The Libertarian Party et al. (Libertarian Party) brings this declaratory judgment action to challenge the constitutionality of 1995 Wis. Act 56 (the Stadium Act) on state grounds. The Stadium
The facts are undisputed. 1995 Wisconsin Act 56 was enacted in a special legislative session after vigorous public debate. In passing the Stadium Act, the legislature determined that substantial statewide public purposes would be served by providing a mechanism for the formation of local baseball park districts in sufficiently populous areas of the state and empowering those districts to build and maintain professional baseball park facilities:
1995 Wisconsin Act 56, § 51 (creating § 229.64).
A district may issue revenue bonds for a portion of these costs (if a supermajority of the members of the board agree) and is empowered to impose a sales and use tax to repay the bonds. The tax is not to exceed 0.1 percent of covered transactions and may be imposed only within a district's boundaries. § 38 (creating § 77.705) and § 51 (creating § 229.68). The proceeds of this tax are to be deposited in a special fund to be used for operating expenses and retirement of the bonds. § 51 (creating § 229.685). A district has no other taxing power and bondholders may not look to its property, or any property within the district, as security or a source of repayment.
The state is not obligated on and does not guarantee the bonds, although under certain circumstances
Furthermore, the bonds issued by a district are secured only by the district's interest in the baseball park facilities, by income from the facilities, by proceeds from the bonds issued by the district and amounts placed in a special redemption fund, investment earnings, and by the sales and use taxes imposed by the district. § 51 (creating § 229.75(3)). The district is prohibited from pledging its full faith and credit on the bonds, and the legislature has declared that the bonds are not a liability of the district. § 51 (creating § 229.75(3)).
Of that total cost, the District will provide $160 million. That money will come from, among other sources, sales and use tax revenues and other revenues raised by the District's issuance of tax exempt revenue bonds. Although the bonds have not yet been issued, the governing board of the District by resolution has authorized a 0.1 percent sales and use tax to be collected commencing on January 1, 1996, in the five counties comprising that District.
The remaining $90 million needed for the construction of the new stadium will come from the Brewers. The team has agreed to make a $90 million "equity contribution" to the project construction fund.
On November 20, 1995, Governor Thompson et al. (Governor) petitioned this court for leave to commence an original action for declaratory judgment seeking a declaration that the Stadium Act is constitutional. Upon accepting original jurisdiction, and recognizing that the Libertarian Party had previously commenced an action in Milwaukee County Circuit Court, this court "inverted" or realigned the parties, directing that the Libertarian Party should be henceforth denominated Petitioners, and the Governor should be denominated as the Respondent in this original action.
The Libertarian Party argues that the Stadium Act violates several provisions of the state constitution and asks this court to grant a permanent injunction restraining the implementation of the act. The Libertarian Party asserts 15 separate constitutional
We begin with the presumption that the Stadium Act is constitutional and must be upheld unless proven unconstitutional beyond a reasonable doubt. Sambs v. City of Brookfield, 97 Wis.2d 356, 370, 293 N.W.2d 504 (1980); State ex rel. Warren v. Nusbaum, 59 Wis.2d 391, 412-13, 208 N.W.2d 780 (1973). Our legislature has plenary power except where forbidden to act by the Wisconsin Constitution. Such general police power is in sharp contrast to that exercised by Congress, which has only those powers specifically provided by the United States Constitution: " [I]t is competent for the legislature to exercise all legislative power not forbidden by the constitution or delegated to the general government, or prohibited by the constitution of the United States." Bushnell v. Beloit, 10 Wis. 155, 168-69 (1860).
We begin our discussion with the Libertarian Party's claim that the Stadium Act violates Wis. Const. art. IV, 31(6) which prohibits the legislature from
The Libertarian Party claims that, by authorizing a sales and use tax that applies only in five counties and by providing for income, franchise and property tax exemptions that may be beneficial to the Milwaukee Brewers, the Stadium Act violates Wis. Const. art. IV, § 31(6) which prohibits the enactment of private laws. Additionally, the Libertarian Party contends that because the legislation exempts the stadium facilities from real and personal property taxes, the Stadium Act grants a local property tax exemption, which directly provides economic benefit to the Milwaukee Brewers.
A claim under Wis. Const. art. IV, § 31 is resolved by determining whether the law is a permissible enactment under art. IV, § 32, which provides:
City of Brookfield, 144 Wis. 2d at 907-08. If a law passed by the legislature meets all these criteria, then it is a "general law" and uniform within the meaning of Wis. Const. art. IV, § 32 and therefore proper, notwithstanding that it comes within one of the specific categories of prohibited legislation found within Wis. Const. art. IV, § 31. "[I]f the legislation being challenged contains classifications which are open, germane, and relate to true differences between the entities being classified, then the legislation is considered
In the present case, the classification employed in the Stadium Act satisfies all five of the Brookfield requirements. First, the classification employed by the legislature makes a substantial distinction on the basis of population. Wisconsin Stat. § 229.67 provides that each district consists of "any county with a population of more than 500,000 and all counties that are contiguous to that county and that are not already included in a different district." Population has frequently been upheld as a relevant ground upon which to create legislative distinctions. In Johnson v. The City of Milwaukee, 88 Wis. 383, 391, 60 N.W. 270 (1894), a case decided soon after the Constitution was amended to create Wis. Const. art. IV, §§ 31 and 32, this Court stated:
Id. at 391.
Second, the classification adopted in the Stadium Act is germane to the purposes of law. The purpose of the Stadium Act is to promote the recreational opportunities that flow from an economically viable professional baseball team and economic development associated with baseball. § 51 (creating § 229.64(1) and
In addition, the legislature could have rationally concluded that the activities of the District ought to be paid for by a tax on economic activity within its boundaries. Contrary to the Libertarian Party's assertion that "geographical disparities" are not allowed, a variety of this state's taxes are only imposed within the boundaries of local units of government. Local property taxes and sales taxes are two such examples. In this case, by requiring sufficient population, the legislature properly precluded the formation of districts that are unlikely to support professional baseball.
Third, the classification is open such that other districts can be created. A district may be created whenever any county attains a population of more than 500,000. § 51 (creating § 229.64(2)). The only argument in the Libertarian Party's brief regarding the Brookfield test is that the Stadium Act does not establish an
In Thielen v. Metropolitan Sewerage Commission, 178 Wis. 34, 189 N.W. 268 (1922), this court upheld a law allowing sewerage commissions to be established in counties containing a first-class city. The only first-class city in the state was Milwaukee. The law provided for funding of the district's operations through a district-wide property tax to be imposed only in that district. Id. at 36-39. This court rejected the claim that the law violated Wis. Const. art. IV, § 31 because it could only apply to Milwaukee County. It held that, although no other county was likely to utilize that law, it was still a general enactment and therefore did not violate § 31:
Id. at 51.
In the present case, it is immaterial that the area surrounding Milwaukee County is currently the only area within the class created by the Stadium Act. The Stadium Act is properly subject to being open such that other cities can join the class.
Fifth, "the characteristics of each class [are] so far different from those of the other classes so as to reasonably suggest at least the propriety, having regard to the public good, of substantially different legislation." Davis v. Grover, 166 Wis.2d 501, 536, 480 N.W.2d 460 (1992). This court recognized in Davis that a large urban area was the best location to experiment with legislation aimed at improving the quality of education. Id. at 535. Milwaukee County and its contiguous counties, having the greatest population concentration in the state, provide a class that is substantially different from other population concentrations in the state.
The Libertarian Party also contends that the Stadium Act's income, franchise and property tax exemptions violate Wis. Const. art. IV, 31 and benefit only the Brewers. We disagree. Wisconsin Stat. § 70.11(36) (1993-94), which contains a property tax exemption for all professional sports facilities, was created by 1991 Act 37, § 34. Its validity is not involved in this proceeding and, even if it were, no question of classification arises because the exemption applies to all professional sports and entertainment stadiums.
Moreover, the tax exemption contained in the Stadium Act is for the District and its bonds, not professional baseball teams. The District's property and bonds are treated like those of any other local unit of government. Any incidental benefit inuring to the Brewers is legally immaterial for purposes of this analysis. Whether the legislature's basis for the classification is wise and judicious, and whether it operates as fairly as other classifications are questions for the legislature, not for the courts. Madison Metropolitan
Id. at 304.
Based on the above, we conclude that the Stadium Act contains classifications which are open, germane, and relate to true differences between the entities being classified. Therefore, the Stadium Act is not a special or private tax law.
Read together, Wis. Const. art. VIII, §§. 4 and 7(2) provide:
The prohibitions embodied in this paragraph are aimed at assuring that public money be raised and used only for public purposes. The question, therefore,
The Libertarian Party argues that the Stadium Act creates a public debt in violation of Wis. Const. art. VIII, § 4 and is not within any of the public purpose exceptions identified in Wis. Const. art. VIII, § 7(2) for which the state may incur a public debt. In essence, the Libertarian Party contends that baseball can never constitute a legitimate public purpose. We disagree.
First, the Libertarian Party's argument fails to distinguish between the District authorized under the Stadium Act and the game of baseball itself. The question is not whether the game of baseball or the Milwaukee Brewers serve a public purpose; rather, the question is whether the legislation creating local baseball park districts satisfies the public purpose doctrine.
In State ex rel. Bowman v. Barczak, 34 Wis.2d 57, 148 N.W.2d 683 (1967), this court recognized that although there is no specific clause in the state constitution establishing the public purpose doctrine, nevertheless such doctrine is firmly accepted as a basic constitutional tenet mandating that public appropriations may not be used for other than public purposes. Id. at 62. The public purpose doctrine commands that public funds can be used only for public purposes. State ex rel. Warren v. Reuter, 44 Wis.2d 201, 211, 170 N.W.2d 790 (1969). In Reuter, this court described the public purpose concept as follows:
Id. at 213.
Although this court is not bound by the declaration of public purpose contained in any legislation, what constitutes a public purpose is, in the first instance, a question for the legislature to determine and its opinion must be given great weight by this court. Id. at 212.
In the present case, the legislature has expressly declared that the formation of local baseball park districts will serve a statewide public purpose by "encouraging economic development and tourism, by reducing unemployment and by bringing needed capital into the state for the benefit and welfare of people throughout the state." § 51 (creating 229.64). These are clearly public purposes and will provide direct, not remote, advantages or benefits to the public at large. See State ex rel. Wisconsin Dev. Authority v. Dammann, 228 Wis. 147, 277 N.W. 278 (1938).
In addition, the fact that a private entity such as the Brewers will benefit from the Stadium Act does not destroy the predominant public purpose of this act. In Reuter, this court addressed a similar argument against a legislative appropriation to the Marquette School of Medicine. That appropriation was challenged as supporting a private school which would not serve a public purpose. We found that this argument confused the means with the end and explained that an act is constitutional if it is designed in its principal parts to promote a public purpose so that the attainment of the public purpose is a reasonable probability. Reuter, 44 Wis. 2d at 214. The benefit to the private Marquette School of Medicine was not enough to destroy the public purpose of that appropriation. Similarly, the fact
Other jurisdictions have reached similar conclusions. See Annotation: Validity of Governmental Borrowing or Expenditure for Purposes of Acquiring, Maintaining or Improving Stadium for Use of Professional Athletic Team, 67 A.L.R.3rd 1186 (1976).
Id. at 754-55.
We agree. More than 65 years ago, this court recognized that providing for recreation—i.e., a wildlife refuge—was a public purpose and a matter for legislative discretion. State ex rel. Hammann v. Levitan, 200 Wis. 271, 228 N.W. 140 (1929). In Levitan, this court stated:
Id. at 281.
Therefore, legislative determinations of public purpose should be overruled only if it can be established that the particular expenditure is "manifestly arbitrary or unreasonable." State ex rel. Hammermill Paper Co. v. La Plante, 58 Wis.2d 32, 56, 205 N.W.2d 784 (1973). The Libertarian Party's assertion that the benefit to the public is only incidental in comparison to the benefit to the Milwaukee Brewers does not satisfy this burden. While some private benefit will result, the project is sufficiently public in nature to withstand constitutional
We now address whether the Stadium Act violates the internal improvements clause of the Wisconsin Constitution. Wisconsin Const. art. VIII, § 10 provides in part:
This clause prohibits the state from being a party in carrying on any work of internal improvement, unless a grant of land or other property has been made to it, specifically dedicated by the grant to such work. Sloan, Stevens & Morris v. State, 51 Wis. 623, 629-32, 8 N.W.2d 393 (1881).
The questions that must be answered in any challenge to this provision are "(1) Is the object sought to be accomplished an `internal improvement'; (2) does it call for the State to `contract any debt' to carry it out, or; (3) does the legislation cause the State to `be a party in carrying on such works'?" Development Dept. v. Bldg. Comm'n, 139 Wis.2d 1, 7, 406 N.W.2d 728 (1987). If
We begin with the recognition that not all construction projects are works of internal improvement. The state may directly engage in construction or other activities if those activities are incident to a predominantly governmental purpose:
The question of whether any particular activity involves a predominantly governmental function varies with time: "[B]oth this court and the legislature have been cognizant of changing times and the everchanging needs of the state and its people." State ex rel. Warren v. Nusbaum, 59 Wis.2d 391, 435-36, 208 N.W.2d 780 (1973). At least two factors are considered: "(1) [t]he dominant governmental function, and (2) the inability of private capital to satisfy the need." Id. at 436.
In State v. Milwaukee Braves, Inc., 31 Wis.2d 699, 721, 144 N.W.2d 1 (1966), we declared that "the interest of the state in preserving business activity within its borders" was a valid governmental interest with respect to a professional baseball team. This court has also upheld state construction for recreational purposes. See Levitan, 200 Wis. at 277 (1929) (construction of a wildlife refuge facility). In Levitan, we stated:
Id. at 280-81. Like the recreational benefits obtained from natural parks, recreational benefits are also received from sports facilities.
Furthermore, we find no merit to the Libertarian Party's argument that construction of the stadium serves a predominantly private purpose. In Lifteau, the Minnesota Supreme Court upheld legislation creating a seven county metropolitan sports taxing district similar to the professional baseball district authorized in the Stadium Act. Relying on the cases collected in 67 A.L.R.3rd 1186 (1976), the Minnesota court noted that: "In every case considering the issue except two ... it has been held that the acquisition or construction of a stadium to be used in part by one or more professional sports teams constitutes a public purpose for which public expenditures could be legally undertaken." Lifteau, 270 N.W.2d at 753-54.
In the present case, the purposes of the Stadium Act, as stated by the legislature, are as follows:
§ 51 (creating § 229.64(1)).
The reduction of unemployment, the promotion of tourism, and the encouragement of industry are all predominately governmental purposes sufficient to avoid a violation of the internal improvements clause. See Earl, 70 Wis. 2d at 481, 492; State v. Village of Lake Delton, 93 Wis.2d 78, 93, 286 N.W.2d 622 (Ct. App. 1979). Therefore, we conclude that the Stadium Act does not violate Wis. Const. art. VIII, § 10, barring state participation in works of internal improvement.
The Libertarian Party claims that, by letting the District borrow money when it lacks the power to levy a direct annual tax to repay the borrowed money, the Stadium Act violates the municipal debt limitation contained in Wis. Const. art. XI, § 3(3) which provides:
This constitutional debt limitation seeks to ensure that a political subdivision does not become overburdened by obligations. It seeks to impose the burden of debt repayment upon those who create the
In the present case, the District's bonds are payable solely from a special fund that does not include any property tax revenues. In this respect, the District's bonds are analogous to special assessment bonds which do not create an indebtedness. Fowler v. City of Superior, 85 Wis. 411, 54 N.W. 800 (1893).
In City of Hartford, this court compared the characteristics of special assessment bonds to tax increment bonds. We noted that "[d] ebts secured by special assessments ... do not burden any property of the municipality other than the revenues from the special assessment tax pledged as repayment." City of Hartford, 172 Wis. 2d at 207. In contrasting tax increment financing with special assessments which are generated in addition to general property taxes, this court noted that special assessments do not impinge on the municipality's general property tax revenues.
Id. at 207.
Further, the Stadium Act is entirely consistent with the "special fund doctrine." This doctrine recognizes that "an obligation payable exclusively from a special fund created by the imposition of fees, penalties or excise taxes, and for the payment of which the general credit of the state or municipality is not pledged... is not a debt within the meaning of constitutional debt limitations." Annotation, 100 A.L.R. 900, 901 (1936). See, e.g., State v. Tampa Sports Authority, 188 So.2d 795, 797 (Fla. 1966) (sources other bonds); City of Phoenix v. Phoenix Auditorium and Convention Center Assn., 412 P.2d 43, 44 (Ariz. 1966) (excise taxes were pledged to
Charles S. Rhyne, Municipal Law 14-7, at 335 (1957).
We find that under the Stadium Act, the bonds to be issued by a baseball park district are revenue bonds which are payable only from the sales and use taxes the District is authorized to impose and revenue from the stadium itself. The Stadium Act mandates that the District can only issue bonds pursuant to Wis. Stat. § 66.066, the specific statute authorizing a municipality—including a local professional park district—to issue revenue bonds. See 51 (creating § 229.68(8)) (granting the stadium district power to issue revenue bonds under § 66.066). Moreover, the bonds to be issued by the District are secured by the District's interest in the park's facilities, the income from those facilities, by the proceeds of the bonds issued by the District, and by the sales and use taxes imposed by the District. Wis. Stat. § 229.75(3). No property tax revenues are involved.
Finally, the District's bonds are also obligations of a public utility, that is, a revenue-producing enterprise that serves a public purpose. The Wisconsin constitution includes an exception for public utilities in Wis. Const. art. XI, § 3(5):
The term "public utility" as used in Wis. Const. art. XI, § 3(5) "must be considered to include all plants or activities which the legislature can reasonably classify as public utilities in the ordinary meaning of the term." Payne v. Racine, 217 Wis. 550, 555, 259 N.W. 437 (1935). Moreover, "anything calculated to promote the education, the recreation or the pleasure of the public is to be included within the legitimate domain of public purposes." Capen v. City of Portland, 228 P. 105, 106 (Ore. 1924).
The Stadium Act expressly declares that, for financing purposes, baseball park facilities are public utilities. Wis. Stat. § 24 (creating § 66.067). The Stadium Act also declares that baseball park facilities serve the public interest by providing recreation, as well as encouraging economic development and tourism, and reducing unemployment. § 51 (creating § 229.64(1)). Finally, the Stadium Act treats the sales and use tax revenues as income of the utility. § 22 (creating § 66.066(1)(c)).
Therefore, because the District's bonds do not create an indebtedness, and because the municipal debt limitation does not apply to the District, we conclude that the Stadium Act does not violate the municipal debt limitation.
The Libertarian Party's final argument is that the Stadium Act pledges state credit for the benefit of the Brewers in violation of Wis. Const. art. VIII, § 3, which provides that "the credit of the state shall never be given, or loaned, in aid of any individual, association or corporation." This section prohibits the state from granting its credit in aid of a private business.
The Libertarian Party advances three arguments under this section: (1) that the clause prohibits gifts as well as loans, and the Stadium Act contains certain cash and "in-kind" subsidies; (2) that the state and the District created under the act are "a legal identity" and thus, the District's liability on any bonds is actually the state's liability; and (3) that the Stadium Act's declaration of a "moral obligation" to pay the bonds in the event of default creates a legal obligation. We address each argument in turn.
The Libertarian Party's primary argument focuses on what they refer to as the "massive state financing" of this stadium project which includes $160 million of revenue bonds to be issued by the District plus another $50 million of bonds to be issued by WHEDA. According to the Libertarian Party, because the proceeds from both will go directly to the Brewers, the "no credit" clause of the state constitution is violated.
Wisconsin Const. art. VIII, § 3 prohibits the pledge of the state's credit on behalf of any private person, but this section says nothing about grants of cash or subsidies, or the provision of services. We agree that such activities must serve a public purpose and satisfy other constitutional limitations. However, the Libertarian Party provides no support for its suggestion that state grants implicate the credit clause. To reach such a conclusion
Second, the Libertarian Party argues that a local professional baseball district does not have a separate legal identity, but is merely an "administrative agency" of the state.
This court has previously held that the legislature has the power to create local units of government which are not subject to the same constitutional restrictions as the state. In Redevelopment Authority v. Canepa, 7 Wis.2d 643, 97 N.W.2d 695 (1959), this .court recognized that "in a sense all governmental bodies created under the constitution of the state, including cities and villages, could be termed `state agencies.'" Id. at 652. This court also observed that:
Id. at 651.
In State ex rel. Gubbins v. Anson, 132 Wis. 461,112 N.W. 475 (1907), this court discussed at length the legislature's authority to create a new governmental unit with territorial limits different from those of existing counties, cities or other municipal corporations. It concluded that the legislature has the power to alter the delegation of powers to local governmental units, and that in creating new units of government, it
Finally, in Warren v. Nusbaum, 59 Wis.2d 391 (1973), this court considered whether the Wisconsin Housing Finance Authority was subject to many of the same limitations and prohibitions that the Libertarian Party suggests apply to a local professional baseball district. The Authority was governed by a board made up of solely appointed members, serving without compensation, and was denominated by the legislature as a body corporate, separate from the state. Recognizing that it must look beyond such a legislative denomination and examine the powers and structure conferred upon the Authority, this court focused on the Authority's powers, including the power to sue and be sued, to enter into contracts, to incur debt, and to own, improve and convey real estate. We held that the Authority was a separate entity from the state. Id. at 424.
In the present case, the District has similar powers. For example, the District has the power to sue and be sued in its own name, and significantly, like all the counties in the state, the District has the power to levy sales and use taxes. Although the Stadium Act places an upper limit on the tax rate that may be imposed, the District is nonetheless empowered to impose a sales and use tax. The fact that the District might use the state to collect those taxes or that the District has an appointed board, does not lead to the conclusion that the District is legally identical to the state.
Third, the Libertarian Party contends that the "moral obligation" pledge in § 51 (creating § 229.74(7)) creates an impermissible state liability because the state has acknowledged a moral obligation to pay the bonds if the team defaults; therefore, such an obligation amounts to a loan of the state's credit.
However, absent a legally enforceable contractual obligation on the part of the state, Wis. Const. art. VIII, § 3 cannot be violated:
Dammann, 228 Wis. at 197. Here, § 51 (creating § 229.75) specifically provides that the state is not liable for the actions of the District. This section also provides that the state is not liable on the District's bonds, that the bonds are not a debt of the state and that the bonds must contain a statement to that effect. 1995 Wis. Act § 51 (creating § 229.75(2)) provides:
1995 Wis. Act 56, § 51 (creating § 229.74(7)) provides for a moral obligation pledge in which the legislature "expresses its expectation and aspiration that, if ever called upon to do so ...," it shall make an appropriation in an amount necessary to restore the special debt service reserve fund to an amount equal to
In Nusbaum, the court upheld a law challenged under Wis. Const. art. VIII, § 3, saying:
Id. at 432.
This reasoning applies with equal force to the Stadium Act. "moral obligation" in the Stadium Act does not create state debt nor pledge state credit, it merely expresses the legislature's intention that if ever called upon to do so, it will make appropriations to further the purposes and objectives of the legislation being challenged.
We conclude that because the District and state are not legally identical, and because the "moral obligation" pledge is not legally enforceable, the Libertarian Party's claim that the Stadium Act violates Wis. Const. art. VIII, § 3 must fail.
The purpose of the Stadium Act is to promote the welfare and prosperity of this state by maintaining and increasing the career and job opportunities of its citizens and by protecting and enhancing the tax base on which state and local governments depend upon. It is clear that the community as a whole will benefit from the expenditures of these public funds. Creation of new jobs is of vital importance to the State of Wisconsin and economic development is a proper function of our government.
Therefore, after considering all of the arguments appropriately raised and presented by the Libertarian Party in their briefs and in oral argument, we conclude that such arguments are without merit. The legislature has carefully crafted the Stadium Act to conform to the law of this state. Accordingly, we declare 1995 Wisconsin Act 56 to be constitutional and deny the Libertarian Party's request for injunctive relief.
By the Court—Rights declared.
SHIRLEY S. ABRAHAMSON, J., did not participate.
In response to this order, the Libertarian Party filed a purported "Notice of Dismissal" asserting that they dismissed the case pursuant to Wis. Stat. § 805.04. This court rejected the notice of dismissal. Subsequently, the Libertarian Party submitted what they denominated as a "special appearance" brief.