IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 81,074
STATE OF KANSAS ex rel. NICK A. TOMASIC,
WYANDOTTE COUNTY DISTRICT ATTORNEY,
Relator,
v.
THE UNIFIED GOVERNMENT OF
WYANDOTTE COUNTY/KANSAS CITY, KANSAS,
Respondent.
SYLLABUS BY THE COURT
1. It is fundamental that our state constitution limits rather than confers powers. Where the constitutionality of a statute is involved, the question presented is, therefore, not whether the statutory act is authorized by the constitution, but whether it is prohibited thereby.
2. In determining constitutionality of a statute, it is the court's duty to uphold a statute under attack rather than defeat it, and if there is any reasonable way to construe the statute as constitutionally valid, that should be done.
3. Statutes are not stricken down unless the infringement of the superior law is clear beyond substantial doubt.
4. There is no precise definition of what constitutes a valid public use, and what may be considered a valid public use or purpose changes over time. As long as a governmental action is designed to fulfill a public purpose, the wisdom of the governmental action generally is not subject to review by the courts.
5. Traditionally, the test utilized in determining if a legislative enactment violates equal protection principles is whether the classification bears a rational relationship to the purpose of the legislation. The legislature is presumed to act within its constitutional power despite the fact that the application of its laws may result in some inequity.
6. The rational basis test contains two substantive limitations on legislative choice: Legislative enactments must implicate legitimate goals, and the means chosen by the legislature must bear a rational relationship to the goals.
7. A statute is rationally related to an objective if the statute produces effects that advance, rather than retard or have no bearing on, the attainment of the objective. So long as the regulation is positively related to a conceivable legitimate purpose, it passes scrutiny; it is for the legislature, not the courts, to balance the advantages and disadvantages.
8. Because a legislature is not required to articulate its reasons for enacting a statute, it is entirely irrelevant for constitutional purposes whether the conceived reason for the challenged distinction actually motivated the legislature. A legislative choice is not subject to courtroom factfinding and may be based on rational speculation unsupported by evidence or empirical data.
9. Whether embodied in the Fourteenth Amendment or inferred from the Fifth Amendment to the United States Constitution, equal protection is not a license for courts to judge the wisdom, fairness, or logic of legislative choices. In areas of social and economic policy, a statutory classification that neither proceeds along suspect lines nor infringes fundamental constitutional rights must be upheld against equal protection challenges if there is any reasonably conceivable state of facts that could provide a rational basis for the classification.
10. The legislature is not prohibited from making distinctions between classifications of persons. Rather, these constitutional limitations amount to a requirement that all persons similarly situated should be treated alike.
11. In taxation, even more than in other fields, legislatures possess the greatest freedom of classification.
12. Great latitude is granted to the legislature to delegate certain functions to the administrative branch of government. Courts start with the presumption that the legislature and the people have the right to assume that public officials will exercise their express and implied powers fairly, honestly, and reasonably. While standards must accompany a delegation of authority, great leeway should be allowed the legislature in setting forth guidelines or standards, and the use of general rather than minute standards is permissible. When the standard expressed in the statute is merely a finding of necessity, such a determination of need is constitutionally adequate when coupled with the assumption that it will be made fairly, honestly, and reasonably.
13. The modern trend is to require less detailed standards and guidance to the administrative agencies in order to facilitate the administration of laws in areas of complex social and economic problems.
14. The standard of whether a redevelopment plan will "enhance the major tourism area," as set forth in L. 1998, ch. 17, § 2, meets the test articulated by this court regarding delegated authority in that it allows the Governor to know his rights, obligations, and limitations thereunder.
15. L. 1998, ch. 17 contains laws of a general nature, operating, in both fact and theory, with geographic uniformity in the application of the law throughout the state. The legislation contemplates uniform application throughout the state, and the entire body of urban redevelopment/tax increment financing statutes, including the authority to designate major tourism areas, applies to all cities in Kansas.
16. The Fifth Amendment to the United States Constitution requires only that just compensation be paid for the taking of private property. It does not prohibit a condemning authority from paying more than what is determined to be just compensation.
17. The constitutionally required just compensation is a minimum, not a maximum entitlement. The legislature cannot require an owner to accept less, although it is free to provide for more.
Original action in quo warranto. Opinion filed July 10, 1998. Quo warranto denied.
Nick A. Tomasic, district attorney, and Michael P. Howe and Thomas M. Martin, of Lewis, Rice & Fingersh, L.C., of Kansas City, Missouri, argued the cause and were on the brief for relator.
N. Cason Boudreau, deputy chief counsel of Unified Government of Wyandotte County/Kansas City, argued the cause, and Harold T. Walker, chief counsel, and Stephen P. Chinn, T. Chris Williams, and David W. Bushek, of Stinson, Mag & Fizzell, P.C., of Kansas City, Missouri, were with him on the brief for respondent.
Joseph R. Borich, III, argued the cause, and Douglas J. Patterson, of Leawood, was with him on the brief for amicus curiae Property Owners.
The opinion of the court was delivered by
ABBOTT, J.: This is an original proceeding in quo warranto. The action was filed by Wyandotte County District Attorney Nick Tomasic, seeking rulings concerning the proposed construction of an auto race track facility and related projects in Wyandotte County. Respondent is the Unified Government of Wyandotte County/Kansas City, Kansas.
In general, relator seeks (1) a determination that some of the amendments to the urban redevelopment statutes, K.S.A. 12-1770 et seq., (also sometimes referred to as the tax increment financing statutes) contained in L. 1998, ch. 17 are unconstitutional, (2) an order prohibiting the Unified Government from exercising its powers under those amendments to develop the proposed auto race track facility and related projects within Wyandotte County, (3) a determination that certain provisions found in the Development Agreement (Agreement) between Kansas International Speedway Corporation and the Unified Government violate the State's Cash Basis Law as well as the full faith and credit provision found in L. 1998, ch. 17, § 3, and (4) a determination that the Unified Government has been acting in violation of state law by acquiring interests in real property in furtherance of the auto race track redevelopment project prior to the adoption of a redevelopment plan and a relocation assistance plan.
FACTS
The facts involving recent preparations for this proposed auto race track facility are not in dispute and were presented by the parties in a stipulation of facts and agreed-upon record. In early 1997, International Speedway Corporation (ISC) approached the City of Kansas City, Kansas, the predecessor of the Unified Government of Wyandotte County/Kansas City, Kansas (Unified Government), and expressed an interest in constructing a super speedway auto race track facility within its jurisdictional boundaries. Following several meetings between the representatives of the Unified Government and ISC, ISC created a wholly owned Kansas subsidiary corporation named Kansas International Speedway Corporation (KISC).
KISC and the Unified Government entered into the Agreement on December 16, 1997, which established a plan for the development of the auto race track facility. The Agreement set forth the obligations of the parties; established dates for accomplishing certain actions in furtherance of the project; contained covenants, warranties, and conditions precedent; and established termination rights, events of default, and remedies for breach of the Agreement. One of the conditions precedent was the adoption of a tax increment financing plan. Another was the requirement that certain portions of the urban redevelopment/tax increment financing statutes be amended. Among other things, these statutes authorize cities to exercise specified redevelopment powers in designated areas, including areas designated by the Secretary of the Kansas Department of Commerce and Housing (KDOCH) as major tourism areas of the State. Financing of the auto race track facility was to proceed, in large part, pursuant to these statutes.
The Agreement also provided for the formation of a committee to establish procedures for the acquisition of property interests necessary for the project and gave the committee the authority to hire an acquisition/relocation consultant. The committee consists of two representatives from KISC and two representatives of the Unified Government. The Agreement also provided for the establishment of an escrow account to pay certain costs incurred in connection with the project prior to the issuance of special obligation bonds. KISC, the Unified Government, and the State of Kansas pooled certain funds together in the escrow account. The escrow funds, although separated for accounting purposes, have been commingled and have been used for pre-acquisition services, such as appraisal and title work. Although a final redevelopment plan has not been approved, money from the pooled account has been transferred to a title company and will be used to pay homeowners upon their execution of a contingent real estate contract. For internal accounting purposes, funds taken from the pooled account to pay for such option contracts were assessed against KISC's contribution to the joint funds.
During the 1998 legislative session, the legislature amended portions of the urban redevelopment statutes. The amended statutes became law when published in the Kansas Register on February 26, 1998.
In general, and as relevant to the matter at hand, the amendments to the urban redevelopment statutes contained in L. 1998, ch. 17 do the following:
(1) state that one of the purposes of the urban redevelopment statutes is to assist in the redevelopment of a "major tourism area," as that term is defined in L. 1998, ch. 17, § 3(a)(1)(D);
(2) establish the boundaries for a redevelopment district in Wyandotte County that will contain an auto race track facility; require completion of the redevelopment project connected with the auto race track facility within 30 years; extend from 20 to 30 years the maximum maturity of special obligation bonds issued to finance an auto race track facility; provide for an exemption from property taxation for all property, both real and personal, constituting an auto race track facility for a period of 30 years, if certain determinations are made by the city; and allow the inclusion within a major tourism area of an additional 400 acres of property for development, upon certain findings by the Governor and subject to certain rules (L. 1998, ch. 17, § 2, amending various subsections of K.S.A. 1997 Supp. 12-1771);
(3) allow the Secretary of KDOCH to find that a redevelopment project will create a major tourism area of the state if the redevelopment project will consist of at least $100 million in capital improvements and the project constructed will be an auto race track facility (thereby setting the stage for tax increment financing of the project through issuance of special obligation bonds); and define the term "auto race track facility" (L. 1998, ch. 17, § 3, amending various subsections of K.S.A. 1997 Supp. 12-1774);
(4) specify that, prior to the exercise of eminent domain power, "the city shall offer to the owner of any property which will be subject to condemnation with respect to any redevelopment project, other than one which includes an auto race track facility, compensation in amount equal to the highest appraised valuation amount determined for property tax purposes by the county appraiser for any of the three most recent years next preceding the year of condemnation" and, upon condemnation, an additional amount equal to 25% of the condemnation or damage award (L. 1998, ch. 17, § 5, amending subsection [a] of K.S.A. 1997 Supp. 12-1773); and
(5) specify that relocation assistance payments, with respect to any redevelopment project other than one which includes an auto race track facility, shall not be less than $500 (L. 1998, ch. 17, § 6, amending K.S.A. 12-1777).
The statutes which are the primary focus of this action are as follows:
L. 1998, ch. 17, § 2(e), amending K.S.A. 1997 Supp. 12-1771(e) and setting boundaries of the major tourism area.
L. 1998, ch. 17, § 2(h), amending K.S.A. 1997 Supp. 12-1771(h) and setting a 30-year maximum period for special obligation bonds for an auto race track facility.
L. 1998, ch. 17, § 2(l), amending K.S.A. 1997 Supp. 12-1771(l) and allowing for the development of an additional 400 acres upon findings by the Governor.
L. 1998, ch. 17, § 5, amending K.S.A. 1997 Supp. 12-1773 and requiring adoption of a redevelopment plan prior to acquisition of property and imposing a 25% premium requirement.
L. 1998, ch. 17, § 3(a)(1)(D), amending K.S.A. 1997 Supp. 12-1774(a)(1)(D) and indicating an auto race track facility may be a major tourism area of the state and requiring findings by the Secretary of KDOCH.
L. 1998, ch. 17, § 3(b)(1), amending K.S.A. 1997 Supp. 12-1774(b)(1) and prohibiting the issuance of full faith and credit bonds for a major tourism area.
L. 1998, ch. 17, § 6, amending K.S.A. 12-1777 and requiring adoption of a relocation assistance plan prior to initiation of the redevelopment project.
On March 5, 1998, the Unified Government adopted Resolution R-17-98 pursuant to K.S.A. 1997 Supp. 12-1771(a), as amended, designating the area in Wyandotte County within the following boundaries as a major tourism area:
Beginning at the intersection of Interstate 70 and Interstate 435; west along Interstate 70 to 118th Street; north along 118th Street to State Avenue; northeasterly along proposed relocated State Avenue to 110th Street; north along 110th Street to Parallel Parkway; east along Parallel Parkway to Interstate 435; south along Interstate 435 to Interstate 70.
These boundaries coincide with the boundaries established by L. 1998, ch. 17, § 2(e).
Part of the Unified Government's resolution also requested the Secretary of KDOCH to approve this area, pursuant to L. 1998, ch. 17, § 3(a)(1)(D), as a major tourism area of the state.
Also on March 5, 1998, the Unified Government set a March 19, 1998, date for a public hearing to consider the establishment of a "Prairie-Delaware Redevelopment District" in the area it had designated as a major tourism area. The Redevelopment District was to include the proposed auto race track facility site, a proposed multi-use 400 acre parcel of land adjacent to and towards the north and east of the proposed auto race track site, and a small section of residential land adjacent to and towards the southwest of the race track site.
On March 19, 1998, pursuant to L. 1998, ch. 17, § 3(a)(1)(D), the Secretary of KDOCH found that the proposed redevelopment area, i.e., the area designated by the Unified Government as a major tourism area, was also a major tourism area of the state. The same day, the Governor, pursuant to L. 1998, ch. 17, § 2(l), found that the development plan and each project within the additional 400-acre area of the proposed Redevelopment District, excluding roads and highways, would enhance the major tourism area of the state.
At the conclusion of its March 19, 1998, public hearing, the Unified Government adopted a resolution finding that the Redevelopment District was within the major tourism area of the state. (Resolution R-24-98.) The Unified Government, in accordance with L. 1998, ch. 17, § 2(e), then passed Ordinance No. O-11-98, which established the Redevelopment District. The boundaries of the Redevelopment District are coterminous with the boundaries of the major tourism area of the state.
On April 15, 1998, the acquisition/relocation consultant, nominally on behalf of KISC, began making real estate offers to property owners within the Redevelopment District to privately acquire an option to purchase their properties. The offers include, in addition to the amount specified by L. 1998, ch. 17, § 5(a) that would be awarded if the properties were condemned, the 25% additional amount established by L. 1998, ch. 17 for owners whose property is condemned as the result of the construction of an auto race track facility. The offers also include an incentive fee that differs in value based on the category of owner or occupant to whom the offer is made and when the offer is accepted.
Shortly after the acquisition/relocation consultant began making real estate offers in furtherance of the project, relator filed his petition for writ of quo warranto, asking this court to exercise its original jurisdiction and determine the several issues presented in this case. In support, relator asserted the need for an early, immediate, and final resolution by this court of the important legal issues presented and noted the importance of the questions relative to displacement of residents in the proposed redevelopment area and to the economic growth and development of the City of Kansas City, Wyandotte County, and the entire state of Kansas. After consideration of the petition and memorandum in support, this court, as a matter of discretion, consented to hear and determine these issues.
STANDARD OF REVIEW
Some of the general rules of state constitutional construction were recently reiterated in State ex rel. Stephan v. Parrish, 257 Kan. 294, 297-98, 891 P.2d 445 (1995) (quoting State ex rel. Schneider v. Kennedy, 225 Kan. 13, 20-21, 587 P.2d 844 (1978):
"'It is fundamental that our state constitution limits rather than confers powers. Where the constitutionality of a statute is involved, the question presented is, therefore, not whether the act is authorized by the constitution, but whether it is prohibited thereby. [Citations omitted.]
"'The constitutionality of a statute is presumed, all doubts must be resolved in favor of its validity, and before the statute may be stricken down, it must clearly appear the statute violates the constitution. [Citations omitted.]
"'In determining constitutionality, it is the court's duty to uphold a statute under attack rather than defeat it and if there is any reasonable way to construe the statute as constitutionally valid, that should be done. [Citations omitted.]
"'Statutes are not stricken down unless the infringement of the superior law is clear beyond substantial doubt. [Citations omitted.]
"'Courts do not strike down legislative enactments on the mere ground they fail to conform with a strictly legalistic definition o[r] technically correct interpretation of constitutional provisions. The test is rather whether the legislation conforms with the common understanding of the masses at the time they adopted such provisions and the presumption is in favor of the natural and popular meaning in which the words were understood by the adopters. [Citations omitted.]
"'The propriety, wisdom, necessity and expedience of legislation are exclusively matters for legislative determination and courts will not invalidate laws, otherwise constitutional, because the members of the court do not consider the statute in the public interest of the state, since, necessarily, what the views of members of the court may be upon the subject is wholly immaterial and it is not the province nor the right of courts to determine the wisdom of legislation touching the public interest as that is a legislative function with which courts cannot interfere. [Citations omitted.]'"
1. Public Purpose
Initially, the relator contends that the development of an auto race track facility is not a valid public purpose for which tax increment financing (TIF) bonds and special obligation (STAR) bonds, issued pursuant to K.S.A. 12-1774(a)(1), may be issued and for which eminent domain authority may be exercised. If, however, the purpose is found to be a valid public purpose, the relator contends that the issuance of such bonds and the exercise of eminent domain authority for such a purpose are nevertheless unconstitutional, as violative of the Equal Protection Clauses of both the Kansas and United States Constitutions, because (1) there is no rational basis for limiting the "major tourism of the State" classification to the development of an auto race track facility in Wyandotte County to the exclusion of other forms and locations of tourism, (2) there is no rational basis for allowing special obligation bonds used solely to finance an auto race track facility to have a maximum maturity of 30 years while limiting other urban redevelopment special obligation bonds to a maximum maturity of 20 years, and (3) the amendments contained in L. 1998, ch. 17 fail to provide sufficient standards for the Governor to make appropriate determinations regarding either the economic feasibility of the project or the enhancement of a major tourism area.
Relator argues that this auto race track redevelopment project has no valid public or governmental purpose because it amounts to nothing more than a private entity, i.e., KISC, cloaking itself with vestiges of eminent domain authority to benefit its own financial well-being. Relator further argues the government has no purpose or compelling reason for its involvement in this area.
This court has held that there is no precise definition of what constitutes a valid public use, and what may be considered a valid public use or purpose changes over time. Ullrich v. Board of Thomas County Comm'rs, 234 Kan. 782, 789, 676 P.2d 127 (1984). Further, this court has noted that as long as a governmental action is designed to fulfill a public purpose, the wisdom of the governmental action generally is not subject to review by the courts. Duckworth v. City of Kansas City, 243 Kan. 386, 389, 758 P.2d 201 (1988).
In Mid-America Pipeline Co. v. Lario Enterprises, 716 F. Supp. 511 (D. Kan. 1989), rev'd on other grounds 942 F.2d 1519 (10th Cir. 1991), the United States District Court for the District of Kansas found that the taking of private property for use as an auto race track facility was a valid public purpose:
"Plaintiff has suggested that eminent domain does not apply to these facts because [Heartland Park Topeka - the motor sports racing facility] does not constitute a public use of land. In this connection, plaintiff notes the substantial private interest of defendant Lario in the project. The court disagrees with plaintiff's contention for two reasons. First, the City has a major interest in this project. . . . Second the development of recreational facilities and the facilitation of economic development in partnership with private enterprise have been considered legitimate public purposes for the exercise of eminent domain and the expenditure of public money. See Ottawa Hunting Ass'n v. State, supra, 289 P.2d at 758 (condemnation of private property for fish and game preserve considered an effort to improve recreational facilities for state's citizens); Duckworth v. City of Kansas City, 243 Kan. 386, 758 P.2d 201 (1988) (loan from city to private developer to remodel downtown building promotes public purpose of economic revitalization); State v. City of Topeka, 176 Kan. 240, 270 P.2d 270 (1954) (city may condemn land for parking facility and lease the facility to a private corporation); Frum v. Little Calumet River Basin Development Authority, 518 N.E.2d 809, 811 (Ind. App. 1988) (eminent domain approved for construction of marina to be leased to a private party); State v. Daytona Beach Racing & Recreational Facilities Dist., 89 So. 2d 34 (Fla. 1956) (bond money for racetrack to be operated by private corporation not less than six months a year for 40 years furthers public purposes of increasing trade and providing recreation)." 716 F. Supp. at 517-18.
In State, ex rel., Fatzer v. Urban Renewal Agency of Kansas City, 179 Kan. 435, 438, 296 P.2d 656 (1956), this court stated:
"It is elementary that the legislature possesses no power to authorize the appropriation of one's property for a private use or purpose, but it is equally well-settled that the right to take private property for a public use is inherent in the state, and that the legislature may authorize the acquisition and appropriation of private property for a public use provided the owner is compensated therefor. [Citation omitted.] The difficulty often encountered lies in the inability of courts comprehensively to define the concept of a public use or purpose, due, no doubt, to the exigencies shown by the facts and the diversity of local conditions and circumstances in an everchanging world.
"In our opinion the concept of the terms public purpose, public use, and public welfare, as applied to matters of this kind, must be broad and inclusive. . . . The mere fact that through the ultimate operation of the law the possibility exists that some individual or private corporation might make a profit does not, in and of itself, divest the act of its public use and purpose."
We hold the development of the auto race track facility and related projects are valid public purposes for which TIF and STAR bonds may be issued and eminent domain authority exercised.
2. Major Tourism Area of the State
Relator next argues there is no rational basis for limiting the major tourism area of the state classification to the development of an auto race track facility to the exclusion of other forms and locations of tourism. In order for the Unified Government to issue bonds for this project, the Secretary of KDOCH must find that the project will create a "major tourism area within the state." L. 1998, ch. 17, § 3(a)(1)(D) in part provides:
"In making a finding that a redevelopment project will create a major tourism area within the state, the secretary must conclude at least: (i) That capital improvements costing not less than $100,000,000 will be built in the state to construct a project for such major tourism area; and (ii) that the project constructed will be an auto race track facility. An auto race track facility means (i) an auto race facility and facilities directly related and necessary to the operation of an auto race track facility including, but not limited to, grandstands, suites and viewing areas, concessions and souvenir facilities, catering facilities, visitor and retail centers, signage and temporary hospitality facilities; but excluding (ii) hotels, motels, restaurants and retail facilities not included in (i)."
Relator argues that because this statute limits a redevelopment project, based on a characterization that the area is a major tourism area of the state, to the development of this particular auto race track facility in Wyandotte County, it violates the equal protection requirements of both the United States and Kansas Constitutions because there is no reasonable or rational basis for such a limitation. Relator further argues that the limitation establishes an improper distinction between the promotion of this particular auto race track facility and any other auto race track facility or potential major tourism area that could be developed in other areas of the state.
The issue here is not whether there is a rational basis for the exclusion of certain forms of tourism from the definition of a "major tourism area" but, instead, whether the classification established by the legislature's inclusion of auto race track facilities in the definition of a major tourism area bears a rational relationship to the purpose of the legislation. Encouraging the location of auto race track facilities in the state of Kansas will, in fact, promote, stimulate, and develop the economic welfare of the state and its communities and assist in the development and redevelopment of major tourism areas, both of which are purposes of the urban redevelopment statutes. There is no equal protection violation merely because incentives for other segments of the tourism industry would also rationally relate to the purposes of the urban redevelopment statutes. Relator misconstrues the amendments contained in L. 1998, ch. 17 because the amendments do not distinguish between this proposed auto race track facility and any other auto race track facility or potential major tourism area that could be developed in other areas of the state.
We hold the inclusion of an auto race track facility in the definition of a "major tourism area" bears a rational relationship to the furtherance of the economic development of the state. The amendments do not make a distinction between an auto race track facility in Wyandotte County and one in another area of the state.
3. The Bonds
Relator next argues another improper distinction results due to the following language of L. 1998, ch. 17, § 2(h):
"The maximum maturity on bonds issued to finance projects pursuant to this act shall not exceed 20 years except that: (1) Such maximum period of special obligation bonds not payable from revenues described by subsection (a)(1)(D) of K.S.A. 12-1774, and amendments thereto issued to finance an auto race track facility shall not exceed 30 years; and (2) such maximum period, if the governor determines and makes and submits a finding to the speaker of the house of representatives and the president of the senate that a maturity greater than 20 years, but in no event exceedi