Opinion ID: 1403585
Heading Depth: 1
Heading Rank: 2

Heading: is the project a capital improvement?

Text: The contention is made that the indebtedness would violate Article IX, § 9, of the Alaska constitution [6] which requires that such debt can be incurred only for capital improvements. It is argued that in City of Juneau v. Hixson, 373 P.2d 743 (Alaska 1962), this court laid down a strict test of what constitutes a capital improvement, rendering that term synonymous with public works of a permanent character. Because an industrial development project is not clearly within that category, it is said that the plan before us must fail. We do not read the Hixson case so narrowly. There we struck down a bond issue because no capital improvement would have resulted from the expenditure of the proceeds. The vice in the Hixson case was that raw land would have been acquired with the proceeds and would then have been donated to the State of Alaska as a proposed capitol site. As a result of the plan, the City of Juneau would have been left with no tangible asset in place of the indebtedness. Furthermore, the State of Alaska had entered into no agreement for and had not otherwise shown an interest in the acquisition or use of any capitol site. By contrast, in the case before us the City of Palmer will own a tangible asset. The plan is that the indebtedness shall be retired out of the rental money received over the life of the bond issue. The land and building fulfill the definition of capital improvements which was stated in the Hixson case [7] as being associated with value represented by real or personal property in some form and with relative permanency. 373 P.2d, at 747. There is here no giving away of the asset. On the contrary, the city's real ownership of the structure should increase as the years of rental payment go by. Even if the tenants should default, the building probably would be susceptible to a number of other beneficial uses. We conclude, therefore, that the bond issue and the plan of expenditure does not violate the capital improvement requirement of our constitution.