Court Opinion

ID: 9537425
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:18:14.018001+00
Date Added: 2024-06-11T14:56:40.402986
License: Public Domain

*186PETERSON, J.,
dissenting.
The majority reaches a result which many would agree is socially, politically and economically desirable. But the decision in this case turns not on social desirability, political wisdom or economic need. This case is determined by Article I, section 32, of the Oregon Constitution. I cannot agree with the conclusion of the majority and therefore dissent. My reasons are:
1. Article I, section 32, by its clear terms, prohibits a taxing authority from creating a class of subjects determined by geographical lines.
2. A policy underlying the "territorial limits” clause of Article I, section 32, is to prevent a majority from imposing tax burdens that should be uniformly distributed upon all, upon a minority within the territorial limits of the taxing authority. The imposition of a tax burden only upon those owning property or operating businesses within a geographical area, when similar property exists outside the geographical area but within the taxing district, is improper and violates the uniformity clause.
1.
Article I, section 32, by its terms, prohibits a taxing authority from creating a class of subjects determined by geographical lines
Article I, section 32, provides:
"* * * [A]ll taxation shall be uniform on the same class of subjects within the territorial limits of the authority levying the tax.”
The phrase "all taxation shall be uniform on the same class of subjects” was contained in a 1917 amendment to Article I, section 32, which previously required that "all taxation shall be equal and uniform.” Prior to 1917, the constitution was construed to require that the rate of taxation "be absolutely *187equal upon all property of whatever kind * * * [and] property was required to be valued and taxed at equal rates.”1
The inclusion in 1917 of the words "all taxation shall be uniform on the same class of subjects” permitted "the classification of property in respect to its nature, condition or class, and the imposition thereon of different rates of taxation upon different classes of property.”2 The framers of the 1917 amendment thus guaranteed that (a) among members of a class, uniformity would exist, and (b) that within the taxing district, territorial uniformity would also exist.
In this case, the "authority levying the tax” is the City of Eugene, not the Downtown Development District. For the purposes of this case, the constitutional provision should be read as follows:
«* * * [A]ll taxation shall be uniform on the same class of subjects within the territorial limits of the [City of Eugene].”
Applying the plain language of the constitution, this requires that all property of the same class within the city be taxed uniformly. There is no claim in this case that properties of the type found in the district are not found elsewhere in Eugene.
The majority upholds the creation of a class determined by geographical location because
"* * * a classification based on or defined by geographical location is nevertheless constitutionally permissible if it is also based upon qualitative differences that distinguish the geographical area from other areas within the territorial limits of the authority levying the tax. * * * [I]f the subterritory is different in quality compared to the rest of the territory, then article I, section 32, does not prohibit a *188taxing authority from defining the subterritory as a separate class. * * *” 289 Or at 180.
The majority concludes that a tax classification based upon geographical location is valid if the territory is "qualitatively different,” either because of (1) natural characteristics such as "swamp land, or land with less than 20 inches rainfall, or a flood plain,” or (2) politically imposed qualitative factors such as those resulting from human conditions or the economy of the area. The majority states:
"* * * [W]e find an additional compelling reason why the District is uniquely and qualitatively different from the remainder of the city.
"In addition to the fact that the businesses and property within the District presently share, and in the past have shared, the conditions unique to being in a downtown urban area, the City is taxing the District for the purpose of creating a unique area in the future. The City has committed itself to provide a package of special services not provided elsewhere in the city, including free motor vehicle parking, an economic promotion and development program, and a public transportation program. In this regard, the qualities that distinguish the District from the rest of the City are politically imposed. The District is unique not only because it contains the only downtown area in the city, but also because the City has committed itself to providing services and programs that patently and physically distinguish the District from any other area of the city.” 289 Or at 181.
The majority’s conclusions do not withstand critical analysis. The "natural characteristics” approach, under which a class of subjects may be determined by the "qualities that exist in the land by reason of nature,” may well be a valid approach, if the law defines the class by the natural characteristics and not by location. But that approach was not used by the City of Eugene to define the class and the subdistricting cannot be upheld on that basis.
*189The City’s creation of the District as a separate class must, if at all, be validated under the majority’s second theory, based upon a qualitative difference as (a) an area in which "the businesses and property within the District presently share, and in the past have shared the conditions unique to being in a downtown urban area” or (b) as an area upon which the city is imposing additional taxes "for the purpose of creating a unique area in the future. ” (Emphasis added.)
As to (b), clearly this is a bootstrap approach under which any taxing body could impose additional taxes upon any area because of planned improvement in order to create "a unique area in the future.” Under this concept, a slum area consisting of modest homes, owned by their occupants, could be slated for urban renewal "in order to create a unique area in the future.” Taxes to renew the area could be imposed solely upon the homeowners. The property owners’ inability to pay the increased taxes might well compel them to sell their homes to investors who could afford to pay the higher taxes in anticipation of increased land values after the qualitative improvements had been made. Such a tax, under the majority’s reasoning, would be valid. It would also, in a real sense, be confiscatory.
The city’s classification of the District, if valid at all, can only be valid because the property within the District shares unique qualities — qualities which are unique to it, and to it only. But there is no evidence in this case that properties of similar type, similar construction and similar use do not exist outside the geographical area.
The only truly unique feature of the District is its location.3 In no other way can it be said that the conditions in the District are totally unique to it.
*190As to the possibility of regarding the Downtown Development District area as a separate class of property and hence separately taxable under the classification power of Article I, section 32, of the Oregon Constitution, there are obvious difficulties. The only common characteristic the Downtown Development District must inevitably share is its location. There are many classifications of property within the area that are common to property immediately outside of the area. Property inside the area is composed of real property, personal property, rental property, inventories, parking lots, perhaps some unimproved property and partially developed property. Whatever its nature, it is clear that similar property exists within the remainder of the city limits of Eugene. Therefore, it cannot be said that any uniform classification was being made within the city on the basis of the property’s use or development. Although as stated in Standard Lbr. Co. v. Pierce, 112 Or 314, 335-336, 228 P 812 (1924), the classification of property for property tax purposes along functional lines is constitutional under Article I, section 32, such a classification has not in fact been made under the charter and ordinances of the City of Eugene.
Orval Etter, one of the attorneys for the City of Eugene in this case, is well known as an authority on Oregon municipal law. The lead article in the 1957 Oregon Law Review was written by Mr. Etter on the subject "Municipal Tax Differentials.”4 On the subject of classifying property for tax purposes on a geographical basis, Mr. Etter’s conclusion leaves no room for doubt — classification based on location is impermissible.
"(2) Location Not a Proper Basis. Before specific permissible bases for classifying property for purposes of taxation are listed, it is appropriate to eliminate one basis which is generally not regarded as *191permissible and which apparently is ruled out explicitly and completely by the requirement of territorial uniformity in the Oregon constitution. This basis is location. 'Location of land,’ says Cooley [citing 1 Cooley, Taxation 718 (4th ed 1924)], is 'not a proper basis for classification.’ ” 37 Or L Rev at 41. (Footnotes omitted.)
Mr. Etter hastens to add that, by creating a special taxing district, with authority to levy taxes, taxes can be validly imposed within a subdistrict. He writes:
"Closely related to benefits as a basis for tax classification is the special taxing district in which property in an area is specially taxed to defray the cost of one or more public services specially benefiting that property. Such special taxing districts have been set up innumerable times without violating constitutional requirements that taxes be equal and uniform. Sometimes the rationale for their creation has been that the charges levied in the district have been special assessments and not taxes. Yet the charges have sometimes been called taxes, and the differentiation between the two is not always clear, or at least is sometimes not made explicit. Whatever the proper differentiation between the two, so long as these taxing districts are set up on a reasonable basis, with boundaries that are not wholly arbitrary, they afford a constitutional approach to the problem of classifying property for purposes of public charges. The classification can be based on the benefits received from expenditure of the revenue derived from the charges. Sometimes, indeed, the courts seem to speak interchangeably of classifying property and of including it in a special taxing district.
'The very purpose of these districts 'is to make taxes for certain purposes equal and uniform.’ To tax all persons in an area [quoting from 1 Cooley, supra at 671, 672, 674]
" 'for improvements of a local character may produce the very inequality which is forbidden by state constitutions; and hence the creation of taxing districts for such improvements, so as to place the burden on those specially benefited, creates equality and uniformity rather than destroys it.
*192* * different taxing districts, for the same general purpose, may be thus created where there are peculiar reasons why one part of the public should bear a proportion of the burden greater than that which should be borne by another, and a greater rate of taxation be imposed on some districts than others.’
"These districts 'may be as numerous as the purposes for which taxes are levied.’ ” 37 Or L Rev at 44-45. (Footnotes omitted.)5
Another way of achieving the goal sought would be to amend the constitution to permit a city to tax some districts differently than others. Oak Park Federal Savings & Loan Association v. Village of Oak Park, 54 Ill 2d 200, 296 NE2d 344 (1973), illustrates this point well. There, Article IX, section 10, of the Illinois Constitution of 1870 required that property located within a municipal corporation be taxed uniformly. In 1970, the Illinois constitution was amended to give home rule units the power to make local improvements by special assessment and also "to levy or impose additional taxes upon areas within their boundaries in the manner provided by law for the provision of special services to those areas and for the payment of debt incurred in order to provide those special services.” 111. Const. Art 7,.§ 6(1). Thus, express constitutional authority allowed cities to create special service districts and to tax them at different rates.
The governing body of Oak Park, Illinois, enacted a series of ordinances "for establishing areas for the providing of special services and provided that the president and board of trustees of the Village of Oak Park shall be the governing body of the special *193service area. It authorized the levying of taxes by the village board on the property in the special service area. * * *” 296 NE2d at 346. The ordinances also provided for the creation of a shopping mall, landscaping, lighting, and for the imposition of a real estate tax against the property of the special service area for the purpose of purchasing parking lots.
For reasons not relevant to this opinion, the action of the village board was held to be invalid. The case illustrates, however, the point that in order to achieve a subdistricting scheme similar to the one involved in this case, a constitutional amendment was required.
The constitutions of other states contain provisions similar to Article I, section 32, and the courts of those states have construed such provisions to prohibit taxing districts based upon geographical lines.
Monaghan v. Lewis, 21 Del (5 Penne) 218, 59 A 948 (1905), is a case involving a law passed by the Delaware legislature which recited:
"* * * whereas, all that portion of the city of Wilmington, bounded by Seventh Street on the south, Twelfth Street extended on the north, Woodlawn avenue on the east, and Greenhill avenue on the west, the same having but two dwelling houses erected thereon, and deriving no benefit from being within the limits of the said city, and will not derive any benefit for years to come * *
The law imposed taxes on the described area at a rate "not exceeding one-fourth of the regular rate levied on persons and estates in the remaining parts of the said city.” Article 8, section 1, of the Delaware Constitution provided that "all taxes shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.” The plaintiff contended that the act was unconstitutional and void under Article 8, section 1, because the tax was not uniform upon the same class of subjects within the territorial limits of the authority levying the tax. The Delaware *194court held that the law was in direct conflict with the constitutional provision and was void.
Essex County Park Commission v. Town of West Orange, 77 NJL 575, 73 A 511 (1909) involved an act which exempted selected public lands from taxation. The New Jersey constitution directed that "property shall be assessed under general laws by uniform rules.” This language had been construed to permit the exemption from taxation of property of various classifications. The challenged act provided that all lands which were the property of a taxing district, and located within the boundaries of the taxing district, were exempted from taxation. If the property owned by the taxing district was located outside the taxing district, it was taxable. The court reasoned that "[i]t is thus sought to form a class for taxation marked by the characteristic of location merely.” 73 A at 513.
The New Jersey court struck down the law, saying:
"To form a class with reference to the accident of the location of the property is to ignore the fact that differences in the amount of ratables in every taxing district make differences in the amounts assessed for township, county, and state taxes. Whether all property similarly used and possessing the same characteristics is included in the ratables should be the test of the generality of the law. * * *
"Classification according to the location of the property is not a classification according to any feature inherent in the property itself, but with reference entirely to chance of location, a circumstance quite as disconnected with the characteristics of the property itself as its ownership * * 73 A at 513.
Accord, Baldwin Construction Co. v. Essex County Board of Taxation, 16 NJ 329, 108 A2d 598 (1954), which held that increased assessments in selected areas determined by "arbitrarily fixed geographical boundaries of necessity worked discrimination in respect of comparable properties immediately beyond the unreasoned and artificial borderline.” 108 A2d at 603.
*195If the class is to be fixed with reference to unique characteristics, the classification should be described in those terms, not on geographical terms. Otherwise, any city could create a special taxing sub-district on a geographical basis and later seek to justify the district on the basis of some "unique characteristics” which had no relevance to its creation. Requiring that the classifications be defined in terms of the unique characteristics of the property at least insures that the authority creating the special district considers those characteristics in determining the necessity for the district.
The record in this case also reflects arbitrary decisions made without reference to any objective criteria. A group of "business people” whose properties were within one block of the northern district boundary requested to have their properties included in the district. According to one of the city planners, these properties did not meet the "distance from the mall criteria [sic],” but the properties were included in the district, nonetheless. Other property owners whose properties met the criterion were excluded from the district because they did not want to be within the district.
I will concede that these variations may be minor. But a classification, the applicability of which depends upon such whims, cannot be valid.
I believe that the majority strains to reach a desired result because it is persuaded that the Eugene City Council has taken a dynamic step toward the solution of a problem chronic to our cities — core area decay — in order to achieve a socially desirable result. I am sympathetic with the goal sought to be attained. Unfortunately, Article I, section 32, expressly prohibits this action. Beyond that, however, the approach of the majority may create the foundation for ills which are more destructive than the ills sought to be cured.
*1962.
A policy underlying the "territorial limits” clause of Article I, section 32, is to prevent a majority from imposing tax burdens that should be uniformly distributed upon all, upon a minority within the territorial limits of the taxing authority. The imposition of a tax burden only upon those owning property or operating businesses within a geographical area, when similar property exists outside the geographical area but within the taxing district, is improper and violates the uniformity clause.
The primary reason justifying the action taken by the city is that a general benefit to the city will result. The majority, at 289 Or 170, states:
"* * * We agree with the circuit court that the City has shown that there would be a general benefit to the economy of the City as a result of the economic improvement of the City’s central business district. Thus the City’s program of free parking and District advertising serves a legitimate public purpose. * * *”
In a very real sense, only the property owners, merchants and business people in the District are being taxed and deprived of their parking in order to create a "benefit to the economy of the City as a result of the economic improvement of the City’s central business district.”
Some contend that the burden of taxes should be imposed according to the benefit which each taxpayer receives from the protection afforded by the government. But almost universally, the public policy of uniformity prevails over the public policy of taxation according to the benefit received.
"But notwithstanding the rule of uniformity lying at the basis of every just system of taxation, there are doubtless many individual cases where the weight of a tax falls unequally upon the owners of the property taxed. This is almost unavoidable under every system *197of direct taxation. But the tax is not rendered illegal by such discrimination. Thus every citizen is bound to pay his proportion of a school tax, though he have no children; of a police tax, though he have no buildings or personal property to be guarded; or of a road tax, though he never use the road. In other words, a general tax cannot be dissected to show that, as to certain constituent parts, the taxpayer receives no benefit. Even in case of special assessments imposed for the improvement of property within certain limits, the fact that it is extremely doubtful whether a particular lot can receive any benefit from the improvement does not invalidate the tax with respect to such lot. * * *” Union Transit Co. v. Kentucky, 199 US 194, 203, 26 S Ct 36, 50 L Ed 150 (1905).
The district in this case was created by a vote of the voters of the entire city, and the tax was imposed by a vote of the elected representatives of the voters of the entire city. Beyond question, and in every sense, the majority is imposing a tax upon the minority which (to use the language of the majority opinion) will "benefit * * * the economy of the [entire] City.”6
Unquestionably, the essence of the democratic process is the sovereignty of the majority. The interests of the many are preferred to those of the few.7 In that sense, the minority is subject to the will of the majority.
But it is equally well settled that the majority cannot, without restriction, impose economic, social, or political burdens upon the minority that are not common to all. The majority’s holding permits the imposition of excessive tax burdens upon the minority.
*198John Stuart Mill wrote:
"* * * [I]n political speculations, the 'tyranny of the majority’ is now generally included among the evils against which society requires to be on its guard.
* * * *
"* * * All that makes existence valuable to any one, depends on the enforcement of restraints upon the actions of other people * * *.”8
The restraint placed upon the legislature is normally found in the state’s constitution. Alexander Hamilton referred to restriction of popular government under a constitution so as to secure the protection of the individual’s rights from the majority.9
The majority’s recognition that the language of Article I, section 32, "was intended to prevent anyone from escaping his just share of the tax burden” necessarily includes a recognition that no one should bear more than his or her "just share” of the tax burden. 289 Or at 172.
The evils which Article I, section 32, seeks to avoid (one being discriminatory taxation) are too easily attained by permitting a "classification” defined only by geographical area. Requiring the class to be defined other than by geographical area (as by zone, or type or nature of property) is not onerous and insures that the generality of the law which the constitution intends to insure, is maintained. Differential classifications should be determined by the use of property or by characteristics of the property, not by location. If a tax is imposed by reason of the location of property, some basis for the classification, apart from location, should be apparent from the law itself, rather than by reference to extrinsic matters. If the tax subdistrict is described geographically, some justifiable basis *199for the classification, apart from location, should be apparent from the law itself.
If a qualitative class is to exist, the class must be determined by qualitative factors. And if the classification is to have validity, those qualitative factors must be set forth in the law itself.
Justice Jackson, concurring in Railway Express v. New York, 336 US 106, 112-113, 69 S Ct 463, 93 L Ed 533 (1949), opined:
"* * * The framers of the Constitution knew, and we should not forget today, that there is no more effective practical guaranty against arbitrary and unreasonable government than to require that the principles of law which officials would impose upon a minority must be imposed generally. Conversely, nothing opens the door to arbitrary action so effectively as to allow those officials to pick and choose only a few to whom they will apply legislation and thus to escape the political retribution that might be visited upon them if larger numbers were affected. Courts can take no better measure to assure that laws will be just than to require that laws be equal in operation.”10
Strict adherence to Article I, section 32, guarantees that taxation not be the means to unfairly oppress a minority.
Lent, J., joins in this dissent.

 Standard Lbr. Co. v. Pierce, 112 Or 314, 334, 228 P 812 (1924).

 Id. at 335. For an extensive analysis of the uniformity clauses of the various state constitutions, see W. Newhouse, Constitutional Uniformity and Equality in State Taxation (1959).

 Webster’s New International Dictionary of the English Language (2d ed 1961), defines "unique” as "1. Single, sole. 2. Being without a like or equal; single in kind or excellence; unequaled; hence, loosely, unusual; notable.”

 Etter, Municipal Tax Differentials, 37 Or L Rev 1 (1957).

 As examples of special districts now permitted under Oregon law, see, e.g., ORS ch 266, Park and Recreation Districts (authority to levy taxes granted by ORS 266.410(5)); ORS 267.510 to 267.650, Transportation Districts (taxing authority provided by ORS 267.620); ORS 440.305 to 440.410, Health Districts (taxing authority granted by ORS 440.395); and ORS 777.005 to 777.725, Ports (taxing power provided by 777.430). See generally ORS ch 198, Special Districts Generally, and Reilly v. Paulus, 288 Or 573, 607 P2d 162 (1980) (upholding a Metropolitan Service District created under ORS ch 268).

 According to one witness, it was a "community [goal] of the City of Eugene.”

 "The majority * * * exercise a prodigious actual authority * * *; no obstacles exist which can impede or even retard its progress, so as to make it heed the complaints of those whom it crushes upon its path * * *.” A. De Tocqueville, Democracy in America 327 (1898 ed).

 J. S. Mill, On Liberty (1859), in Prefaces to Liberty 244-245 (B. Wishy ed 1959).

 See G. Dietze, The Federalist 148 (1960).

 As to the equal protection aspects of taxation uniformity and the relationship between the Oregon Constitution and the Fourteenth Amendment to the Constitution of the United States, O. Etter, in Municipal Tax Differentials, 37 Or L Rev 1, 37-38 (1957), has advanced trenchant arguments which I neither accept nor reject at this time.