Opinion ID: 1270666
Heading Depth: 2
Heading Rank: 2

Heading: Is the Dillingham Cold Storage Plant a Beneficial New Industry?

Text: AS 28.48.260(e) authorizes a municipality to lease real property to persons who agree to operate a beneficial new industry. [8] Such a lease may be upon the terms and conditions the assembly or council considers advantageous to the community. AS 29.48.260(e). The City contends that this section exempts leases to beneficial new industries from competitive bid requirements. The City further contends that the Dillingham cold storage plant is such a beneficial new industry and is therefore exempt from the competitive bid requirements. The statute itself does not define beneficial new industry, [9] and there are no Alaska cases construing the term. [10] We therefore turn for guidance to cases from other jurisdictions which have construed similar terms. Most of these cases involve tax advantages that are available only to new industries. [11] A few involve statutes establishing eligibility for discount railroad rates or exemptions from restrictions on importation of foreign labor. [12] We have been unable to discover any cases discussing the term new industry in the context of a municipality's authority to acquire or dispose of property, and none of the cases we have examined [13] has involved facts precisely analogous to those of the case at bar. The cases are nevertheless helpful. The tax exemption cases, [14] for example, consistently refuse to find that a new industry exists where the business in question is merely an expansion or a continuation of an existing business, even if it has a new name or a new corporate form. See, e.g., Chronicle Publishers, Inc. v. South Carolina Tax Commission, 244 S.C. 192, 136 S.E.2d 261, 262 (1964) (special tax treatment not available to a new corporation which has acquired and improved established businesses). On the other hand, where an old corporation establishes a separate operation, entirely independent of its existing operation, the cases find that the new operation is a new industry. See, e.g., Arkwright Mills v. Murph, 219 S.C. 438, 65 S.E.2d 665, 668-69 (1951) (new textile plant constructed five miles from existing plant, which continued in operation, not a mere addition and therefore entitled to special tax treatment). The distinction was stated succinctly in City of Louisville v. Louisville Tin & Stove Co., 170 Ky. 557, 186 S.W. 124 (1916): [I]f defendant's plant ... was, as a matter of fact, an entirely new manufactory which had not theretofore existed in the city, and it was induced to locate its plant in the city by the offered exemption, the property in question is exempt. On the other hand, if the new plant was a mere expansion of a manufacturing business theretofore conducted, the property is not exempt. We find that the term new industry, as used in AS 29.48.260(e), refers to any newly organized business that is not a mere expansion or continuation of a business that has previously operated in the municipality. Since Engstrom Brothers Company was totally independent of the Nushagak Fishermen's Cooperative, Inc., its operation of the cold storage plant was not a continuation of that business. It was a separate and therefore new business in Dillingham. It was also a new type of business, for although its type of business was one that had previously been conducted by Nushagak, there was apparently no other cold storage plant actually in operation in Dillingham at the time. [15] We conclude that the term new industry contemplates a newly organized enterprise, which may or may not be a new type of business. We do not believe, however, that every new enterprise comes within the statute, for the statute specifies  beneficial new industry. Thus, for example, if several cold storage plants were already doing business in Dillingham and were adequately fulfilling the needs of the community, it would probably not be proper for the city to lease land or facilities to an additional cold storage plant under AS 29.48.260(e). Even if it were a newly organized enterprise, so as to be a new industry within the meaning of AS 29.48.260(e), it would not be a  beneficial new industry, since it would provide no apparent benefit to the community. On the other hand, if a cold storage facility were operating in Dillingham but it was not able to satisfy the needs of the community, it might be proper for the city to thus lease land or facilities to a second cold storage operation. Although the second plant would not be a new type of industry, as a new enterprise that would benefit the community it would be a beneficial new industry within the meaning of AS 29.48.260(e). Operation of the Dillingham cold storage plant by Engstrom Brothers Company was both a new enterprise and a new type of business, and it was apparently beneficial to the community. [16] We therefore hold that it was a beneficial new industry within the meaning of AS 29.48.260(e), and we consequently affirm the decision of the superior court on this issue.