Appeal from the District Court of Burleigh County, South Central Judicial District, the Honorable Donovan John Foughty, Judge.
The opinion of the court was delivered by: Sandstrom, Justice.
N.D. Supreme CourtHaugland v. City of Bismarck, 2012 ND 123
This opinion is subject to petition for rehearing. [Go to Documents]
[Download as WordPerfect]
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Opinion of the Court by Sandstrom, Justice.
[¶1] Erling "Curly" Haugland appeals and the City of Bismarck cross-appeals from a summary judgment declaring North Dakota's Urban Renewal Law, N.D.C.C. ch. 40-58 ("the Act"), is not unconstitutional and Bismarck's implementation of an urban renewal plan and use of tax increment financing to fund urban renewal projects in its urban renewal area complies with the Act. Haugland claims the Act violates the gift clause provisions of N.D. Const. art. X, § 18, the requirements for imposing taxes in N.D. Const. art. X, §§ 3 and 5, and the equal protection provisions of the state and federal constitutions. He also claims Bismarck's implementation of a perpetual urban renewal plan violates the Act. We hold the Act is constitutional, but the summary judgment record in this case does not establish whether Bismarck's renewal plan complies with the provisions of the Act. We affirm in part, reverse in part, and remand for further proceedings.
[¶2] Haugland's lawsuit raises issues about Bismarck's implementation of an urban renewal plan under the Act and use of tax increment financing under the renewal plan to fund renewal projects within its downtown renewal area. See N.D.C.C. § 40-58-01.1(7)-(9) (defining "development or renewal area" as industrial or commercial property, slum or blighted area, or a combination of those properties or areas designated by a municipality as appropriate for a development or renewal project; defining "development or renewal plan" as a sufficiently complete plan for a development or renewal project which conforms to the municipality's general plan; and defining "development or renewal project" to include authorized undertakings in a renewal area for development of industrial or commercial properties or for elimination and prevention of the development or spread of slums and blight) and N.D.C.C. § 40-58-20 (outlining procedure for tax increment financing). To understand those issues, we briefly outline the statutory framework of the Act and Bismarck's implementation of its urban renewal plan under the Act, which generally authorizes a municipality to use private enterprise and public resources, including tax increment financing, to pay for the development, rehabilitation, or redevelopment of a renewal area under a renewal plan. See N.D.C.C. §§ 40-58-03 and 40-58-20.
[¶3] Section 40-58-04, N.D.C.C., authorizes a municipality to use private and public resources to facilitate the development of industrial or commercial properties, to eliminate and prevent the development or spread of slums and urban blight, and to rehabilitate slum and blighted areas by encouraging voluntary rehabilitation and by compelling repair of deteriorated or deteriorating structures and redevelopment of those areas. Section 40-58-01.1(14), N.D.C.C., defines "industrial or commercial property" to mean "unused or underutilized real property that is zoned or used as an industrial or commercial site." Section 40-58-01.1(23), N.D.C.C., defines a "slum area" to mean: an area in which there is a predominance of buildings or improvements, whether residential or nonresidential, which by reason of dilapidation, deterioration, age or obsolescence, inadequate provision for ventilation, light, air, sanitation, or open spaces, high density of population and overcrowding, or the existence of conditions which endanger life or property by fire and other causes, or any combination of these factors is conducive to ill health, transmission of disease, infant mortality, juvenile delinquency, or crime, and is detrimental to the public health, safety, morals, or welfare. Section 40-58-01.1(2), N.D.C.C., defines a "blighted area" to mean:
an area other than a slum area which by reason of the presence of a substantial number of slums, deteriorated or deteriorating structures, predominance of defective or inadequate street layout, faulty lot layout in relation to size, adequacy, accessibility, or usefulness, unsanitary or unsafe conditions, deterioration of site or other improvements, diversity of ownership, tax or special assessment delinquency exceeding the fair value of the land, defective or unusual conditions of title, improper subdivision or obsolete platting, or the existence of conditions which endanger life or property by fire and other causes, or any combination of these factors, substantially impairs or arrests the sound growth of a municipality, retards the provision of housing accommodations or constitutes an economic or social liability and is a menace to the public health, safety, morals, or welfare in its present condition and use.
[¶4] A municipality has "all the powers necessary or convenient" to effectuate the purposes of the Act, including the authority to adopt, modify, and amend necessary renewal plans and to undertake and carry out renewal projects within its area of operation for voluntary or compulsory repair and rehabilitation of buildings and improvements in connection with renewal projects; to appropriate funds, make expenditures, and levy taxes necessary to carry out the purposes of the Act; to make and execute contracts necessary or convenient to exercise its powers under the Act; and to acquire, deal with, and dispose of property in a renewal area. See N.D.C.C. §§ 40-58-07 (describing municipality's powers), 40-58-09 (authorizing municipality to dispose of property in renewal area), and 40-58-18 (authorizing municipality to adopt ordinance for repair, closing, and demolition of dwellings unfit for human habitation).
[¶5] Before exercising any of its powers under the Act, a municipality must adopt a resolution finding one or more slum or blighted areas or industrial or commercial properties exist in the municipality and the development, rehabilitation, conservation, or redevelopment of the area or properties is necessary in the interest of the public economy, health, safety, morals, or welfare of the municipality's residents. N.D.C.C. § 40-58-05. The Act outlines the requirements for a municipality to approve a resolution for adoption of a renewal plan and includes a procedure for modifications of a renewal plan that substantially change a previously approved plan. N.D.C.C. § 40-58-06.
[¶6] The Act authorizes a municipality to use tax increment financing under N.D.C.C. § 40-58-20 to pay for development or renewal of the renewal area under the renewal plan and any modifications of the plan. When tax increment financing is used to pay for development or renewal of the renewal area, the county auditor ascribes two taxable values to each lot and parcel of land in the renewal area--an original taxable value when the municipality requests the auditor to compute and certify that value and a subsequent taxable value based upon the net amount the original taxable value has increased or decreased as a result of renewal of the area under the renewal plan and any modifications. See N.D.C.C. § 40-58-20(1)-(3). The net amount of the increase or decrease is the incremental value or lost value. N.D.C.C. § 40-58-20(3). An owner of property in a renewal area pays property taxes based on the redeveloped taxable value of the land. See N.D.C.C. § 40-58-20(2)-(5). The property tax attributable to the original taxable value of each lot and parcel is distributed to the normal property tax recipients, including the park district, the school district, and the county, and the property tax attributable to any incremental increased taxable value is diverted from those normal recipients to the municipality to pay for renewal projects "until the cost of development or renewal of the area has been reimbursed" to the municipality. See N.D.C.C. § 40-58-20(4) and (7). Section 40-58-20(10), N.D.C.C., also describes a procedure to be employed when the cost of renewal of any renewal area has been fully paid and all obligations to pay the cost have been retired, or the municipality has received sufficient funds to retire its obligations.
[¶7] Here Haugland's complaint alleges Bismarck adopted its renewal plan in January 1979 and substantially modified the plan in December 1979, July 1984, June 1988, November 1994, October 2006, and March 2010. This record reflects that at a Bismarck City Commission meeting in December 1978, Bismarck adopted a resolution to amend a previously approved renewal plan. The resolution stated the described area of about 14 downtown city blocks "consists of a combination of slum and blighted areas" appropriate for a renewal project financed with tax increment funds. After notice and a public hearing, Bismarck approved the modified renewal plan on January 23, 1979, in a resolution directing the City Auditor to take appropriate action to obtain tax increment financing resulting from the renewal of the area to reimburse Bismarck for renewal costs. The renewal plan described the boundaries of the renewal area, objectives of the plan, proposed renewal actions, land use plans, and project proposals. The plan proposed acquisition of substandard and blighted properties, disposal, retention, or dedication of various lands for redevelopment by private or corporate developers, installation of public improvements, and rehabilitation of buildings to local standards.
[¶8] In December 1979, after notice and a public hearing, Bismarck modified the previously approved renewal plan to add about 35 contiguous city blocks to the renewal area. Bismarck adopted a resolution stating the modified area "consists of a combination of slum and blighted areas" appropriate for a renewal area. The renewal plan again described the boundaries of the area, objectives of the plan, proposed renewal actions, land use plans, and project proposals. The plan explicitly listed several items for acquisition and construction, including public parking on Block 44, restoration and acquisition of the Burlington Northern Depot, overhead walkway between parkade and adjacent structures, addition of two stories to a parkade, rehabilitation and removal of structures as recommended and approved by the City, and federally assisted low income elderly housing on part of one block in the renewal area.
[¶9] In July 1984, after notice and a public hearing, Bismarck modified its urban renewal plan to add about 17 contiguous city blocks, including the Bismarck Civic Center, to the renewal area. Bismarck's resolution modifying the renewal plan identified the prior resolutions and stated Bismarck has determined the prior renewal area and the additional area "consist of a combination of slum and blighted areas." The renewal plan described the boundaries of the area, objectives of the plan, proposed renewal actions, land use planning, and project proposals. The plan generally listed the same proposed renewal actions from the December 1979 plan and also listed the same items for acquisition and construction in the revised area as listed in the December 1979 plan.
[¶10] In June 1988, after notice and a public hearing, Bismarck modified its renewal plan to authorize use of tax increment funds to pay for improvements to the Bismarck Civic Center and Exhibition Hall and for improvements to the Chancellor Square Pedestrian Mall. The plan generally identified the same items for acquisition and construction as the earlier plans and added specific language for the addition of seating and exhibit space for the Bismarck Civic Center and for renovations for the Chancellor Square Pedestrian Mall.
[¶11] In August 1994, after notice and a public hearing, Bismarck considered a proposal to modify its renewal area to include an additional contiguous area. Haugland appeared at the Bismarck City Commission meeting and protested the proposed modification of the plan, claiming all debt for the previously approved plan had been paid and the plan must be discontinued. Bismarck sought an Attorney General's opinion, asking if "N.D.C.C. § 40-58-20(10) requires a city to remove an individual parcel from . . . an urban development or renewal area after any tax increment-financed improvements to the specific parcel have been individually completed and any tax increment-financed obligations with respect to such parcels have been repaid." The Attorney General opined "that N.D.C.C. § 40-58-20(10) does not authorize a city to remove individual parcels from an urban development or renewal area after tax increment-financed improvements to the specific parcel have been individually completed and paid." N.D. Op. Att'y Gen. 94-L-282, Oct. 17, 1994. After a continued public hearing in November 1994, Bismarck modified its renewal plan to add about six additional contiguous city blocks to the renewal area. The 1994 modified plan generally identified the same proposed renewal actions as the earlier plans and identified the same items for acquisition and construction within the renewal area.
[¶12] In January 2007, after notice and a public hearing, Bismarck adopted a resolution to modify its renewal plan to include additional contiguous area. Bismarck's resolution approving the modified plan stated Bismarck had determined the prior renewal area and the additional area "consist of a combination of slum and blighted areas." As modified, the renewal area included about 88 contiguous city blocks in downtown Bismarck. The modified plan, dated October 24, 2006, identified the same specific items as the earlier plans for acquisition and construction within the renewal area and also identified the creation of a program to encourage private investment in the core of the community, including facade and signage incentive grants, housing incentive grants, technical assistance, revolving loan funds, sidewalk subsurface infill, downtown streetscape elements, skyway development, and a quiet rail zone. A brochure describes the CORE Incentive Programs as a program:
to encourage rehabilitation, reinvestment, and new development in the downtown area of our community. These programs were created to stimulate new development in the downtown area and fund projects that will serve as the foundation for future downtown development and a healthy tax base. These incentive programs are funded by the Downtown Tax Increment District and are available to property owners, developers, and tenants for projects within that District. All CORE Incentive Program grants and awards are discretionary and will be considered on a case-by-case basis. [The] Facade and Signage Grant . . . program . . . provides 50% matching funds for improvements made to building facades, signs, and awnings. [The] Housing Incentive Grant . . . program provides 20% matching grants for the creation or rehabilitation of housing units within the downtown area[. The] Technical Assistance Bank . . . offers financial assistance for professional design services from licensed architects and engineers. [The] Revolving Loan Fund . . . provides loans at reduced interest rates for projects within the downtown area and is funded jointly by the City's tax increment fund and participating financial institutions. [The] Sidewalk Subsurface Infill . . . program offers grants for work within the public right-of-way needed to fill subsurface vaults under sidewalks.
[¶13] In March 2010, during a public hearing, Bismarck again modified its urban renewal plan to move the outer boundary of the renewal area from the center line of the perimeter streets of the renewal area to the outside edge of those streets. As relevant to the issues in this case, Bismarck's March 2010 action did not otherwise add any property to the renewal area.
[¶14] In May 2010, Haugland sued Bismarck, seeking a declaration that Bismarck's adoption and modifications of its renewal plan and use of tax increment financing to fund renewal projects in its renewal area violated N.D.C.C. ch. 40-58, the gift clause provisions of N.D. Const. art. X, § 18, the requirements for imposing taxes in N.D. Const. art. X, §§ 3 and 5, and the equal protection provisions of N.D. Const. art. I, §§ 21 and 22, and the federal constitution.
[¶15] Haugland claimed Bismarck's renewal plan created an illegal and perpetual downtown renewal area, which continues to keep redeveloped property within the renewal area as a resource for completion of the plan as a whole. Haugland alleged that when Bismarck substantially modified its plan, it failed to make findings that each parcel of property within the renewal area is a slum or blighted area or combination thereof, and that each parcel of property is appropriate for a renewal project. Haugland alleged Bismarck failed to appropriately notify the Burleigh County Auditor for inclusion of new properties within the renewal area and for removal of redeveloped properties from the area, which resulted in an illegal perpetual renewal area and permitted Bismarck to collect tax increment funds from non-blighted and non-slum properties at the expense of the lawful recipients of the property taxes, including the Bismarck School District, the Bismarck Park Board, and Burleigh County. Haugland claimed the original taxable values of properties within the renewal area were not properly adjusted as required by law when Bismarck's renewal plan was modified. Haugland also claimed Bismarck retained excess tax increment funds not necessary for any properly approved renewal project and had collected and illegally retained $15,125,605 in excess tax increment funds as of December 31, 2009, which Bismarck purported to use for future renewal projects that had not been properly adopted. Haugland also claimed Bismarck improperly used excess tax increment funds for its "CORE Incentive Program," which resulted in gifts to some property owners within the renewal area for facade and signage, housing incentives, technical assistance, revolving loans, and payments for subsurface infill of vaults below the public right-of-way within the renewal area.
[¶16] Bismarck denied Haugland's claims and moved for judgment on the pleadings, or alternatively, for summary judgment. Haugland resisted Bismarck's motion and also moved under N.D.R.Civ.P. 56(f) for time to conduct additional discovery. The district court considered documents outside the pleadings and treated Bismarck's motion as a request for summary judgment. The court granted Bismarck summary judgment, ruling the Act was not unconstitutional, there were no disputed issues of material fact, and Bismarck's renewal plan complied with N.D.C.C. ch. 40-58. A judgment dismissing Haugland's claims was entered in January 2011.
[¶17] The district court had jurisdiction under N.D.C.C. § 27-05-06 and N.D. Const. art. VI, § 8. Haugland's appeal and Bismarck's cross-appeal are timely under N.D.R.App.P. 4(a)(1) and (2). This Court has jurisdiction under N.D.C.C. § 28-27-01 and N.D. Const. art. VI, §§ 2 and 6.
[¶18] Haugland has moved under N.D.R.App.P. 10(h) and N.D.R.Ev. 201(d) to supplement the record on appeal to include the minutes from a Bismarck City Commission meeting on September 13, 2011, and for this Court to take judicial notice of Bismarck's determination that it has excess tax increment funds under the current provisions of N.D.C.C. § 40-58-20(12). See 2011 N.D. Sess. Laws ch. 300, §§ 2 and 3 (amending provisions of N.D.C.C. §§ 40-58-20(1) and adopting 40-58-20(12)).
[¶19] Rule 10(h), N.D.R.App.P., applies when the record does not truly disclose what occurred in the district court, or when there are omissions from or misstatements of the record in the district court. Haugland's motion involves matters arising after the January 2011 judgment was entered in this action. Those matters generally are not within the purview of N.D.R.App.P. 10(h), and we deny Haugland's motion.
[¶20] In its cross-appeal, Bismarck argues the district court erred in not granting Bismarck's motion for judgment on the pleadings under N.D.R.Civ.P. 12. Bismarck claims the case involves only matters of public record and should have been decided on the pleadings.
[¶21] Under N.D.R.Civ.P. 12, when matters outside the pleadings are presented to and not excluded by the district court, the motion must be treated as one for summary judgment. Davidson v. State, 2010 ND 68, ¶ 11, 781 N.W.2d 72. Although the resolution of this case may involve some matters of public record, Bismarck's motion included an affidavit and matters outside the pleadings. We conclude the district court did not err in treating Bismarck's motion under the standards for summary judgment, which is a procedural device for promptly resolving a controversy on the merits without a trial if there are no disputed issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. See Davidson, at ¶ 11.
[¶22] Haugland argues Bismarck's use of tax increment financing for renewal projects under the Act constitutes a gift of public money to private parties in violation of N.D. Const. art. X, § 18, which he claims prohibits Bismarck from gifting tax money to private property owners unless Bismarck receives fair consideration for the transfer, or unless the transfer is part of a legitimate for-profit business enterprise operated by Bismarck. He asserts Bismarck's renewal plan is unconstitutional under N.D. Const. art. X, § 18, because Bismarck is gifting property to private entities for something that is not an enterprise and not a public purpose. He claims Bismarck's perpetual renewal plan and disbursements do not promote the contentment of all Bismarck's inhabitants, because only the property owners within the renewal area are beneficiaries of the plan. Bismarck responds the Act is not ...