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City of Fairbanks. v. Fairbanks Convention & Visitors Bureau (10/11/91), 818 P 2d 1153
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Notice: This is subject to formal correction
before publication in the Pacific Reporter.
Readers are requested to bring typographical
or other formal errors to the attention of
the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501, in order
that corrections may be made prior to
permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
CITY OF FAIRBANKS, )
)
Appellant, ) Supreme Court No. S-3663
) 4FA-89-1478 Civil
v. )
)
FAIRBANKS CONVENTION AND )
VISITORS BUREAU, an Alaskan ) O P I N I O N
Non-Profit Corporation, )
) [No. 3760 - October 11, 1991]
Appellee. )
)
Appeal from the Superior Court of the
State of Alaska, Fourth Judicial District,
Fairbanks
Mary E. Greene, Judge.
Appearances: Herbert P. Kuss, City
Attorney, Fairbanks, for Appellant. James D.
DeWitt, Guess & Rudd, Fairbanks, for
Appellee.
Before: Matthews, Chief Justice,
Rabinowitz, Burke, Compton and Moore,
Justices.
COMPTON, Justice.
In 1979 the City of Fairbanks (city) enacted a motel
and hotel tax (bed tax) as part of its municipal code.1 Up to
seventy percent of the revenues from this tax supports the
Fairbanks Convention and Visitors Bureau (FCVB). In 1989 the
city certified for inclusion on the general election ballot a
voter initiative to create a new arrangement for allocating the
bed tax revenues. FCVB sought declaratory and injunctive relief
against the initiative in superior court, and was granted a
preliminary injunction barring the initiative from appearing on
the ballot. The court then declared the proposed initiative
unconstitutional, concluding it repealed an appropriation, and
issued a permanent injunction. The city appeals. We reverse.
I. FACTUAL AND PROCEDURAL BACKGROUND
Under Fairbanks General Code Ordinance (FGCO) 5.402
(1988),2 up to seventy percent of the revenues from the city's
bed tax go to the FCVB unless the city council votes otherwise.
There is no evidence in the record of any occasion when the
council has voted to give the FCVB less than seventy percent.
The FCVB received approximately $750,000 from the bed tax during
1989; this was about eighty-five percent of its total budget.
In the summer of 1989 the Interior Taxpayers
Association (ITA), a citizens' group, proposed an initiative for
the October 3rd general election ballot. The proposed initiative
would substantially change FGCO 5.402.3 It would expand the
purposes for which bed tax revenues can be used, not limiting
funding to tourist and entertainment activities. In addition, it
would delete the maximum percentage level of funding specified
for FCVB and other groups, leaving FCVB to compete for tax
revenues. FCVB would no longer automatically receive a
particular share, or any share at all.4 As the superior court
noted, "[t]he current Section 5.402 operates to tie the City
Council's hands in the spending of revenue generated from the
hotel/motel bed tax and earmarks funds for specific purposes.
The initiative would remove almost all of those restrictions."
Fairbanks Convention & Visitors Bureau v. Roberson, No. 4FA-89-
1478 Civ., mem. decision and order at 6 (Alaska Super. Sept. 18,
1989). On August 29, 1989, the city clerk certified the
initiative for placement on the ballot.
FCVB filed suit on September 1, seeking declaratory and
injunctive relief. FCVB argued that the initiative was an
unconstitutional attempt to appropriate money, dedicate tax
revenues to a specific purpose, and repeal an existing
appropriation. The city responded that the initiative did not
make or repeal an appropriation, or dedicate funds.
Alternatively, the city argued that if the court determined that
the initiative dedicated funds unconstitutionally, the court
could cure the initiative by severing any unconstitutional
portions. The court concluded that the proposed initiative
repealed an existing appropriation. It did not reach the other
issues. It granted FCVB's motion for summary judgment and issued
a permanent injunction.
There are no genuine issues of material fact in this
case. The parties do not dispute that the Fairbanks City Council
has the power to enact a municipal ordinance identical to the
proposed initiative. This appeal is not about whether the city
council could do what the initiative petition seeks; rather, the
issue is whether this goal can be attained through an initiative.
II. DISCUSSION
The usual rule applied by this court is to construe
voter initiatives broadly so as to preserve them whenever
possible. Thomas v. Bailey, 595 P.2d 1, 3 (Alaska 1979).
However, initiatives touching upon the allocation of public
revenues and assets require careful consideration because the
constitutional right of direct legislation is limited by the
Alaska Constitution. Article XI, section 7 of the Alaska
Constitution states in part:
The initiative shall not be used to
dedicate revenues, make or repeal
appropriations, create courts, define the
jurisdiction of courts or prescribe their
rules or enact local or special legislation.
The City of Fairbanks is a home-rule municipality, and the
initiative limitation has been extended by statute to home-rule
municipalities. AS 29.10.030(c).5 Therefore, the proposed
initiative is illegal if it makes or repeals an appropriation or
dedicates funds.
By its own language, the initiative repeals FGCO 5.402.6
Therefore, to decide whether the initiative violates the Alaska
Constitution, we must first determine whether FGCO 5.402 is an
appropriation. The superior court concluded that FGCO 5.402 is
an appropriation, and that the proposed initiative is an
unconstitutional attempt to repeal this appropriation. We
disagree, for reasons hereafter stated.
Since we conclude that the initiative does not repeal
an appropriation, we must consider whether it makes an
appropriation or dedicates funds. These issues were not
considered by the superior court but have been raised by FCVB as
alternative grounds for affirming the judgment. This is
procedurally proper as, "[t]his court may affirm a judgment of
the superior court on different grounds than those advanced by
the superior court and even on grounds not raised by the parties
in the superior court." Sisters of Providence v. Municipality of
Anchorage, 672 P.2d 446, 448 n.2 (Alaska 1983). On questions of
law, we "adopt the rule of law that is most persuasive in light
of precedent, reason, and policy." Guin v. Ha, 591 P.2d 1281,
1284 n.6 (Alaska 1979). We conclude that the initiative neither
makes an appropriation nor dedicates funds.
A. Does the initiative repeal an appropriation?
Our prior cases defining "appropriation"in the context
of article XI, section 7 have concentrated on the two parallel
purposes for preventing the making of appropriations through the
initiative process. First, initiatives should not be "used to
enact give-away programs, which have an inherent popular appeal,
that would endanger the state treasury." Thomas v. Bailey, 595
P.2d 1, 7 (Alaska 1979). This is because "[i]nitiatives for the
purpose of requiring appropriations were thought to pose a
special danger of 'rash, discriminatory, and irresponsible
acts.'" Id. (quoting V. Fischer, Alaska's Constitutional
Convention 80-81 (1975)). The second "reason for prohibiting
appropriations by initiative is to ensure that the legislature,
and only the legislature, retains control over the allocation of
state assets among competing needs." McAlpine v. Univ. of
Alaska, 762 P.2d 81, 88 (Alaska 1988).
In the context of an initiative that would repeal an
appropriation, only the second of these purposes -- retention of
control of the appropriation process in the legislative body --
is relevant. We have ruled on a number of cases involving
initiatives which arguably made appropriations. In those cases
we construed the term "appropriations"broadly so that the intent
of our constitutional framers in prohibiting appropriations by
initiative would be fully met. Thus, in Thomas v. Bailey, 595
P.2d 1, 7 (Alaska 1979), we extended the definition of
appropriation to include transfers of non-monetary assets such as
land. In Alaska Conservative Political Action Committee v.
Municipality of Anchorage, 745 P.2d 936, 938 (Alaska 1987), we
held that an appropriation need not involve public revenues if it
compelled transfer of a government asset. Most recently, in
McAlpine v. University of Alaska, 762 P.2d 81, 89 (Alaska 1988),
we concluded that the prohibition against appropriations by
initiative applied to initiatives which "simply designate[d] the
use of assets."
In a broad sense, FGCO 5.402 is arguably an appropri
ation because it designates bed tax revenues for the purpose of
tourist and entertainment facilities and other economic
development.
However, the purposes of the constitution are not met
by construing the term "appropriations"broadly in the context of
an initiative which arguably repeals an appropriation. The
purpose of the prohibition on repeal of appropriations by
initiative is to ensure that the legislative body remains in
control of and responsible for the budget. A broad construction
of "appropriations"is not necessary to accomplish this purpose.
Repealing a particular law that is an appropriation in a broad
sense, because, for example, it permanently designates assets for
a special purpose, does not disempower the legislative body from
making annual spending decisions. It follows that the general
rule that the initiative power will be construed broadly should
control in the repeal context, and result in a more narrow
construction of the term "appropriations." In our view, in the
context of the prohibition on repealing "appropriations," the
term should be used in the same sense as the legislature has used
it in the municipal code, AS 29.35.100, that is as an act which
accompanies the approval of the annual budget or is supplemental
to that act:
The governing body shall establish the
manner for the preparation and submission of
the budget and capital program. After a
public hearing, the governing body may
approve the budget with or without amendments
and shall appropriate the money required for
the approved budget. (b) The governing body
may make supplemental and emergency appropri
ations. Payment may not be authorized or
made and an obligation may not be incurred
except in accordance with appropriations.
FGCO 5.402 is not an appropriation in the sense of the
term used in AS 29.35.100 because it does not reflect an action
taken by the governing body after annual approval of the budget,
nor can it be construed in any sense to be a supplemental or
emergency act of the governing body.
B. Does the initiative itself make an appropriation?
The FCVB argues that even if the initiative does not
repeal an existing appropriation in FGCO 5.402, it itself makes
an appropriation. It claims that the setting aside of bed tax
revenues for deposit in a city council discretionary fund meets
the "classic definition"of appropriation, comparing this use of
funds to the attempt to convey state property to a new community
college in McAlpine and the attempt to convey state utilities in
ACPAC. The city, on the other hand, argues that the initiative
would not allocate funds specifically any more than the present
FGCO 5.402 does, but rather broadens the city council's authority
to appropriate bed tax funds.
We find the city's argument persuasive. Applying the
same test to the initiative as we did to the existing ordinance,
we must ask whether the initiative would set aside a certain
specified amount of money or property for a specific purpose or
object in such a manner that is executable, mandatory, and
reasonably definite with no further legislative action. The
initiative does not meet these requirements.
Under the terms of the initiative, any public or
private organization or any person can apply to the city council
for funding from the discretionary fund for a particular fiscal
year. These applications are to be reviewed by a committee
appointed by the mayor with council concurrence, and then voted
on by the council before any funds are distributed. The
initiative specifies no sums that must be distributed, no
specific purpose that must be funded, and no mandatory process
that must be followed.
A reference to the dual purposes behind the prohibition
of initiatives which make appropriations is instructive. First,
the initiative is not a give-away program. No particular group
or person or entity is targeted to receive state money or
property, nor is there any indication that by passing this
initiative, the voters would be voting themselves money. Second,
this initiative does not reduce the council's control over the
appropriations process. Instead, the initiative allows the
council greater discretion in appropriating funds than does the
current law. It is axiomatic that if FGCO 5.402 does not make an
appropriation, then the initiative, which affords greater
legislative discretion and is not a give-away program, cannot
make an appropriation.
C. Does the initiative dedicate revenues?
The city concedes that FGCO 5.402 as currently written
is a dedicated fund.7 The question is whether the initiative,
which would repeal and reenact that ordinance, itself dedicates
revenues. We have not had occasion to review the clause in
article IX, section 7 of the Alaska Constitution prohibiting
initiatives which dedicate revenues. However, we have reviewed a
similar provision in article IX, section 7, which prohibits the
dedication of the proceeds of any state tax or license to any
special purpose. Because the language of these two provisions is
similar, we adopt a similar analysis of the meaning of each
provision and the purposes behind them.
This court has considered the meaning of dedicated
revenues only once before. In State v. Alex, 646 P.2d 203
(Alaska 1982), we held that a mandatory tax on the sale of
salmon, the proceeds of which were to be allocated to regional
associations for enhancement of salmon production, was an
unconstitutional dedication of revenues. In reaching that
conclusion, we relied on the fact that the allocation of revenues
to the regional associations was mandatory, leaving no discretion
to the legislature to spend the money in any other way. We also
noted that other provisions of the statute entitled the regional
associations to rely on the receipt of the salmon tax funds as
collateral for state loans or as evidence of their ability to
establish sufficient equity in their hatcheries. As we said,
"[t]hese provisions are nonsensical if the assessments are not
earmarked in some way so that the association has a `right' to
them." Alex, 646 P.2d at 208.
The questioned initiative would not create any similar
"right"for any person or group. It would not earmark any funds
for any particular organizations. Nor does it create any
mandatory expenditures. In the context of the current law, it
actually broadens, rather than limits, the council's discretion
to spend money for the benefit of the city. FCVB nevertheless
argues that the initiative would require the dedication of
revenues to a specific purpose. We disagree. The initiative's
statement of purpose cannot be characterized as a dedication.
Indeed, the phrase used in the initiative, "for the purpose of
funding city facilities and services for the general public," is
so broad as to include any city expenditures.
Analysis of the purposes behind the prohibition of
dedicated revenues confirms our conclusion. In Alex, 646 P.2d at
209-10, we cited the Alaska Statehood Commission's studies on
dedicated revenues as the motivation for the inclusion of article
IX, section 7 in the Alaska Constitution:
Even those persons or interests who seek
the dedication of revenues for their own
projects will admit that the earmarking of
taxes or fees for other interests is a fiscal
evil. But if allocation is permitted for one
interest the denial of it to another is
difficult, and the more special funds are set
up the more difficult it becomes to deny
other requests until the point is reached
where neither the governor nor the
legislature has any real control over the
finances of the state.
3 Alaska Statehood Commission, Constitutional Studies pt. IX, at
111 (1955). Thus the two main motivations behind the ban on
dedicated revenues were to maintain the potential of flexibility
in budgeting and to ensure that the legislature did not abdicate
responsibility for the budget. In the initiative context, only
the former motivation is relevant.
The initiative in this case does not infringe on
flexibility in the budget process. Indeed, it removes existing
restraints on the city council's flexibility. Under the current
law, the city council is encouraged, if not obligated, to
appropriate certain percentages of the city's bed tax revenues to
certain groups. In addition, all appropriations of bed tax
revenues must be "for the purpose of and shall be limited to the
funding of tourist and entertainment facilities." The initiative
eliminates each of these dedications. Under the initiative, bed
tax revenues could be used to fund any city facility or service,
not just tourist and entertainment facilities, and there is no
organization "entitled"to receive funds simply upon approval of
its budget. By no means would the initiative restrict the power
of the city council in distributing the bed tax revenues. The
initiative might be better described as an "undedication"than a
dedication.
III. CONCLUSION
For the above reasons, we hold that the initiative is
constitutional, and should be placed on the ballot. The decision
of the superior court granting summary judgment for FCVB and a
permanent injunction against the initiative is REVERSED and the
case REMANDED with directions to enter judgment on behalf of the
city and to dismiss FCVB's complaint.
_______________________________
1Fairbanks General Code Ordinance (FGCO) 5.401 (1979).
2FGCO 5.402 states:
(a) The tax on the daily rental of
hotel and motel rooms levied by this article
is for the purpose of and shall be limited to
the funding of tourist and entertainment
facilities for the general public and to
promote the tourist industry and other
economic development of the city. It is
recognized that various public and private
businesses and organizations in the
community, including but not limited to the
chamber of commerce, the Fairbanks Convention
and Visitors Bureau and other bureaus,
organizations and commissions organized and
existing for these same purposes, may be
areawide in scope and the promotion and
economic development of the greater Fairbanks
area, whether within or without the corporate
limits of the city, has a direct and major
impact on the city itself.
(b) Revenues collected under this
article in the (12) month period ending
October 31st of the calendar year shall be
available for appropriation for the next
calendar year as follows:
(1) Ten percent (10%) for
the funding of the Fairbanks
Industrial Development Corporation;
(2) Seventy percent (70%)
for the funding of the Fairbanks
Convention and Visitors Bureau;
(3) Fifteen percent (15%)
for the discretionary funding of
proposals which clearly demonstrate
a direct relationship to the
purposes and objectives set forth
in this section; three percent (3%)
of this amount shall be dedicated
to the funding of beautification
and littering projects;
(4) Five percent (5%) for
forward funding of this tax
account;
(5) All residual funds
shall be made available for the
council's discretionary funding.
(6) Any and all overhead
costs relating to auditing and tax
collection, as determined by the
finance department, shall be
subtracted from the gross amount of
tax collected before disbursement
as provided above.
(c) The Fairbanks Industrial
Development Corporation and the Fairbanks
Convention and Visitors Bureau shall submit
their annual and maximum operating budget to
the council for approval no later than
October 31st of the current calendar year.
The council shall review these budgets no
later than December 1st of the current
calendar year and, if approved, may
appropriate revenues in accordance with the
scheduled and maximum percentages. In the
event the council fails to review these
budgets by December 1st, the budgets shall be
deemed approved and the scheduled percentages
shall be appropriated to them.
In addition, in their budget
submissions the Fairbanks Industrial
Development Corporation and the Fairbanks
Convention and Visitors Bureau shall provide
the council with a financial statement
including both income and expenditures for
the current calendar year.
(d) Any organization, public or
private, or any person may submit an
application and proposal, if any, to the
council prior to October 31st of the current
calendar year which seeks funding from the
capital project fund or the discretionary
fund. The council shall establish the
criteria for selection and publish the same
no later than August 1st of the current
calendar year. A committee shall be
appointed by the mayor to review proposals
and make recommendations to the council. Two
(2) members of the visitor industry
(Fairbanks Convention and Visitors Bureau or
Alaska Visitors Association) shall sit on
this committee. Nothing in this subsection
shall require the council to fund any
proposal.
3The ITA - sponsored initiative provides:
Shall FGCO sec. 5.402 which limits the
use of the hotel/motel tax . . . be repealed
and reenacted as follows:
Sec. 5.402. Purpose and limitation.
(a) The tax on the daily rental of
hotel and motel rooms levied by this article
is for the purpose of funding city facilities
and services for the general public and to
promote the tourist industry and other
economic development of the city.
(b) Any organization, public or
private, or any person may submit an
application and proposal, if any, to the
council no later than two (2) months prior to
the expiration of the current fiscal year
which seeks funding from the discretionary
fund for the following fiscal year. The
council shall establish standards and
criteria for selection and publish the same
for a reasonable period before the
applications are to be submitted. A
committee shall be appointed by the mayor
with council concurrence to review the
proposals and make recommendations to the
council.
4The initiative may also affect what organizations can
obtain the revenues. Under the existing ordinance, tourist
organizations and other organizations which promote economic
development in Fairbanks but operate outside the corporate limits
of the city can be funded from bed tax revenues. The proposed
initiative is silent on whether such organizations could be
funded, but the deletion of the language in the first paragraph
of the existing ordinance indicates that the proponents of the
initiative intend to change the way organizations operating
outside the city limits are to be treated.
5AS 29.10.030(c) reads: "A charter may not permit the
initiative and referendum to be used for a purpose prohibited by
art. XI, sec. 7 of the state constitution."
6The city argues that even if the ordinance is an
appropriation, the initiative merely amends it and does not
repeal it, despite its use of the term "repeal and reenactment."
Amending an appropriation through an initiative, the city argues,
is not unconstitutional.
We do not find this argument persuasive. The language
of the initiative includes the word "repeal,"not "amend," and
this language determines the intent of the initiative. A
comparison of the ordinance and the initiative section by section
demonstrates that the initiative effectively replaces most of the
existing ordinance. As this court has noted previously, "[a]n
amendment of an act operates as a repeal of its provisions to the
extent that they are materially changed by, and rendered
repugnant to, the amendatory act." Warren v. Thomas, 568 P.2d
400, 402 (Alaska 1977) (quoting Meyers v. Bd. of Supervisors, 243
P.2d 38, 42 (Cal. App. 1952)). It would be unreasonable to
consider the initiative to be a continuation of the existing
ordinance when it so completely emasculates that ordinance.
7We note that neither party addressed the issue of whether
the ordinance itself violates article IX, section 7 of the Alaska
Constitution, prohibiting dedicated revenues. Our decision today
should not be read as expressing any opinion on that question.
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