Case Title: Metro. Dev. & Hous. Agcy. v. Leech

Citation: 591 S.W.2d 427

Docket Number: 

State: tennessee

Court: Tennessee Supreme Court

Date: 1979-12-10T00:00:00Z

Document:
591 S.W.2d 427 (1979) METROPOLITAN DEVELOPMENT AND HOUSING AGENCY, et al., Appellants, v. The Honorable William LEECH, Attorney General for the State of Tennessee et al., Appellees. Supreme Court of Tennessee. December 10, 1979. *428 Stone & Hinds, P.C., R. Thomas Stinnett, Knoxville, for Tinsley et al. George E. Barrett, Nashville, for Metropolitan Develop. & Housing. Dale C. Workman, Knoxville, for Knox Co. and C. Howard Bozeman, Judge. William M. Leech, Jr., Atty. Gen., William W. Hunt, III, Asst. Atty. Gen., Nashville, James G. O'Kane, Poore, Cox, Baker, Ray & Byrne, Knoxville, for Knoxville Community Develop. Corp. John L. Kennedy, Metropolitan Atty., Nashville, for appellees. COOPER, Justice. This is a declaratory judgment action, questioning the constitutionality of the 1978 amendments to the Housing Authorities Law, T.C.A. § 13-801 et seq., contained in Acts 1978 (Adj.S.), ch. 854. The chancellor upheld the amended provisions, and the case is before us on appeal as of right, Tenn.R.App.Proc. 3, under the provisions of T.C.A. § 16-408, pertaining to the review of decisions in which the constitutionality of a statute is the sole determinative question. We affirm. The several provisions under attack are appended to the text of this opinion for reference. In essence, their object is to provide a means by which a municipality may stimulate, and, in part, finance, the redevelopment of blighted urban areas. Under the statute, areas are selected for renewal by a housing authority, a "public body corporate" which, when constituted by a city, is effectively a municipal agency. See T.C.A. § 13-802, § 13-901 et seq... The property is purchased by the authority with funds from a bond issue, and then redeveloped as necessary and resold to private interests. After the sale, any property taxes due either the county or the municipality that are attributable to an increase in the property's value after its purchase by the housing authority are allocated to the authority to retire the bonds that funded the purchase.[1] When the bonds for a given project are retired, all property tax receipts from that tract are treated once more as are those from any other property. This method of financing urban renewal, termed "tax increment financing," has been used in a number of other jurisdictions. See e.g., M.C.L.A. § 125.1664 et seq.; M.S.A. § 472 A. 01 et seq. The appellants have questioned the constitutionality of the amended provisions on several grounds. Their more significant claims are those that arise with respect to Art. 2, § 29, and, by reference, Art. 2, § 28, of the state constitution. These sections provide, in pertinent part: The appellants' first argument is based upon the clause of Art. 2, § 29, which states that taxes may be imposed by the counties and cities "for County and Corporation purposes, respectively." In the past, this provision has been interpreted as prohibiting either a county or a city from appropriating funds to a purpose not properly within its own sphere of action, either on its own initiative, or at State direction. See e.g., Judges' Salary Cases, 110 Tenn. 370, 75 S.W. 1061 (1903). The appellants claim that this prohibition is violated by the statutory requirement that the county appropriate funds to a municipal housing authority within its borders, in that such an authority serves a municipal, and not county, purpose. We disagree. The upgrading of blighted urban areas is not only a municipal purpose, but the proper concern of both the county in which the municipality lies and the state as a whole. Cf. West v. Tennessee Housing Development Agency, 512 S.W.2d 275 (Tenn. 1974); Oehmig v. City of Chattanooga, 168 Tenn. 618, 80 S.W.2d 83 (1935). The state may direct a county to expend funds for a state purpose, or for a purpose common to the state and the county, without falling afoul of Art. 2, § 29. Richardson v. City of Chattanooga, 214 Tenn. 384, 381 S.W.2d 1 (1964); Gates v. Long, 172 Tenn. 471, 113 S.W.2d 388 (1938). The appellants also contend that the amended statutes authorize the lending of public credit to a corporation, the housing authority, without prior authorization by the electorate, again in violation of Art. 2, § 29. This argument must fail because, as the housing authority alone is liable on the bonds issued, there is no lending of the credit of either the municipality or the county. See Fort Sanders Presbyterian Hospital v. Health and Educational Facilities Board of County of Knox, 224 Tenn. 240, 453 S.W.2d 771 (1970). The appellants have also raised the question of whether there is a violation of those clauses of Art. 2, §§ 28 and 29 that require that all property be taxed uniformly according to its value. It is their theory that these provisions should be interpreted as requiring that all property subject to taxation by a particular taxing entity contribute to the expenses of that entity in proportion to its value, a requirement which, by their argument, would be violated by tax increment financing because it diverts a portion of the property taxes collected by the county on the redevelopment property to the housing authority, causing the redevelopment property to contribute less, in proportion to its value, to the cost of general county services. This argument is without merit. In the past, the requirements of taxing uniformity in these sections, insofar as they are relevant to this case, have been interpreted as requiring only that the tax burden apply equally to all nonexempt property. See, e.g., King v. Sullivan County, 128 Tenn. 393, 160 S.W. 847 (1913). We can find no reason to extend that interpretation as has been suggested by the appellants. However, even were we to do so, we do not believe that it would have any application here. The appellants' argument appears to be implicitly grounded upon a misconception of the nature of tax increment financing. The statutes as amended do not grant the housing authority or the municipality any additional taxing power with respect to the redevelopment property, nor, conversely, do they take such power away from the county. Neither *430 does the statute require that a given parcel contribute "its" taxes to the housing authority. When T.C.A. § 13-817 speaks of allocating a portion of the taxes received from the redeveloped property to the housing authority, it means only that the various taxing entities shall appropriate an amount equal to that specified portion of the taxes received from the subject property to the authority, not that the actual taxes received from that parcel are in any sense to be set aside. Given that money is perhaps the quintessential fungible good, we cannot believe that the legislature intended any other interpretation. Once it is recognized that we are dealing with a mandated appropriation, whose amount is regulated by the taxes received from the subject property, and not with a transfer, direct or indirect, of taxing power, the appellants' argument fails. The appellants next claim that the statute violates Art. 1, § 21 of the Tennessee constitution, and the due process clause of the 14th amendment of the federal constitution, by authorizing the taking of property without either the consent of the elected representatives of those affected, or adequate compensation. Assuming that a mandatory appropriation of tax funds may be construed to be a taking within the contemplation of these constitutional provisions, we find no violation. The statutory program has been authorized by the General Assembly. The legislature may, in its discretion, require the expenditure of local funds for appropriate purposes. Demoval & Co. v. Davidson County, 87 Tenn. 214, 10 S.W. 353 (1889). While certain decisions with respect to the implementation of the statute, including, indirectly, the amount of public funds that will be appropriated, have been delegated to the housing authority, there is no constitutional requirement that all bodies to which the legislature has delegated aspects of the implementation of its programs be directly accountable to the electorate. Cf. State v. Edwards, 572 S.W.2d 917 (Tenn. 1978). The appellants have raised, but do not press, a number of other arguments. Their claim that the statute violates the equal protection clause of the 14th amendment of the federal constitution, in that the effect of tax increment financing is to place upon the owners of the redevelopment property proportionately less of the burden of paying for general county and municipal services, is based upon the same misconception of the nature of the statutory scheme as was discussed previously with respect to the appellants' arguments predicated upon the uniform taxing provision of the Tennessee constitution, and is, for the same reason, baseless. The appellants have also failed to demonstrate any way in which the delegation of power to the housing authority is, as they claim, either excessive or improper. Cf. State v. Edwards, 572 S.W.2d 917 (Tenn. 1978). Finally, with respect to the appellants' claim that tax increment financing impairs the obligation of contracts, in violation both of Art. 1, § 10 of the federal and Art. 1, § 20 of the Tennessee constitutions, we note, first, that, as none of the appellants alleges that it is a party to a contract whose rights thereunder might be impaired by these statutes, none has standing to raise this question. However, we would say that, at least with respect to bonds and similar debt obligations of the taxing entities concerned, the provisions of T.C.A. § 13-817(7) appear to be sufficient to prevent any unconstitutional impairment. The chancellor's decree is affirmed. Costs will be taxed to the appellants. BROCK, C.J., and FONES, HENRY, and HARBISON, JJ., concur. T.C.A. 13-804. Powers of housing authority. An authority shall have the following powers: T.C.A. 13-813. Blighted areas defined. Blighted areas are areas (including slum areas) with buildings or improvements which, by reason of dilapidation, obsolescence, overcrowding, faulty arrangement or design, lack of ventilation, light and sanitary facilities, excessive land coverage, deleterious land use, or obsolete layout, or any combination of these or other factors, are detrimental to the safety, health, morals, or welfare of the community. T.C.A. 13-814. Powers of housing authority as to blighted areas. Any housing authority now or hereafter established under and pursuant to the provisions of the Housing Authorities Law (including any municipal housing authority whether created under and pursuant to the provisions of such law or of any special statute) may carry out any undertaking hereinafter called a redevelopment project and to that end may: T.C.A. 13-817. Redevelopment plan containing tax increment financing provisions Allocation of taxes collected Contents of plan Tax status of property leased. [1] Excepting taxes levied by any taxing agency for the payment of bonds or other indebtedness. T.C.A. § 13-817(7).