Opinion ID: 1345826
Heading Depth: 2
Heading Rank: 2

Heading: Case Law and Statutory Evolution

Text: The constitutionality of this statute was first challenged in Schrey v. Allison Steel Mfg. Co., 75 Ariz. 282, 255 P.2d 604 (1953). In Schrey, the city of Glendale awarded a construction contract to the low bidder, Chicago Bridge and Iron Company, a foreign corporation licensed to do business in Arizona and holding an Arizona contractor's license. Allison Steel, an Arizona corporation, had paid taxes for 1950 and 1951 on a plant sufficient to perform the contract and therefore claimed a preference under the statute. Allison Steel filed a mandamus action to compel the city council to award it the contract. The writ was issued and the city appealed, challenging the statute under both the federal and Arizona equal protection clauses (U.S. Const. amend. XIV; Ariz. Const. art. 2, § 13). This court upheld the statute, concluding that it applied equally to all members of the class, and that the state had a reasonable basis for granting the preference to contractors who contributed to the public funds from which they would benefit. Schrey, 75 Ariz. at 287-88, 255 P.2d at 607-08. Later cases involving the bid preference statute followed Schrey. See, e.g., Tanner Cos. v. Superior Court, 144 Ariz. 141, 143, 696 P.2d 693, 695 (1985) (joint venture entitled to same consideration as single resident contractor; to qualify for preference, contractor must have paid taxes for two years on real or personal property in an amount equal to a reasonable valuation of the plant and equipment necessary to complete the bid); Mardian Constr. Co. v. Superior Court, 113 Ariz. 489, 491, 557 P.2d 526, 528 (1976) (statute intended to provide advantage for resident over nonresident contractors); City of Phoenix v. Superior Court, 109 Ariz. 533, 535, 514 P.2d 454, 456 (1973); Western Sun v. Superior Court, 159 Ariz. 223, 228, 766 P.2d 96, 101 (Ct.App. 1989) (payment of another party's tax liability does not entitle one to the benefits of the preference statute). The statute remained relatively unchanged until 1981, when the legislature deleted the requirement that a contractor must be licensed in Arizona to qualify for the bid preference. H.B. 2112, 35th Legislature, Reg.Sess., 1981, ch. 221, § 27. Shortly after Tanner was filed, the legislature again amended A.R.S. § 34-241, removing the requirement that, in order to qualify for the preference, a contractor must have paid taxes on property substantially equivalent in value to that needed to perform the contract. Instead, a contractor could qualify for the preference merely by paying taxes of $200 per year for at least two consecutive years immediately prior to submitting a bid. H.B. 2278, 37th Legislature, Reg.Sess., 1985, ch. 149, § 1. The statute was amended a third time in 1988. This amendment stipulated that the location of the contractor's home office is not a factor in determining whether the contractor qualifies for the preference. H.B. 2250, 38th Legislature, Reg.Sess., 1988, ch. 158, § 1. [6] The 1988 amendment also restored the requirement that the bidding contractor must be licensed under Title 32, ch. 1 or ch. 10. Id. CONSTITUTIONALITY OF A.R.S. § 34-241 A. Contentions Big D claims that the statutory preference of A.R.S. § 34-241 violates both article 2, § 13 of the Arizona Constitution, which provides that [n]o law shall be enacted granting to any citizen,... or corporation other than municipal, privileges or immunities which, upon the same terms, shall not equally belong to all citizens or corporations; and article 4, part 2, § 19, which provides that [n]o local or special laws shall be enacted... [g]ranting to any corporation, association, or individual, any special or exclusive privileges, immunities, or franchises. We turn to these contentions mindful of the precept that we should resolve any doubts in favor of a statute's constitutionality. Arizona Downs v. Arizona Horsemen's Found., 130 Ariz. 550, 554, 637 P.2d 1053, 1057 (1981). If possible, we will construe a statute to give it a reasonable and constitutional meaning. Id. B. The Constitutional Tests Big D contends that A.R.S. § 34-241 improperly discriminates between two classes of contractors. However, it is not always a denial of equal protection when the state treats different classes of individuals in different ways. See Arizona Downs, 130 Ariz. at 555, 637 P.2d at 1058 (citing Eisenstadt v. Baird, 405 U.S. 438, 92 S.Ct. 1029, 31 L.Ed.2d 349 (1972)). When challenged under the equal protection provisions of article 2, § 13, the legality of a particular classification depends on its character, the individuals affected, and the asserted government purpose. Arizona Downs; State v. Kelly, 111 Ariz. 181, 184, 526 P.2d 720, 723 (1974), cert. denied, 420 U.S. 935, 95 S.Ct. 1143, 43 L.Ed.2d 411 (1975). The test applied to evaluate a challenged classification varies. If the statute limits a fundamental right or affects a suspect class, we subject it to strict scrutiny and will only uphold it if it is necessary to promote a compelling state interest. But if the statute does not affect a fundamental right or a suspect class, we will apply the rational basis test. The rational basis test applies particularly to legislation that is a form of economic regulation. Arizona Downs. The parties all agree that the bid preference statute is strictly economic legislation. No suspect classifications are involved, nor does the statute affect any fundamental rights. Therefore, the rational basis test applies. Under the rational basis test, a statute must be rationally and reasonably related to furthering some legitimate governmental interest. Bryant v. Continental Conveyor Equip. Co., 156 Ariz. 193, 197-98, 751 P.2d 509, 513-14 (1988); Arizona Downs, 130 Ariz. at 555-56, 637 P.2d at 1058-59; Uhlmann v. Wren, 97 Ariz. 366, 388, 401 P.2d 113, 128 (1965). A perfect fit is not required; a statute that has a rational basis will not be overturned merely because it is not made with `mathematical nicety, or because in practice it results in some inequality.' Bryant, 156 Ariz. at 197, 751 P.2d at 513 (quoting Uhlmann, 97 Ariz. at 388, 401 P.2d at 128). To withstand scrutiny, however, the statute must not be arbitrary or irrational, and must be reasonably related to furthering a legitimate state purpose. Bryant. In determining whether a statute meets the rational basis standard, we must first ascertain whether the challenged legislation has a legitimate purpose and then determine if it is reasonable to believe that the classification will promote that purpose. See JV-111701 v. Superior Court, 163 Ariz. 147, 786 P.2d 998 (Ct.App. 1989) (citing Western & Southern Life Ins. v. State Bd. of Equalization, 451 U.S. 648, 101 S.Ct. 2070, 68 L.Ed.2d 514 (1981)). A somewhat similar test is applied to statutes attacked as violating the special legislation prohibition, article 4, pt. 2, § 19: Whether a law is attacked as special legislation or as violative of equal protection, it is still the duty of the courts to decide whether the classification is unreasonable in that it preferentially and arbitrarily includes a class (special legislation) to the exclusion of all others, or improperly denies a benefit to a class (equal protection).... While certain pieces of legislation may be attacked as both special legislation and [violating] equal protection since they confer a benefit on one class while denying a benefit to another, there will be many cases where a benefit is conferred on one class to which no other class has a right. In those cases, legislation would be attacked as special legislation but not as [violating] equal protection. Arizona Downs, 130 Ariz. at 557, 637 P.2d at 1060 (quoting Illinois Polygraph Soc'y v. Pellicano, 83 Ill.2d 130, 46 Ill.Dec. 574, 579, 414 N.E.2d 458, 463 (1980)).