Court: subdivision meets public purpose doctrine

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"[W]e hold that the combination of the town’s enunciated goals of creating jobs, promoting orderly growth, increasing the tax base, and preserving and conserving an environmentally sensitive area for the benefit of the citizens of the town is a legitimate and valid public purpose…" Justice N. Patrick Crooks Wisconsin Supreme Court

The state Supreme Court has determined that the Town of Beloit’s use of tax money to develop and sell a municipally-owned subdivision appropriately fell within the guidelines of the public purpose doctrine.

The state’s high court in a 5-2 decision found that the expenditure of tax dollars to develop the infrastructure of a 24-lot subdivision benefited the community and therefore was appropriate. Chief Justice Shirley S. Abrahamson and Justice Ann Walsh Bradley dissented.

Justice N. Patrick Crooks, writing on behalf of the majority court stated, “[W]e hold that the combination of the town’s enunciated goals of creating jobs, promoting orderly growth, increasing the tax base, and preserving and conserving an environmentally sensitive area for the benefit of the citizens of the town is a legitimate and valid public purpose under Wisconsin statutes, case law, and the United States and Wisconsin Constitutions.”

Land in Hand

In its decision, the court noted that the Town of Beloit owned the property on and off since the mid-1960s. During the 1980s, the Town tried to sell the land, which was 55 acres at that point, to a businessman, but that effort failed. During the early 1990s, the Town sold part of the land to the Department of Natural Resources for a natural conservancy district.

The Town retained a 20.4-acre parcel, which became the Heron Bay Subdivision and was zoned for single-family residential use. In 1997, following a variety of attempts to find private individuals to develop the land, the Town adopted a master plan for town development and decided to develop the subdivision on its own. The Town of Beloit Board approved a preliminary plat for 36 lots and forwarded it to Rock County. The County then gave conditional approval for 24 lots on the land, along with other conditions including a 300-foot-wide easement, providing an environmental corridor along the Rock River.

The Town approved the modified plat, but also brought a court action. In 1999, the Town filed a petition for a writ of certiorari complaining that Rock County did not have authority to impose some of the conditions it had placed on the subdivision. During that same period, the town approved spending $600,000 in tax revenue for development of waste and sewerage work to serve the new subdivision and land beyond.

The Green-Rock Audubon Society and two other people filed a motion to intervene along with a complaint charging that the Town exceeded its authority by developing the subdivision without a public purpose. The Town moved for summary judgment stating that the subdivision would increase the tax base, help direct orderly development and serve an environmental purpose through the creation of the easement along the river.

Rock County and the intervenors opposed the motion. The circuit court denied the Town’s motion for summary judgment and the Wisconsin Court of Appeals reversed, granting summary judgment against the intervenors. The Supreme Court affirmed the court of appeals in its March 4 opinion.

Public Purpose Doctrine

Kenneth W. Forbeck, of Forbeck, Elliott, Monahan & Schomber S.C. in Beloit, represented the Town. Forbeck indicated the Supreme Court’s decision was a natural extension of the public purpose doctrine, which the court has recognized in a variety of cases.

“There’s been a lot of expansion of that public purpose law in the state of Wisconsin in the last few years,” Forbeck observed.

Although not specifically stated in the state’s constitution, the court in a number of decisions including State ex rel. Bowman v. Barczak, 42 Wis. 2d 57, 62, 148 N.W.2d 683 (1967), recognized as a constitutional tenet that public appropriations could only be used for public purposes. In several recent cases, such as Libertarian Party of Wis. v. State, 199 Wis. 2d 790, 809, 546 N.W.2d 424 (1996), that principle has been found to include the use of public money for projects such as the Miller Park baseball stadium.

In that decision, the court pointed to goals such as creating jobs and enhancing the tax base as legitimate reasons to spend tax dollars on a project, which appeared to be private in
nature.

Crooks, citing the court’s 1998 decision in Jackson v. Benson, 218 Wis. 2d 835, 896, 578 N.W.2d 602, stated:

“Under the public purpose doctrine, ‘We are not concerned with the wisdom, merits or practicability of the legislature’s enactment. Rather we are to determine whether a public purpose can be conceived which might reasonably be deemed to justify or serve as a basis for the expenditure.’ A court can conclude that no public purpose exists only if it is ‘clear and palpable’ that there can be no benefit to the public.”

Crooks stressed the importance that the court could find there was no public purpose only if it were “clear and palpable” that there would be no public benefit. He noted that the most significant consideration was the Supreme Court’s decision in Libertarian Party, which dealt with Miller Park.

Forbeck said he looked very closely at that decision when making his argument in support of the Town of Beloit.

“The things I enunciated in the affidavit, namely the orderly growth, expansion of tax base and providing jobs, etc. really come out of that Miller Park case,” Forbeck said.

He noted that the Town did not see any developers coming forward with what it considered to be reasonable offers. Because of that, he said, the Town decided to move ahead on its own.

Questioning Goals

In her dissent, Abrahamson challenged the Town’s stated goals and the court’s reliance on those statements. She questioned the idea that development and sale of the subdivision would provide a direct benefit to the public.

Abrahamson stated her desire, “to express my conviction that some of the goals on which the majority opinion rests its conclusion are merely assertions unsupported by the facts of this case while others are admittedly hoped for but distant outcomes not justifications. The public purpose doctrine becomes a charade if a town may justify expenditures by merely offering enough of the proper buzzwords, ‘job creation,’ ‘orderly growth,’ ‘increasing the tax base,’ and ‘environmental concerns,’ without any facts to back up the assertions.”

Later in her dissent Abrahamson summarized her position: “The majority opinion’s combination of goals justifying the expenditures in this case thus boils down to this: the expenditure serves an acceptable public purpose because the town’s tax base might be enhanced. I disagree with this position. An enhanced tax base from the sale of land and the construction of homes is an indirect, remote, and uncertain benefit of the expenditure in the present case and is not a sufficient public purpose to justify the town’s running a for-profit real estate development business and engaging in the non-traditional enterprise of building residential home sites.”

Joseph R. Cincotta, of Schweitzer & Cincotta LLP in Milwaukee, represented the intervenors in the Town of Beloit case. Looking at Libertarian Party, Cincotta said the court established a two-pronged test, reviewing whether the project was public in nature and whether there was a need for it that would not be met without spending public dollars. His clients took the position that the project was not public in nature.

“It could be looked at as the court modifying the test to say that the actual object of the public expenditure isn’t as important as the hoped for benefits are,” Cincotta said. “The court somehow felt there was a lot more that the town had suggested they were doing than their actions demonstrated.”

Public Purpose-Public Use

Cincotta also tried to make a connection between the public purpose doctrine
and language in the takings clause of the state constitution and the guarantee clause of the federal constitution. He attempted to equate the taking of tax dollars to the taking of real property. Cincotta asserted that supporting the court of appeals decision would weaken the protections of the public use clause.

“I wanted to get the court to realize that the public use that justifies the expenditure of tax dollars and the taking of those tax dollars prior to that is the same as the public purpose or public use that then justifies an outright taking of real estate property,” Cincotta explained.

Forbeck stated emphatically that this was not an eminent domain case. He indicated that he did not see the nexus between the public purpose doctrine and eminent domain.

“If the municipality hadn’t owned the land, I would never have advised a municipality that you have a right under eminent domain to take a piece of property and create a subdivision,” he said.

In the majority opinion, Crooks stated that although the reasons behind the public purpose doctrine and the public use clause under eminent domain might be similar — “protecting individual property rights against the government” — the public use argument did not apply to this case.

Crooks wrote, “Here, the property at issue was not private property being taken. To the contrary, the property was currently owned by the town, and pursuant to Wis. Stat. 61.34(3), the town has the authority to sell and subdivide the property. An entirely separate statute deals with a town’s authority to condemn property under eminent domain.”

Public Use Not at Issue

Abrahamson chastised the majority court for considering the relationship between the public purpose doctrine and public use, because it was not an issue on which the court had accepted the case.

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She wrote, “There is a growing tendency for this court to reach out and decide issues that are neither squarely presented nor adequately briefed and argued by the parties. In the present case, the majority opinion does exactly that in its discussion of the relationship between the public purpose doctrine and the public use doctrine under eminent domain. Specifically, the majority opinion declares that ‘[a]lthough the test under the public use clause, like the test under the public purpose doctrine, is deferential to the legislative determination, the analyses are not identical.’”

Abrahamson’s dissent did not challenge whether the majority court’s conclusion was correct. Instead, she challenged the court’s discussion of the issue, which was “pure, adulterated dicta.” Therefore, it had no place in the opinion.

As a result of this decision, Forbeck explained that if a municipality wants to develop something like a subdivision, they need to provide the reasons that they are doing it. And, in order to be acceptable, those reasons have to be grounded in the public purpose doctrine.

“What a local municipal attorney would have to look at is to see whether or not they would fall within criteria that show an attempt to do something, a need that they perceive and what it will create as far as the municipality goes, whether it’s jobs, tax base or whatever,” Forbeck said.

Tony Anderson can be reached by email.