STOPAQUILA.ORG, et al., Appellants, v. CITY OF PECULIAR, Missouri, Respondent.
No. SC 87302.
Supreme Court of Missouri, En Banc.
Dec. 19, 2006.
208 S.W.3d 895
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.
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 sec-
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 coun-
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.
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;
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
C. Authority Of City To Issue Revenue Bonds Under Section 27(b).
1. Section 27(b) Permits Issuance of Revenue Bonds by the Board.
This Court’s analysis necessarily begins with the words of section 27(b), which Peculiar argues clearly authorize its issuance of the revenue bonds. Section 27(b) states:
Any county, city or incorporated town or village in this state, by a majority vote of the governing body thereof, may issue and sell its negotiable interest bearing revenue bonds for the purpose of paying all or part of the cost of purchasing, constructing, extending or improving any facility to be leased or otherwise disposed of pursuant to law to private persons or corporations for manufacturing, commercial, warehousing and industrial development purposes, including the real estate, buildings, fixtures, and machinery. The cost of operation and maintenance and the principal and interest of the bonds shall be payable solely from the revenues derived by the county, city or incorporated town or village from the lease or other disposal of the facility.
By its terms, section 27(b) authorizes a municipality: (1) upon a vote of the majority of its governing body (rather than of the general electorate); (2) to issue and sell revenue bonds; (3) for the purpose of paying for facilities to be leased to private persons or corporations; (4) when the facilities are for manufacturing, commercial, warehousing or industrial development purposes; and (5) the cost of operation and maintenance of the facility and the principal and interest of the bonds shall be payable solely from the revenues derived from the lease or other disposal of the facilities.
StopAquila does not dispute that Peculiar’s approval of the revenue bonds complied with requirements 1, 2, 3 and 5 just listed. Specifically, Peculiar’s governing body approved the issuance of revenue bonds (requirement 1); issued and sold the bonds (requirement 2); for the purpose of paying for facilities to be leased to Aquila, a private corporation (requirement 3); and the revenues from the lease provide the sole source of payment for the principal and interest of the bonds, with Aquila solely responsible for the operation and maintenance of the facility (requirement 5).
StopAquila argues, however, that the Aquila plant fails to meet requirement (4), that the facilities be used for “manufacturing, commercial, warehousing or industrial development purposes.” Aquila disagrees, noting that the plant is to be used for the commercial purpose of generating and selling electricity and “commercial purposes” should include the generation of electricity to be sold by Aquila. The determinative issue, thus, becomes the meaning of the term “commercial purposes” as used in section 27(b).11
In King, as here, the defendant was a utility company in the business of buying and selling electricity. It alleged, however, that the underground storage facilities in which it stored natural gas for use in generating electricity when needed for its customers were not part of its commercial operation. Stating that “[t]he only issue here is the statutory interpretation of the term ‘commercial,‘” 648 S.W.2d at 114, King noted that the dictionary definition of the term “commercial” is quite broad and includes any operation that “has financial profit as a primary aim.” Id. at 115.
Applying that definition to the issue whether Laclede Gas’ storage tanks were used in commerce, King held that Laclede’s business of buying and selling electricity was clearly commerce and “[t]he facts of this case clearly indicate that the use of the electricity was such an integral part of the commercial activities of the taxpayer that to construe the use as unrelated to commerce would result in a rejection of the plain meaning of the statute.... The facilities were essential to the utility’s successful commercial operation.” Id. King expressly overruled cases more narrowly construing the word “commercial” to the extent that they were inconsistent. Id.
King’s analysis is directly applicable here. Aquila, like Laclede Gas, is in the business of buying and selling electricity. Here, as in King, the utility unquestionably will seek to sell, i.e., engage in commerce, and profit from the electricity it generates at the Peculiar plant. Reference to other dictionaries confirms the broad meaning of the word “commerce” as referring to matters relating to commerce or which have profit as a primary motive.12 Under both King and the plain dictionary definition of the term “commercial,” then, the Peculiar plant is for “commercial purposes.”
2. Section 27(a) Does Not Apply to Power Plants Not Owned and Operated by the City Itself.
StopAquila argues that even if the term “commercial purposes” otherwise could be read to include power plants, it must be more narrowly construed because the words “power plant” are used in section 27(a) expressly and if the voters had wanted section 27(b) to apply to power plants
StopAquila’s interpretation of section 27(a) would require the Court to reject the plain meaning of “commercial.” Equally importantly, it ignores the fact that section 27(a) applies only to a small subset of power plant projects, which does not include the Aquila plant at issue here. More specifically, section 27(a) says that the voters may by majority vote approve issuance and sale of:
negotiable interest bearing revenue bonds for the purpose of paying all or part of the cost of purchasing, constructing, extending or improving any of the following: (1) revenue producing water, gas or electric light works, heating or power plants; or (2) airports; to be owned exclusively by the county, city or incorporated town or village the cost of operation and maintenance and the principal and interest of the bonds to be payable solely from the revenues derived by the county, city or incorporated town or village from the operation of the utility or the airport.
Here, however, Peculiar has leased the plant to Aquila, a private party, which may purchase it for $1,000 at the end of the lease. In this case, the cost of operation and maintenance of the power plant and the principal and interest of the bonds will not be payable solely, or indeed at all, from the revenues Peculiar derives from the operation of the plant, for Peculiar is not responsible for the plant’s operation, nor will it derive any revenues therefrom. The costs of the plant’s operation and any revenues therefrom will be borne and retained by Aquila; Peculiar’s revenue derives from the lease to Aquila, not from the operation of the plant.
This is exactly the situation to which section 27(b) is intended to apply. As set out at length above, section 27(b) specifically permits the governing body of a municipality to approve by majority vote the issuance of revenue bonds for any commercial, industrial development, manufacturing or warehousing purposes, where, as here, the facility is “to be leased or otherwise disposed of pursuant to law to private persons or corporations” and so long as the “cost of operation and maintenance and the principal and interest of the bonds shall be payable solely from the revenues derived by the county, city or incorporated town or village from the lease or other
Section 27(b) by its terms applies to all commercial, manufacturing, industrial development and warehousing facilities to be leased to private entities, not merely to a subset thereof such as power plants. Because, as set out at length above, Aquila’s plant is to be used for commercial purposes, it comes within section 27(b). The Peculiar board acted within its authority in authorizing the bond issue in this case.
This distinction between requiring voter approval of revenue bonds issued for plants to be operated by the municipality under section 27(a), but allowing governing body approval of revenue bonds for privately operated plants under section 27(b), is a rational one. The retention of risk by the municipality is different in the two instances. “An undertaking on the part of the city to maintain and operate such a utility necessarily entails the hazard of some loss, direct or indirect, of the general revenue, and the uniform legislative policy of this State, evidenced by its Constitution and statutes, is that assent thereto of the inhabitants of the city at an election held for that purpose is essential.” State ex rel. City of Blue Springs v. McWilliams, 335 Mo. 816, 74 S.W.2d 363, 367 (banc 1934).
Although it is clear that revenue bonds do not result in general obligations upon the city, see City of Maryville v. Cushman, 363 Mo. 87, 249 S.W.2d 347, 351 (banc 1952) (“We have many times ruled that bonds payable solely from the revenues of a municipal utility, service or facility, and not from taxation, are not a general municipal indebtedness within the Constitution“), where the city is operating and maintaining the utility, it may retain greater contingent risk than if it has contracted the operation and maintenance to a third party. City of Springfield v. Monday, 353 Mo. 981, 185 S.W.2d 788, 791 (banc 1945) (holding that a city retains contingent liability on revenue bonds where it is maintaining and operating the utility). It is sensible, then, that the voters approved retaining the requirement of a public vote for all instances of municipal operation and maintenance of a utility, but did not require such a vote for issuance of bonds for commercial developments—whether power plants or otherwise—that were to be leased where the bonds would be retired solely from revenue derived from the lease.
3. Article VI, Section 27’s authorization of Other Methods of Issuing Revenue Bonds Cannot Limit the Reach of Section 27(b).
StopAquila also contends that, even if the use of the term “power plants” in section 27(a) does not prevent section 27(b)’s application to leased power plants operated by a private entity for commercial purposes, such an interpretation of sections 27(a) and (b) puts them into irreconcilable conflict with article VI, section 27 of the Constitution. StopAquila so argues because section 27 permits the building of power plants, airports, and other revenue producing utility plants to be owned and operated by a city or joint board or to be leased to private companies upon a majority vote of the people of the city or joint board or commission of cities authorizing the project.
StopAquila’s argument hinges on the assumption that the Missouri Constitution cannot confer alternative methods of exercising power upon Missouri municipalities and that there is an inherent conflict between the provisions of section 27, on the one hand, and sections 27(a), (b) and (c) on the other hand, because they provide vary-
As Ashcroft noted, “[t]he test for determining whether a conflict exists is whether one amendment prohibits what the other permits or vice versa.” 642 S.W.2d at 620. Where two provisions are not irreconcilably inconsistent, both must stand even if there is “some tension between them.” Id.14 In Ashcroft, relator prosecuted an action in quo warranto seeking a declaration that Fulton’s bond issue was invalid because both section 27 and sections 27(a) and (b) failed to become part of the Constitution in 1978 due to the alleged conflict between them. Id.
This Court rejected that argument for at least two reasons. First, Missouri statutes provide that in the case of adoption of conflicting amendments, the one receiving the largest affirmative vote will prevail.15 Id. Second, and more fundamentally, this Court rejected the argument that because the two amendments both dealt with the issuance of revenue bonds for similar purposes they were in conflict and that amendment 7 (current article VI, section 27) prevailed over amendment 6 (current article VI, sections 27(a)-(c)) because it received more votes. Noting that only irreconcilable conflicts (and therefore not mere overlapping provisions) can justify ignoring the voters’ will by declaring a constitutional amendment invalid, this Court held that although there is “some tension between [section 27 and sections 27(a), (b) and (c)] ... [t]here is no irreconcilable conflict between the amendments, and ... both became part of the constitution.” Id. at 620-21.
This Court reaffirms its holding in Ashcroft that “there is no conflict between the texts of the amendments.” Id. at 620. Both section 27 and sections 27(a) and (b) are constitutional grants of authority to cities and other political subdivisions to issue revenue bonds for certain purposes under certain conditions.
These sections can be harmonized and present no irreconcilable conflict. While authority is granted under section 27 to issue revenue bonds upon satisfaction of certain requirements—including voter approval—not set out in section 27(b), and vice versa, this does not ipso facto mean that the two amendments are in conflict. Rather, they set out parallel methods of accomplishing the goal of issuing revenue bonds for the building of commercial power plants, among many other projects. While section 27 requires voter approval of such plants, section 27(b) provides an alternative method of authorizing such plants where they are to be leased to a private entity for commercial purposes and that entity will be responsible for the plant’s cost, operation and maintenance. Neither section “is written in the form of a prohibition or limitation ... [rather] each ... is written as an affirmative grant of permission.” Cape Motor Lodge, Inc., 706 S.W.2d at 212 (holding that permissive provisions do not prohibit what the other permits). Therefore, neither amendment contains such a prohibition on what the other permits. While it is rather unusual to authorize alternative methods of proceeding in two separate amendments, that is what occurred when both amendments were concurrently submitted to and approved by the voters. Ashcroft makes clear that this joint approval did not itself create an inherent conflict or require one amendment’s terms to be given precedence over the other. By virtue of the people’s simultaneous adoption of both of these amendments, the people’s intention to authorize cities to issue revenue bonds through the alternative methods of either section 27 or sections 27(a) and 27(b) is manifest.
IV. CONCLUSION
Peculiar’s issuance of the revenue bonds upon the approval of the majority of Peculiar’s aldermen was authorized under article VI, section 27(b) of the Missouri Constitution. The judgment is affirmed.
WOLFF, C.J., LIMBAUGH, and RUSSELL, JJ., and BLACKMAR, Sr.J., concur.
TEITELMAN, J., dissents in separate opinion filed; WHITE, J., concurs in opinion of TEITELMAN, J.
PRICE, J., not participating.
RICHARD B. TEITELMAN, Judge, dissenting.
Article VI, section 27 required a vote of a majority of the qualified electors prior to issuing revenue bonds for the construction of the power plant at issue in this case. Therefore, I respectfully dissent.
Article VI, section 27 provides that a city may, by vote of a majority of qualified electors, issue revenue bonds for the purpose of constructing or improving “revenue producing water, sewer, gas or electric light works, heating or power plants....” In contrast, Article VI, section 27(b) provides that a city may, without a vote of the people, issue revenue bonds for the purpose of constructing or improving any facility to be leased to private corporations for “manufacturing, commercial, warehousing and industrial development purposes....” Section 27 applies to this case. Peculiar issued revenue bonds for the purpose of paying all or part of the cost of constructing a revenue producing power plant. However, prior to issuing the revenue bonds, the city did not obtain voter approval as required by section 27. The circuit court erred in holding the voter approval was not required.
The majority opinion avoids the necessity of voter approval by holding that sections 27 and 27(b) provide alternate methods of authorizing the issuance of revenue bonds. Although section 27 refers specifically to “power plants” and section 27(b) does not, the majority concludes that the word “commercial,” as used in section 27(b), must be broadly interpreted to include the generation of electricity by a power plant. While the word “commercial” is often used as a general reference to business-related activity, in this case, the word is used in a particular context. In section 27(b), the word “commercial” appears in the phrase “manufacturing, commercial, warehousing and industrial development....” The majority opinion does not utilize this context to support its broad interpretation and instead analyzes the word in isolation, with reference to King v. Laclede Gas Co., 648 S.W.2d 113 (Mo. banc 1983), a case which interpreted the word “commercial” as used in an unrelated tax statute. When a word is used in a list, the word is known by the company it keeps. See, State v. Bratina, 73 S.W.3d 625, 626 (Mo. banc 2002); Pollard v. Board of Police Com’rs, 665 S.W.2d 333, 345 (Mo. banc 1984). The better approach would be to assess the meaning of the word “commercial” in the context in which the word is actually used.
When analyzed in context, the word “commercial” as used in section 27(b) does not readily encompass power plants. Section 27 refers to revenue producing power plants. Section 27(b) does not reference power plants. If, as the majority concludes, the word “commercial” as used in section 27(b) means all forms of commerce, including power plants, then the reference in section 27(b) to “manufacturing ... warehousing, and industrial development” is arguably superfluous, as all those activities would fall under the broad umbrella of commercial activity.
A better reconciliation of sections 27 and 27(b) can be had by simply applying, in context, the plain language of the constitutional provisions. Thus, section 27(b) applies to commercial and industrial development projects but not to the power plant in this case, as section 27 specifically requires voter approval of revenue bonds for power plants. That voter approval would be required prior to issuing revenue bonds for the construction of a power plant is reasonable, considering the potentially dramatic, negative effects that a nearby power plant can have on property values and community well-being.
The majority opinion, rather than reconciling sections 27 and 27(b), renders the voting requirement of section 27 practically meaningless. Where the constitution requires a vote of the people, courts should be reluctant to make that requirement optional. I would reverse the circuit court’s judgment to the extent it holds that there was no need for the people to vote on whether to issue the revenue bonds.