will examine secondary principles to identify the correct interpretation. See
¶22 As the parties note, “transaction,” in isolation, has alternate meanings. It may refer to “an exchange or transfer or goods, services, or funds,” or “a communicative action or activity involving two parties or things that reciprocally affect or influence each other.” Transaction, Merriam-Webster, https://www.merriam-webster.com/dictionary/transaction (last visited July 28, 2020); see also Transaction, Black’s Law Dictionary (10th ed. 2014) (defining the term variously as “[t]he act or an instance of conducting business or other dealings,” “the formation, performance, or discharge of a contract,” or “[a]ny activity involving two or more persons“).
¶23 The context in which “transaction-based” is used in Section 25 reveals the meaning intended by voters. “Transaction-based” appears in Section 25’s “catch-all” provision after a list of enumerated taxes. See
¶24 Section 25 prohibits governmental entities from imposing or increasing “any sales tax, transaction privilege tax, luxury tax, excise tax, [or] use tax” on the privilege to engage in services or on the sales or income generated by those services. These taxes are all calculated based on consumer spending in commercial dealings with persons engaged in a business or occupation. See
¶25 Applying this definition, we agree with the City that the trip fees here are not “transaction-based.” The “transaction” subject to Section 25 is a passenger’s payment of money to a provider in exchange for a ride to or from the Airport. Section 25 prohibits the City from taxing or imposing fees and the like on such transactions. But the Ordinance’s trip fees are not based on the transaction between providers and passengers. Neither imposition of the fee nor its amount depends on whether a passenger takes the ride, cancels it, or even pays for it. Instead, the trip fees are based on the providers’ use of Airport property in picking up and dropping off passengers at designated sites as recorded by technology-based trip-tracking or provider reports. Cf. Jacksonville Port Auth. v. Alamo Rent-A-Car, Inc., 600 So.2d 1159, 1162, 1165 (Fla. App. 1992) (concluding that a 6% gross receipts fee was “tied exclusively” to off-site car rental agency’s use of airport facilities to conduct its business and was therefore an “authorized user fee” rather than a tax).
¶26 The Ordinance’s trip fees are best characterized as “authorized-user fees” paid in exchange for the providers’ privilege to use Airport property, including dedicated curb space, for conducting business with Airport travelers. See id.; Ace Rent-A-Car, Inc. v. Indianapolis Airport Auth., 612 N.E.2d 1104, 1108 (Ind. App. 1993) (characterizing fee imposed on off-site car rental agency as “authorized user fee” based on use of airport roadways to pick up customers in courtesy shuttles, even though fee amount is based on revenues generated by those customers’ rentals). The fees are not imposed on trips in the City that do not originate or terminate at the Airport, as would be expected for broadly imposed transaction-based taxes like those specifically enumerated in Section 25. Instead, the fees are imposed only when providers access the Airport and stop at Airport property dedicated to their exclusive use to pick up or drop off passengers. Also, the fee amount differs depending on how usage affects Airport property, further demonstrating that trip fees are tied to property use rather than provider-passenger transactions. Specifically, trips starting or ending at the less-congested PHX Sky Train stations and those using energy efficient vehicles pay discounted fees, while large capacity vehicles operated by non-TNCs pay greater fees. See
¶28 Tying trip fees to the number of trips made by providers to and from the Airport reflects the fair value for accessing and using Airport property, depending on the amount of the fee, just as a toll collected at an Airport booth for each trip would. Courts have long recognized tolls as mechanisms for charging commercial entities for use of government property. See, e.g., Sands v. Manistee River Imp. Co., 123 U.S. 288, 293–94 (1887) (describing per-log toll for floating logs down improved waterway as “compensation for benefits conferred” and rejecting analogy to taxes, which are “levied for the support of government“); Huse v. Glover, 119 U.S. 543, 548 (1886) (“The exaction of tolls for passage through the locks is as compensation for the use of artificial facilities constructed, not as an impost upon the navigation of the stream.“); Am. Trucking Ass’ns, Inc. v. Alviti, 944 F.3d 45, 47–52 (1st Cir. 2019) (holding that per-trip fees collected for commercial trucking companies’ use of state-owned bridges were properly described as tolls, not taxes).
¶29 Other user fees at the Airport are similarly measured. For example, the City imposes landing fees on commercial aircraft on a per-landing rate. See
¶30 The Attorney General argues that the trip fees “are not triggered by one’s use of Airport curb space, given that thousands of persons daily use curb space in the exact same manner to drop off or pick up friends or family without having to pay any ‘use’ fee whatsoever.” But neither he nor amici making the same argument offer authority for their implicit premise that a user fee only exists if it is imposed on all users. Reasons exist for not imposing trip fees on non-providers. Friends and family do not individually use Airport property as frequently as providers, they do not commercially benefit from that use, and although they use curb space, it is not dedicated for their exclusive use. The City could impose access fees on non-providers if it so chooses. But whether or not fees are imposed on non-providers, it does not change the fact that the trip fees here are imposed on providers for use of Airport
¶31 In sum, we hold that “transaction” in Section 25, when read in context, plainly means consumer spending for goods or services. Paying fees to use Airport property for commercial purposes is not “transaction-based,” as that term is used in Section 25. For this reason, the City did not violate Section 25 by imposing and increasing trip fees as established in the Ordinance. Because we resolve the constitutional challenge on this basis alone, we need not address the parties’ other arguments. We also do not address the reasonableness of the trip fee amounts, as that issue is not before us.
II. Is the bond provision in § 41-194.01(B)(2) enforceable?
¶32 If the Attorney General petitions this Court to determine whether a local law violates state law or the constitution, “[t]he court shall require the [local government] to post a bond equal to the amount of state shared revenue paid to the [local government] pursuant to
¶33 In City of Tucson, the only other case involving
¶34 The City argues the bond requirement is either an unconstitutional “obstacle to judicial review” or is unenforceable as “incomplete and unintelligible.” The Attorney General presumes that the legislature required a bond to “ensure that a municipality or county does not benefit from receiving state-shared revenue while possibly violating state law.” He asserts that because staying implementation of the challenged law fulfills that purpose, we should interpret the bond requirement as applying only in the absence of a stay. He also contends this Court may reduce the bond amount in appropriate circumstances. These interpretations, however, are untethered to any language in
¶35 When a statute is so incomplete or unintelligible that we cannot divine its purpose and intent, or how to implement it, it is invalid and unenforceable. See Sw. Eng’g Co. v. Ernst, 79 Ariz. 403, 414 (1955) (stating that a statute imposing a duty on a public official “must be prescribed in terms sufficient and definite to serve as a guide” for “intelligent execution“); Cohen v. State, 121 Ariz. 6, 9 (1978) (“[S]tatutory language must be sufficiently definite so that those who are to execute the law may do so in a rational and reasoned manner.“). Otherwise, it could violate due process by failing either to provide sufficient notice of what the law requires or to restrict the discretion of administrative agencies or public officers charged with applying the statute. See Ernst, 79 Ariz. at 412–13; CAVCO Indus. v. Indus. Comm’n of Ariz., 129 Ariz. 429, 434 (1981). Or it might require the Court or agencies to effectively “legislate” by supplying material and necessary missing terms not suggested, either expressly or impliedly, by the statutory language, which would violate separation-of-powers principles. See Ernst, 79 Ariz. at 413–14. Before declaring a statute invalid as incomplete or unintelligible, however, we must “us[e] every authorized means to ascertain
¶36 The bond requirement in
¶37 The bond provision in
CONCLUSION
¶38 We accept jurisdiction as required by