Court Opinion

ID: 9548973
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:11:25.190864+00
Date Added: 2024-06-11T15:19:41.448262
License: Public Domain

FELDMAN, Justice,
dissenting.
In the last half-century economic and industrial conditions in Arizona have changed significantly. As a result, the statutory procedures at issue here have become so outmoded as to have lost all rational basis. A.R.S. § 241 was a product of the depression. In its consideration of the statute, prior to adopting it in 1933, the legislature explicitly stated the act’s purpose:
WHEREAS, many residents of the State of Arizona are without employment and many contractors ... within the state of Arizona are without work, or without a market for their products, and non-resident contractors bring into the state non-resident employees to remain and become a burden on the public after their contracts are completed, and many resident contractors, producers and dealers are unable to pay their taxes, and the provisions of this act will tend to relieve such unemployment, to prevent the increase of the unemployed, and to aid in the collection of taxes ...
H.B. 37, 11th Legis., Reg.Sess. (1933, State Library and Archives).
*146Obviously, the statutory grant of a benefit to resident contractors and the concomitant disability imposed upon non-resident contractors constitutes a privilege to the former and a discrimination against the latter. Any law which has such an effect must be examined in light of the equal protection provisions of the fourteenth amendment of the United States Constitution and article 2, § 13 of the Arizona Constitution. The latter specifically proscribes the grant of “privileges ... which, upon the same terms, shall not equally belong to all citizens or corporations.” Thus, the legislature may discriminate between classes only if all those in a given class are treated equally and the classifications are not unreasonable. Arizona Downs v. Arizona Horsemen’s Foundation, 130 Ariz. 550, 637 P.2d 1053 (1981). Where the matter being regulated involves economic interests, the least stringent analysis, known as the rational basis test, is applied to determine the validity of a discriminatory statute. Id. at 555, 637 P.2d at 1058. That test permits the courts to uphold constitutionality if the statute has some conceivable, rational basis which furthers a legitimate governmental interest. Id.
Assuming, arguendo, that the quoted legislative statement of purpose creates a legitimate public interest justifying state action, we still must inquire whether the statute has any rational relation to that interest. In examining the constitutionality of this statute in 1953, we acknowledged that the statute showed “partiality” and granted privileges “not granted to others,” but found the statute constitutional because it was “not whimsical, capricious, or arbitrary.” Schrey v. Allison Steel Manufacturing Co., 75 Ariz. 282, 286, 255 P.2d 604, 606 (1953).
The statute no longer meets the test. Any rational relation between the statute and achievement of the stated legislative goals has been destroyed by changes in the construction industry since 1933. Today, large construction companies do business in many states. Award of a contract to a “non-resident” contractor would not result in hiring significantly less Arizona labor than if the award was made to Tanner. It would be senseless for any company to import labor if it were available in Arizona. On the other hand, if such labor were not available in Arizona, nothing in the statute prohibits Tanner from importing workers. Why would labor imported by Tanner be less likely to remain in Arizona “and become a burden on the public after their contracts are completed” than labor imported by a non-resident contractor? We are a much more transient nation than we were in 1933. The “home base” of construction workers in modern times depends upon economic conditions and job availability more than upon the home-office location of the contractor. Construction labor is not kept on the general contractor’s payroll between jobs. Most labor, in fact, is provided by subcontractors, and the statute does not require a general contractor which has received the preference to limit itself to using Arizona subcontractors.
Nor does determining “residency” for preference purposes on the basis of tax payments on property within the jurisdiction make sense any longer. The facts of this case illustrate the manner in which the statute operates. There has never been a joint venture. It is a fiction created by an ingenious lawyer and hurriedly formed by “oral agreement” just before the bid submission. It was “formalized” by written agreement the day after the contract was awarded. The purpose of this joint venture between Mr. Rein and Rein, Schultz & Dahl (RSD) is obvious. Mr. Rein is the chief executive officer of RSD, an Illinois contracting corporation which otherwise could not qualify for the Arizona residential contractors’ preference. The joint venture between Rein and RSD was formed so that Mr. Rein’s ownership of a winter residence in Arizona might, be used to qualify the joint venture for the preference. The absurdity of this is highlighted by the fact that RSD had performed a number of construction contracts in Arizona prior to the one in question. Since these jobs were performed on an Indian reservation, the equipment used was not taxed by the state. *147In addition, the corporation has a ten year lease on Arizona land where it has located its construction plant. The property is leased, so RSD pays no real estate taxes. Because it had paid no taxes, RSD was not eligible for the preference. Nevertheless, RSD’s payroll (almost $50,000 per week) for its Arizona jobs largely went to Arizona employees, most of whom were Arizona Indians taken off the unemployment rolls. Under the statutory scheme, however, hiring unemployed residents did not qualify RSD for the preference designed to promote the hiring of unemployed Arizona workers. All of this forced Mr. Rein and RSD to resort to the legal legerdemain of forming a joint venture on the day prior to the submission of bids.
The majority opinion does not disapprove of such hocus pocus. It merely holds that the joint venture is not entitled to a preference because Mr. Rein’s condominium had too low a value. If Mr. Rein had been smart enough to buy a more expensive condominium — on the Biltmore golf course, for instance — he would have been able to obtain a 5% resident contractor’s preference. The majority fails to explain how this would promote the welfare of Arizona labor, encourage the hiring of unemployed residents, and prevent the importation of non-resident workers who would become burdens upon the public.
In recent years we have had other examples of the mischief promoted by this statute. Many contractors now use leased equipment, but paying rent on leased equipment usually does not involve direct tax payment and does not qualify one as a contractor entitled to the preference. (See majority opinion at 694, n. 1). Thus, a contracting firm operated by an agency of an Arizona Indian tribe was held not entitled to a preference — and was not awarded a contract. See White Mountain Apache Tribe v. Superior Court (No. 16455-SA, jurisdiction declined March 17, 1983). It made no difference that the workers who would have been hired by the tribal agency were unemployed Indians and that Arizona Indians have the highest unemployment rate of any group in Arizona. In another case, an enterprising bidder moved a trailer used as a construction field office across the Colorado River from Winterhaven to Yuma a week before bid opening. This act could qualify a firm for the preference if it could successfully persuade the Yuma County assessor to accept a tender of two years’ personal property tax — even though the tax was not owed. See Brinderson Corporation v. Superior Court (No. 17352-SA, jurisdiction declined February 2, 1984).
The majority chooses to ignore these examples of irrationality but does acknowledge that it “was never the legislative intent” to permit a non-resident contractor to “ally itself” with a residential taxpayer and thus qualify for a resident contractor preference on public building contracts. Ante at 697. It finds “such a result untenable.” Id. It attempts to cure the problem by disapproving the “narrow reading” given the statute in Mardian Construction Co. v. Superior Court, 113 Ariz. 489, 557 P.2d 526 (1976) and construing the statute to require that a preference not be given a bidder whose taxes were paid on “real and personal property” unless the value of such property is reasonably equal to the valuation of the plant or equipment necessary for the job. It does make better sense, I suppose, that Mr. Rein get the preference if his warm-weather condominium is worth a minimum of $350,000 than to allow it if the residence is worth only $130,000. What the majority overlooks is that our constitution does not permit us to uphold a legislative grant of special privilege on such illusory grounds. We may uphold the grant of such privilege only if we can find that the legislative system is “not whimsical, capricious, or arbitrary” (Schrey, supra) and has at least some rational relationship to a proper legislative goal.
The majority has failed to inform us how the latter test is met by this statute. In its desire to uphold a statute which no longer makes sense, the court has closed its eyes to the reality of the marketplace. All this, of course, would be of but passing interest except for the harm done to the public. *148First, we deal with public funds; the contract should go to the lowest qualified bidder, not the bidder with the most expensive condominium in Carefree or Scottsdale. Second, the subterfuges to which bidders are put in order to qualify for the preference result in frequent controversy and litigation. Thus, public agencies are forced to appoint hearing officers, conduct hearings, and adjudicate conflicting claims on the preference issues before awarding contracts. The expense, delay, and waste attendant to all of this is unnecessary, unseemly, and contrary to the public interest.
This statute violates equal protection. It is an anachronism whose usefulness ended thirty years ago. The time has come to bury it and leave the legislature to devise some rational method of promoting employment of Arizona’s unemployed construction workers.
I dissent and would hold the statute unconstitutional.