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Keane v. Boundary Commission (4/14/95), 893 P 2d 1239
<![CDATA[
NOTICE: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501.
THE SUPREME COURT OF THE STATE OF ALASKA
JACK KEANE and CONCERNED )
CITIZENS OF BRISTOL BAY, )
) Supreme Court No. S-5370
Appellants, )
) Superior Court No.
v. ) 3AN-91-10479 CI
)
LOCAL BOUNDARY COMMISSION and )
INCORPORATORS OF THE CITY )
OF PILOT POINT, Intervenors, ) O P I N I O N
)
Appellees. ) [No. 4187 - April 14, 1995]
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
J. Justin Ripley,
Judge.
Appearances: Andrew M. Hemenway,
Anchorage, for Appellants. Marjorie L.
Odland, Assistant Attorney General, Juneau,
Stephen Slotnick, Assistant Attorney General,
Juneau, Charles E. Cole, Attorney General,
Juneau, for Appellee Local Boundary
Commission. Bruce F. Stanford, Anchorage,
for Intervenors and Appellees Incorporators
of the City of Pilot Point. Glen K. Vernon,
King Salmon, for Amicus Curiae Lake and
Peninsula Borough.
Before: Moore, Chief Justice,
Rabinowitz, Matthews and Compton, Justices,
and Bryner, Justice pro tem.*
COMPTON, Justice.
This appeal arises from a decision of the Local
Boundary Commission (LBC) approving the incorporation of the City
of Pilot Point. Jack Keane and Concerned Citizens of Bristol Bay
(collectively Keane) argue that the LBC's decision lacks a
reasonable basis, that it is based upon an illegal tax, and that
it is contrary to Alaska law. In addition, Keane appeals the
following discreet superior court decisions: (1) the decision to
allow the incorporators of Pilot Point (Incorporators) to
intervene, (2) the decision to deny Keane's request for a stay
pending appeal, (3) the decision to deny Keane public interest
status, and (4) the decision to award attorney's fees to the LBC
and the Incorporators.
I. FACTUAL AND PROCEDURAL BACKGROUND
Pilot Point is located within the Lake and Peninsula
Borough1 (Borough), on the shores of Bristol Bay. Voters from
the Pilot Point area prepared a petition seeking incorporation of
Pilot Point as a second class city. The petition included a
request that incorporation be conditioned on approval of a three
percent sales and use tax on the sale of fish in the community.
After review and approval by the Department of
Community and Regional Affairs (DCRA), the petition was presented
to the LBC. Following a public hearing, the LBC approved an
amended petition. Both incorporation and the sales and use tax
were approved by the voters of Pilot Point.
Keane appealed the LBC decision to the superior court,
and filed a motion to stay certification of the incorporation
election results. The Incorporators filed a motion to intervene
in the appeal and an opposition to the motion to stay. The LBC
aligned itself with the Incorporators, supporting the motion for
intervention and opposing the motion to stay. Keane opposed the
Incorporators' motion to intervene. The superior court granted
the motion to intervene, denied the motion for a stay and allowed
certification of the election results. Keane then sought review
of the superior court's order by filing an Emergency Motion for
Stay in this court. The motion was denied. (No. S-4922 Order,
January 21, 1992). The superior court affirmed the LBC's
decision approving the petition for incorporation. The
Incorporators and the LBC then filed motions for attorney's fees.
Keane opposed both motions, claiming public interest litigant
status. The court denied Keane's request and awarded partial
attorney's fees to the LBC and the Incorporators in the amount of
$1,500 and $11,350, respectively. This appeal followed.
II. DISCUSSION
A. STANDARDS OF REVIEW
When an administrative decision involves expertise
regarding either complex subject matter or fundamental policy
formulation, we defer to the decision if it has a reasonable
basis. Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746
P.2d 896, 903 (Alaska 1987); Mobil Oil Corp. v. Local Boundary
Comm'n, 518 P.2d 92, 98 (Alaska 1974). In contrast, we exercise
our independent judgment when interpreting a statute which does
not implicate an agency's special expertise or determination of
fundamental policies. See City of Valdez v. State, Dep't of
Community & Regional Affairs, 793 P.2d 532, 533 n.6 (Alaska
1990). Constitutional issues present questions of law to
which this court applies its independent judgment. They "should
be given a reasonable and practical interpretation in accordance
with common sense." ARCO Alaska, Inc. v. State, 824 P.2d 708,
710 (Alaska 1992).
B. ALASKA'S CONSTITUTION AND STATUTES REQUIRE
AN INQUIRY INTO WHETHER IT IS REASONABLE OR
PRACTICABLE FOR A BOROUGH TO PROVIDE SERVICES
BEFORE INCORPORATION OF A CITY IS ALLOWED
1. Statutory and constitutional provisions.
Article X, section 1 of the Alaska Constitution states
that the purpose of article X is
to provide for maximum local self-
government with a minimum of local government
units, and to prevent duplication of tax-
levying jurisdictions.
Article X, section 5 of the Alaska Constitution
provides in part:
Service areas . . . may be established .
. . by the assembly, subject to the
provisions of law or charter. A new service
area shall not be established if, consistent
with the purposes of this article, the new
service can be provided by . . .
incorporation as a city . . . .
Alaska Statute 29.05.021(b) provides:
A community within a borough may not
incorporate as a city if the services to be
provided by the proposed city can be provided
on an areawide or nonareawide basis by the
borough in which the proposed city is
located . . . .
Alaska Statute 29.35.450(b) provides:
A new service area may not be
established if, consistent with the purposes
of art. X of the state constitution, the new
service can be provided by an existing
service area . . . or by incorporation as a
city.
2. Arguments presented.
Keane contends that AS 29.05.021(b) prohibits the
incorporation of a city when formation of a service area is
theoretically possible, or at least when formation of a service
area is "reasonable"or "practicable." Keane asserts that the
Borough could reasonably and practicably provide the services
desired by the Incorporators as evidenced by the LBC's statement
acknowledging that the Borough "could, on a service area basis,
provide other services needed or desired by the residents of
Pilot Point."2
The LBC argues that Keane's interpretation of
AS 29.05.021(b) is contrary to AS 29.35.450(b), constitutional
law and the relevant interpretive regulation, 19 Alaska
Administrative Code (AAC) 10.020(a), as well as the LBC's power
to base its decision on fundamental policy considerations. The
LBC contends that (1) Keane's interpretation would force a
borough to provide services regardless of whether the borough
"wants" to provide them, and (2) a borough cannot be "required"
to establish a service area. The Borough argues that
even if AS 29.05.021(b) is construed to require boroughs to
create new service areas, it is exempt from its provisions
because of its home rule status.3 The Borough argues that
article X, section 5 of the Alaska Constitution allows the
creation of service areas only when other options, including
incorporation of a city, are not available.
Keane responds that article X, section 5 of the Alaska
Constitution, when read in conjunction with article X, section 1,
allows incorporation of a city only when a service area could not
be created to provide the same services, because incorporation of
a city will increase the number of local government units and tax-
levying jurisdictions.
3. Interpretation of the law.
We conclude that AS 29.05.021(b) is not in conflict
with either AS 29.35.450(b) or article X, section 5 of the Alaska
Constitution. Alaska Statute 29.35.450(b), which follows the
language of article X, section 5, is a limitation on the creation
of new service areas.4 It provides that a new service area may
not be established if the new service can be provided by another
means such as incorporation of a city. In contrast,
AS 29.05.021(b) is a limitation on the incorporation of cities.
It disallows incorporation when the desired services can be
provided by a borough on an areawide or nonareawide basis. A
home rule borough can provide services on an areawide or
nonareawide basis without resort to a service area.5
It is reasonable to interpret AS 29.35.450(b) and
article X, section 5 as preferring incorporation of a city over
the creation of new service areas. This interpretation is
supported by legislative history and is not inconsistent with
article X, section 1 of the Alaska Constitution.6 Constructing a
barrier to approving an excessive number of government units does
not prohibit the creation of them when they are necessary.7
Whether a service area or a city is established, another
government unit is created. If numerous service areas are set up
supplying only one or two services each, there is the potential
for an inefficient proliferation of service areas. In contrast,
once a city is established, it can provide many services, and
other communities can annex to the city in the future.8 Although
the framers entertained the idea of unified local governments,
they realized that the need for cities still existed.9
Based on the above discussion, we interpret
AS 29.05.021(b) as follows: when needed or desired services can
be reasonably and practicably provided on an areawide or
nonareawide basis by the borough, they should be.10 As discussed
supra, this inquiry is not limited to an evaluation of service
areas. When it is established that the services cannot be
provided reasonably or practicably, then the LBC is required to
consider other available options. We also clarify that there is
a statutory and constitutional preference for incorporation of
cities over the establishment of new service areas. We believe
these to be reasonable and practical interpretations of the
Alaska Constitution in accordance with common sense. See ARCO
Alaska, 824 P.2d at 710.
4. The LBC erred in its incorporation
determination by failing to address
whether the Borough could reasonably
and practicably provide the desired
services.
Keane argues that even if a requirement of
"reasonableness" or "practicability" is read into AS
29.05.021(b), the LBC provides no evidence which supports a
conclusion that formation of a service area is not "reasonable"
or "practicable." Keane contends that a Borough's support of a
petition for incorporation is not equivalent to a refusal to
create a new service area.
At issue is former 19 AAC 10.020,11 a regulation which
interprets AS 29.05.021(b) and assists the LBC in determining
whether the formation of a service area is reasonable or
practicable. It provided in part:
(a) The commission will not allow
the incorporation of a community located
within an organized borough unless the
petitioners demonstrate to the satisfaction
of the commission that the services to be
exercised by the proposed city cannot be
reasonably or practicably exercised by the
borough on an areawide or non-areawide basis.
The commission will consider the requirement
of this subsection satisfied if:
. . . .
(2) the commission determines that
the city is remote from the borough seat and
is not connected to the borough seat by the
state highway system.
Keane asserts that the LBC raises for the first time on
appeal to the superior court its finding of remoteness and
attendant reliance on 19 AAC 10.020. The LBC asserts that it did
not "overlook"the application of 19 AAC 10.020. It notes the
applicability of 19 AAC 10.020 in its Findings and Conclusions:
AS 29.05.011 sets out four
standards for the LBC to apply to all
petitions for city incorporation. A fifth
standard, set out in AS 29.05.021(b), applies
only to communities such as Pilot Point which
are in organized boroughs. The Alaska
Administrative Code, 19 AAC 10.010 and
10.020, gives the criteria which the LBC, in
its discretion, should consider when applying
the statutory standards, although the
Commission is not limited to the listed
factors.
Remoteness was part of the record before the LBC. The fact that
Pilot Point is not connected to the borough seat, King Salmon, by
any road, and the fact that Pilot Point is eighty-five air miles
from King Salmon, were mentioned in the Incorporator's petition
as well as the DCRA reports to the LBC. The LBC argues that
there was no need to discuss specifically in its decision
remoteness or its effect on the criteria of 19 AAC 10.020(a)(2).
The LBC is not required to set forth findings of fact
in its incorporation decisions. Mobil Oil Corp. v. Local
Boundary Comm'n, 518 P.2d 92, 97 (Alaska 1974). In Mobil Oil, we
stated that "[t]he special function of the [LBC], to undertake a
broad inquiry into the desirability of creating a political
subdivision of the state, makes us reluctant to impose an
independent judicial requirement that findings be prepared." Id.
We stated that we were able to determine the basis of the LBC's
decision from our own review of the entire record. Id.
Keane responds that where a decisional document shows
on its face that an important factor was not considered, the
court should remand the matter for further consideration. See,
e.g., Southeast Alaska Conservation Council, Inc. v. State, 665
P.2d 544, 549 (Alaska 1983). We agree.
The LBC's decision allowing incorporation provides:
Given the lack of any city close to the
community of Pilot Point, annexation to an
existing city is impractical. While the Lake
& Peninsula Borough could, on a service area
basis, provide other services needed or
desired by the residents of Pilot Point, the
Borough Assembly formally supports
incorporation of the city. Therefore,
service area formation does not appear to be
a viable option at this time.
The LBC argues the applicability of 19 AAC 10.020,
notes its importance in the consideration of the statutory
standards for incorporation, and acknowledges the facts that
support a finding of remoteness. Nonetheless, we cannot
ascertain from the record whether the LBC made a "reasonableness"
or "practicability"determination, and if it did, whether it
found a lack of the two based on a remoteness theory. The LBC
does not refer to the facts concerning a remoteness determination
in its conclusions. Its decision appears to be based solely on
the fact that the residents of Pilot Point wanted to incorporate
and that the Borough Assembly formally supported the
incorporation.12 There is no indication that a determination of
the "reasonableness"or "practicability"of a service area was
considered. Therefore, we remand to the LBC to make findings
consistent with this opinion.
C. THE LBC'S DECISION WAS NOT PREDICATED
ON AN ILLEGAL TAX
Approval of the incorporation petition by local voters
was contingent on their simultaneous approval of a proposed three
percent tax on the sale of fish within the city. Keane argues
that this tax is illegal based on three theories: (1) the tax
violates AS 29.45.090(b); (2) the tax denies due process of law
to the taxpayers; and (3) the tax violates article IX, section 6
of the Alaska Constitution. Each of these areas is discussed
below.
1. Alaska Statute 29.45.090(b)(1) does not
apply to sales taxes.
Alaska Statute 29.45.090(b)(1) provides that "[A]
municipality . . . may not levy taxes . . . that will result in
tax revenues from all sources exceeding $1,500 a year for each
person residing within the municipal boundaries." Keane asserts
that the tax limitation of AS 29.45.090(b)(1) applies to sales
taxes13 because the language refers to "all sources"and that the
three percent tax exceeds the amount allowed.14 The LBC responds
that Keane's interpretation of AS 29.45.090(b)(1) is inconsistent
with municipal taxation practices as well as rules of statutory
construction.15
Alaska Statute 29.45.090 provides in part:
(a) A municipality may not, during
a year, levy and tax for any purpose in
excess of three percent of the assessed value
of property in the municipality. All
property on which a tax is levied shall be
taxed at the same rate during the year.
(b) A municipality, or combination
of municipalities occupying the same
geographical area, in whole or in part, may
not levy taxes
(1) that will result in tax
revenues from all sources exceeding $1,500 a
year for each person residing within the
municipal boundaries; or
(2) upon value that, when combined
with the value of property otherwise taxable
by the municipality, exceeds the product of
225 percent of the average per capita
assessed full and true value of property in
the state multiplied by the number of
residents of the taxing municipality.
(Emphasis added). When subsection (b)(1) is read in context with
subsections (a) and (b)(2), it appears that the entire section is
dealing with property taxes. See 2B Norman J. Singer, Sutherland
Statutory Construction 46.05 (5th ed. 1992) [hereinafter
Sutherland] ("A statute is passed as a whole and not in parts or
sections and is animated by one general purpose and intent.
Consequently, each part or section should be construed in
connection with every other so as to produce a harmonious
whole."). The LBC correctly contends that property
valuation is a basic principle inherent throughout AS 29.45. We
can consider these sections in pari materia as they relate to the
method by which municipalities assess, levy and collect property
taxes.16 AS 29.45.010. See 2B Sutherland, supra, 51.03
("Statutes are considered to be in pari materia when they . . .
have the same purpose or object.").
In addition, the DCRA reports that the State Assessor
interprets AS 29.45.090(b)(1) as applying only to property taxes.
A "contemporaneous and practical interpretation of a statute by
the executive officer[] charged with its administration and
enforcement . . . constitutes an invaluable aid in determining
the meaning of a doubtful statute." 2B Sutherland, supra,
49.03; see also Casperson v. Alaska Teachers' Retirement Bd., 664
P.2d 583, 586-87 (Alaska 1983) (Compton, J., dissenting).
Furthermore, AS 29.45.090 assumes that the prohibited
tax is of an amount capable of predetermination. This suggests
that it applies to property tax only. As a practical matter, the
amount of property tax to be levied and collected in an upcoming
year is capable of exact calculation based upon the amount of
assessed, taxable property in a municipality and the
establishment of an annual mill rate. In contrast, the amount to
be collected in a fish sales taxes in an upcoming year can only
be estimated: revenues are dependent on the strength of the
salmon runs and the price paid per pound to the fishermen.17
After considering the language of the statute, its
legislative history and underlying policies, we conclude that
AS 29.45.090 is inapplicable to sales taxes.18 We believe this
interpretation to be the most persuasive in light of precedent,
reason and policy. Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska
1979).
2. The sales tax does not violate
due process.
Keane argues that the three percent sales and use tax
violates due process of law because it confers no benefit upon
the taxpayers. The LBC contends that the City of Pilot Point
plans to provide shore-based facilities and to offset the effects
of the seasonal influx of fishermen to the community.19 The
Incorporators also contend that the taxpayers will benefit from
the waste disposal, storage, waterfront and fresh water
improvements that the city proposes to provide. Keane responds
that the majority of the taxpayers have no shore-based presence.
As long as services are available, the issue of usage by the
taxpayers is irrelevant. North Slope Borough v. Puget Sound Tug
& Barge, 598 P.2d 924, 928 (Alaska 1979). Therefore, we conclude
that the three percent sales and use tax does not violate the
taxpayers' due process rights.
3. The sales and use tax does
have a public purpose.
Keane also contends that the proposed tax violates
article IX, section 6 of the Alaska Constitution, which provides
in part that "[n]o tax shall be levied . . . except for a public
purpose." Keane asserts that the three percent tax violates the
public purpose clause because the Incorporators' petition
anticipated the generation of fifty percent more revenue than
needed to operate the city as well as the establishment of a
permanent fund.20 The LBC responds that (1) the DCRA considered
the petitioner's anticipated revenues overly optimistic, and (2)
even if a city has excess tax revenues it is not prohibited from
establishing a savings account to draw on in less prosperous
times. The phrase "public purpose"cannot be precisely
defined; each case must be judged on its own particular facts and
circumstances. DeArmond v. Alaska State Dev. Corp., 376 P.2d
717, 721 (Alaska 1962).
[I]f the object is beneficial to the
inhabitants and directly connected with the
local government it will be considered with
favor as a . . . public purpose . . . . To
justify a court in declaring a tax invalid on
the ground that it was not imposed for a
public purpose, the absence of a public
interest must be clear and palpable.
16 Stephen M. Flanagan, McQuillin, Municipal Corporations
44.35, at 114-15 (3rd ed. 1984). We conclude that establishment
of a savings account for future public purposes appears to be a
prudent decision with a public purpose.
D. THE SUPERIOR COURT DID NOT ABUSE ITS
DISCRETION IN DENYING A STAY
Keane argues that Alaska Appellate Rule 603(a)(2) does
not require any consideration of the merits of the appeal, the
probability of success, a finding of irreparable harm, or
adequate protection to the appellee. Keane asserts that the
cases relied on by the LBC and the Incorporators that considered
these elements are no longer applicable because they have been
superseded by Appellate Rule 603.21 Keane argues that a $750 cash
deposit in the amount of a cost bond satisfies the requirements
of a supersedeas bond under Alaska Appellate Rule 603(a)(2) by
application of Alaska Appellate Rule 602(f). He cites Pipeliners
Union 798, United Association v. Alaska State Commission for
Human Rights, 681 P.2d 330 (Alaska 1984), to support the
proposition that he is entitled to a stay unless it would be
contrary to the public interest. The Pipeliner court concluded
that "[a] monetary enforcement judgment may be stayed as a matter
of right upon the posting of an appropriate supercedeas [sic]
bond under Appellate Rule 603(a)(2)." Id. at 336. However,
Keane's reliance on Pipeliner is misplaced; Pipeliner involved a
monetary judgment.
The distinction between monetary and non-monetary
judgments is clear in Rule 603(a)(2) which provides in part:
When an appeal is taken, the appellant
may obtain a stay of proceedings to enforce
the judgment by filing a supersedeas bond. .
. . The filing of a supersedeas bond does not
prohibit the court from considering the
public interest in deciding whether to impose
or continue a stay on that portion of an
administrative or district court judgment
which is not limited to monetary relief.
(Emphasis added). Thus stays not involving money judgments are
not mandatory upon the mere issuance of a supersedeas bond, and
certainly are not mandatory on the issuance of a $750 cost bond.
Accordingly, the superior court has discretion to grant a stay
concerning a non-monetary judgment. This determination is guided
by the "public interest." Keane contends that it was in the
public interest to grant a stay because disincorporation of a
municipality substantially disrupts the life and livelihood of
those associated with the municipality. The LBC and the
Intervenors respond that the public interest cannot be protected
with a $750 cost bond: this amount does not come close to the
amount spent in reviewing the incorporation petition, holding
meetings and hearings, holding an election, or the loss of tax
revenues if a stay is granted. Moreover, certain public
interests would be advanced by denying the stay: the right to
petition and vote for incorporation, and the right to vote for a
tax measure to insure the financial viability of the city. We
find the public interest arguments advanced by the LBC and the
Intervenors persuasive.
Additionally, we clarify that the test presented in
A.J. Industries, Inc. v. Alaska Public Service Commission, 470
P.2d 537 (Alaska 1970), is still applicable:
While the rule requiring a clear showing
of probable success applies in situations
where the party asking for relief does not
stand to suffer irreparable harm, or where
the party against whom the injunction is
sought will suffer injury if the injunction
is issued, a different rule applies where the
party seeking the injunction stands to suffer
irreparable harm and where, at the same time,
the opposing party can be protected from
injury.
Id. (footnotes omitted).22
Because Keane has made no showing of either irreparable
harm or probability of success on the merits, we conclude that
the superior court did not abuse its discretion in denying
Keane's motion for a stay.23
E. THE SUPERIOR COURT DID NOT ERR IN ALLOWING
THE INCORPORATORS TO INTERVENE
The Incorporators argue that they were properly allowed
to intervene as a matter of right. In the alternative, they
argue that they were entitled to permissive intervention pursuant
to Alaska Civil Rule 24(b). The LBC supports the intervention of
the Incorporators, noting that "[a] newly incorporated entity has
a direct interest in any legal challenge to its existence."
Keane argues that if intervention was available it was
permissive, not as of right. However, Keane asserts that even
permissive intervention should have been denied in this case
because of the increased complications of tripartite litigation.
Assuming, arguendo, that intervention as a matter of
right was improper, we conclude that the Incorporators were
properly allowed permissive intervention. Permissive
intervention is proper "when an applicant's claim or defense and
the main action have a question of law or fact in common."
Alaska R. Civ. P. 24(b). The Incorporators' claims do share
common issues of law and fact with the LBC: they both want to
uphold the LBC decision.
An additional factor that a court must consider before
allowing intervention is "whether the intervention will unduly
delay or prejudice the adjudication of the rights of the original
parties." Id. This court has recognized that "additional
parties are . . . the source of additional questions, briefs,
objections, arguments and motions;"where no new issues are
presented, it is most effective to allow participation by a brief
amicus curiae rather than by intervention. State v. Weidner, 684
P.2d 103, 114 (Alaska 1984).
The Incorporators have raised additional arguments and
interests that are not raised by the LBC, i.e., that the legality
of the sales tax is not properly before the court, and that if a
stay were issued, a substantial bond would be needed to cover the
amount of the city's lost revenues and grants from the State and
Federal governments. Furthermore, the intervention does not
appear to have unduly delayed or prejudiced the original parties.
Keane merely asserts that there are increased complications in
tripartite litigation; he fails to persuade us that he is thereby
prejudiced. Therefore, we conclude that the superior court did
not abuse its discretion in allowing the Incorporators to
intervene. See id. at 113.
F. THE SUPERIOR COURT ERRED IN ITS AWARDS OF
ATTORNEY'S FEES BECAUSE KEANE WAS ENTITLED
TO PUBLIC INTEREST STATUS
Keane contends that the superior court abused its
discretion when it denied him public interest status and awarded
attorney's fees to the Incorporators and the LBC. See Citizens
Coalition for Tort Reform, Inc. v. McAlpine, 810 P.2d 162, 171
(Alaska 1991) ("We review the trial court's determination of
public interest status under the abuse of discretion standard.").
We agree.
The criteria for identifying a public interest suit are
as follows: "(1) whether the case is designed to effectuate
strong public policies; (2) whether, if the plaintiff succeeds,
numerous people will benefit from the lawsuit; (3) whether only a
private party could be expected to bring the suit; and (4)
whether the litigant . . . would lack sufficient economic
incentive to bring the lawsuit if it did not involve issues of
great public importance." Carney v. State, Board of Fisheries,
785 P.2d 544, 549 (Alaska 1990). All four factors must exist
before a party is considered a public interest litigant. Id.
We conclude that Keane is a public interest litigant.
First, this lawsuit was designed to effectuate public policy.
Keane challenged an alleged violation of a policy of the Alaska
Constitution that favors limiting tax-levying authorities. Keane
also sought a determination that would clarify statutory
limitations on municipalities' tax-levying powers. Each of these
goals involves important public policies.
Second, numerous people will benefit from this lawsuit
if Keane succeeds. Although Keane admits that "[t]he hundreds of
fishermen of the Ugashik District would be the primary
beneficiaries,"defining boundaries of constitutional provisions
will benefit the public at large. See, e.g., Whitson v.
Anchorage, 632 P.2d 232, 234 (Alaska 1981); Thomas v. Bailey, 611
P.2d 536, 540 (Alaska 1980). Likewise, interpreting public laws
will benefit the public. See Girves v. Kenai Peninsula Borough,
536 P.2d 1221, 1227 (Alaska 1975).
Third, it is reasonable to conclude that only a private
party would be expected to bring this suit because the LBC's
decision is supported by the DCRA.
Fourth, Keane lacked sufficient economic incentive to
bring this suit. This appeal was directed at the formation of a
municipality, rather than at the imposition of a tax; economic
interests were affected only indirectly. Keane alleges that in
this case the affected economic interest of a typical fisherman
is quite small, approximately $555.55.24 See Citizens for the
Preservation of the Kenai River, Inc. v. Sheffield, 758 P.2d 624,
627 (Alaska 1988) (holding that whether a party is a public
interest litigant depends on the interests of "typical members"
rather than the interests of a single member). The economic
interest of a typical fisherman in this case is not substantial
and does not preclude Keane's public interest status.25
Keane satisfied all four of the necessary criteria to
be considered a public interest litigant. We conclude that the
superior court abused its discretion in denying Keane public
interest status. Therefore, we reverse the awards of attorney's
fees.26
III. CONCLUSION
We conclude that AS 29.05.021(b) requires an inquiry
into the reasonableness and practicability of having a borough
provide the desired services. Therefore, we REMAND to the LBC to
make such an inquiry. We conclude that the three percent sales
and use tax is not limited by AS 29.45.090(b)(1), that it does
have a public purpose, and that it does not violate taxpayers'
due process. We AFFIRM the decisions of the superior court
denying Keane's motion to stay proceedings pending appeal and
allowing the Incorporators to intervene. Finally, we conclude
that Keane is a public interest litigant and therefore REVERSE
the superior court's awards of attorney's fees, and REMAND the
issue of attorney's fees to the superior court for
redetermination.
IN THE SUPREME COURT OF THE STATE OF ALASKA
JACK KEANE and CONCERNED )
CITIZENS OF BRISTOL BAY, )
) Supreme Court No. S-5370
Appellants, )
) O R D E R
v. )
)
LOCAL BOUNDARY COMMISSION and )
INCORPORATORS OF THE CITY OF )
PILOT POINT, Intervenors, )
) Superior Court No.
Appellees. ) 3AN-91-10479CI
______________________________)
Before:Moore, Chief Justice, Rabinowitz,
Matthews, Compton, Justices and Bryner,
Justice pro tem.*
On consideration of the petition for rehearing, filed on November
28, 1995, IT IS ORDERED:
1. The petition for rehearing is GRANTED to the extent that the
final sentence of the opinion is deleted and replaced with the
following sentence: "Finally, we conclude that Keane is a public
interest litigant and therefore REVERSE the superior court's awards
of attorney's fees, and REMAND the issue of attorney's fees to the
superior court for redetermination."
a. Opinion No. 4145, issued on November 28, 1995, is
WITHDRAWN.
b. Opinion No. 4187 is issued today in its place.
2. The petition for rehearing is DENIED in all other respects.
Entered by direction of the Court at Anchorage, Alaska on April
14, 1995.
CLERK OF THE SUPREME COURT
__________________________
JAN HANSEN
*Sitting by assignment under article IV, section 16 of the Alaska
Constitution.
_______________________________
*Sitting by assignment made pursuant to article IV, section
16 of the Alaska Constitution.
1 The validity of the 1989 incorporation of the Borough
is currently before this court on a challenge from villages in
the Nushagak watershed. See Lake & Peninsula Borough v. Local
Boundary Comm'n., Nos. S-5476/5485.
2 Arguing as amicus curiae, the Borough contends that it
"has never provided, nor does it now provide, either on an
areawide or a nonareawide basis, the services that Pilot Point
proposed to provide for itself through incorporation." It
further argues that state law does not suggest that, "in the
absence of such services already being provided, the Borough was
somehow obligated to create a service area in preference to
having a local community incorporate in order to provide needed
municipal services." In addition, the Borough has established a
preference for incorporation over establishment of a new service
area when necessary services are not already provided. See Lake
& Peninsula Borough, Municipal Code 10.01.010(C).
3 A home rule municipality "is a city or borough that has
adopted a home rule charter, or . . . is a unified municipality.
[It] has all legislative powers not prohibited by law or
charter." AS 29.04.010; see Alaska Const. art. X, 11. In
contrast, a general law municipality "is an unchartered borough
or city. It has legislative powers conferred by law." AS
29.04.020. General law municipalities are of five classes, two
of which are first and second class boroughs. AS 29.04.030. The
powers of first and second class boroughs are set forth at AS
29.35.200, .210. The concepts of "general"and "home rule" are
not exclusive. A first class city or first class borough may
adopt a home rule charter. Alaska Const. art. X, 9; see
generally, Thomas A. Morehouse & Victor Fischer, Institute of
Social, Economic & Government Research, Borough Government in
Alaska 56-59 (1971).
Alaska Statute 29.10.200 provides in part: "Only the
following provisions of this title apply to home rule
municipalities as prohibitions on acting otherwise than as
provided . . . ." The section continues, listing the applicable
sections of the code. Alaska Statute 29.05.021(b) is not listed.
When the Alaska Legislature revised the municipal code in 1975,
it elaborated on the purpose of AS 29.10.200:
Home rule limitations are gathered
together and listed in one place in article 2
of the chapter (Sec. 29.13.010) [renumbered
to 29.10.200 in 1985]. The listing makes
explicit the legislative intent as to which
provisions of the code apply to home rule
municipalities, as prohibitions on acting
otherwise than as provided, and which do not.
Additionally, the provisions themselves
contain a specific reference making them
applicable to home rule municipalities. The
listing and specific references in the
provisions are intended to coincide. (As
additional provisions of law are enacted
subsequent to the time the code takes effect,
provisions which are intended to apply to
home rule as well as to general law
municipalities as prohibitions on acting
otherwise than as provided should make a
specific reference to home rule
municipalities within the provision and
should, under the form of the new code, also
be included in the listing under Sec.
29.13.100, so as to maintain clearly the
legislative distinction as to which code
provisions apply to home rule municipalities
and which do not.)
1972 House Journal 1720. It appears from the legislative history
that AS 29.05.021(b) is inapplicable to home rule municipalities.
See Faipeas v. Municipality of Anchorage, 860 P.2d 1214, 1222 n.3
(Alaska 1993) (Moore, C.J., dissenting).
4 A service area "provide[s] specialized services in a
borough . . . [that are] not provided on an areawide or
nonareawide basis in the borough, or a higher or different level
of service than that provided on an areawide or nonareawide
basis." AS 29.35.450(a).
5 As a home rule borough, the Lake & Peninsula Borough is
necessarily a first class borough. Alaska Const. art. X, 9;
see also AS 29.35.200(c) ("[A] first class borough may, on an
areawide basis, exercise a power not otherwise prohibited by law
if the power has been acquired in accordance with AS
29.35.300."); AS 29.35.200(a) ("A first class borough may
exercise by ordinance on a nonareawide basis any power not
otherwise prohibited by law.).
6 See Morehouse & Fischer, supra, at 42 ("The stated
purpose of preventing duplication of tax levying jurisdictions
and providing for a minimum of local government units was
directly responsible for [article X, section 5 of the Alaska
Constitution]."); see also 4 Proceedings of the Alaska
Constitutional Convention (PACC) 2714-15 (January 20, 1956)
(Delegate Rosswog stated that the main intention of section 5 was
"to try not to have a lot of separate little districts set up . .
. handling only one problem.") It is noteworthy that an
amendment to eliminate the option of "incorporation as a city"
from article X, section 5 was defeated by the convention. 4 PACC
2712-17 (January 20, 1956).
Indeed, the LBC has recognized that the provisions for
service areas in article X, section 5 would be "particularly
applicable to conditions in Alaska. Thus many areas which have
not yet attained a sufficient tax base or population to
incorporate as a city will be assisted." Local Boundary
Commission, First Report to the Second Session of the First
Alaska State Legislature, at I-7 to I-8 (1960).
7 Victor Fischer, an authority on Alaska government,
"advises that the 'minimum of local government units'
language . . . was aimed at avoiding special districts such as
health, school, and utilities districts having separate
jurisdiction or taxing authority. He notes no policy was stated
limiting the number of cities and boroughs." DCRA Report to the
Alaska Local Boundary Commission on the Proposed Yakutat Borough
Incorporation and Model Borough Boundaries for the Prince William
Sound, Yakutat, Cross Sound/Icy Strait Regions 50 (December 1991)
[hereinafter Yakutat Report]. Nonetheless, in City of Douglas v.
City and Borough of Juneau, 484 P.2d 1040 (Alaska 1971), we noted
that article X, section 1 "expresse[s] [a] constitutional policy
of minimizing the number of local government units." Id. at 1044
(emphasis added). In addition, the DCRA has concluded that "the
constitutional language 'minimum of local government units' does
admonish the LBC to guard against approving the creation of an
excessive number of local governments." Yakutat Report, supra at
52. We note that neither view supports the addition of
unnecessary government units.
8 Delegate Doogan referred to a city as a "combination of
service areas within a borough." 4 PACC 2652 (January 19, 1956).
9 "In an attempt to simplify local government and prevent
the overlapping of governmental functions,"consistent with the
purpose of article X, section 1, "the framers of the constitution
. . . considered establishing a single unit of local government
with the abolition of cities altogether." City of Homer v.
Gangel, 650 P.2d 396, 400 (Alaska 1982). Although advantageous,
the framers considered it a "concept whose time had not yet
come." Id. "Section 2 of Article X presents the compromise
solution: 'All local government powers shall be vested in
boroughs and cities. The state may delegate taxing powers to
organized boroughs and cities only.'" Id. (quoting Alaska
Const. art. X, 2).
10 We reject Keane's interpretation that incorporation of
a city is allowed only when it is theoretically impossible for a
borough to provide services. To accept such an interpretation
would render the LBC powerless to approve the incorporation of
any new city that is located within an organized borough because
all organized boroughs have the power to provide services. See
Alaska Const. art. X, 5; AS 29.35.450.
11 Former 19 AAC 10.020(a) was revised and renumbered in
1992. AAC Register 123. The new regulation does not mention
remoteness. It reads:
In accordance with AS 29.05.021(b),
a city may not incorporate as a city if
essential city services can be provided more
efficiently or more effectively by annexation
to an existing city, or can be provided more
efficiently or more effectively by an
existing organized borough.
19 AAC 10.010(b).
Keane argues that regardless of whether the LBC relied
on former 19 AAC 10.020(a), it does not govern this appeal.
Keane asserts that the court needs to follow the law in effect at
the time it renders its decision, not the law in effect at the
time of the administrative decision. However, AS 44.62.240
provides:
If a regulation adopted by an agency
under [the Administrative Procedure Act
(APA)] is primarily legislative, the
regulation has prospective effect only. A
regulation adopted under [the APA] that is
primarily an "interpretative regulation" has
retroactive effect only if the agency
adopting it has adopted no earlier
inconsistent regulation and has followed no
earlier course of conduct inconsistent with
the regulation. Silence or failure to follow
any course of conduct is considered earlier
inconsistent conduct.
The earlier regulation included a remoteness factor;
the new regulation does not include this factor and is
inconsistent with the prior regulation. Thus, regardless of
whether this court interprets 19 AAC 10.020(a) as a legislative
or interpretative regulation, its application is prospective
only.
12 The Borough has formulated and adopted a "Philosophy
and Mission Statement"favoring community self-determination and
limiting the size and scope of Borough government and services.
Minutes of Joint Borough Assembly/Planning Committee Meeting,
March 16, 1992.
13 Keane contends that, historically, the limitation on
municipal taxes applied to all taxes. Section 16-4-1 Alaska
Compiled Laws Annotated (ACLA) (1949) provided:
No incorporated town or municipality
shall levy any tax for any purpose in excess
of 3 per centum of the assessed valuation of
property within the town in any one year.
(Emphasis added). This language was amended in 1960 by a proviso
that the three percent limitation did not apply to taxes levied
for bond payments. Ch. 94, 1, SLA 1960, codified as AS
29.30.020. The general tax limitation was codified in 1962 as AS
29.30.010. It provided:
No incorporated town or municipality may
levy and tax for any purpose in excess of
three per cent of the assessed valuation of
property within the town in any one year.
(Emphasis added). Keane claims that the change of "any"to "and"
is a typographical error. There is no legislative history
available on this change. A staff member of the Legislative
Reference Library opines that in 1962 there was a conscious
effort to eliminate as many "any's"as possible from the code.
Keane contends that AS 29.30.010 was and remained a generic
limitation on all forms of municipal taxation. AS 29.30.010 was
recodified without substantial change as AS 29.53.050 (1972).
Ch. 118, 2, SLA 1972. AS 29.53.050 was amended by adding
subsection (b) in 1973. Ch. 1, 4, FSSLA 1973. AS 29.53.050(b)
expanded on the three percent limitation by providing two
alternative per capita tax limitations. Keane contends that the
valuation formula used in subsection (b)(2) was, for the first
time, a limit specifically restricted to property taxes, but that
(b)(1) refers to "any"taxes. AS 29.45.090 is the recodification
of AS 29.53.050 as amended in 1973. Ch. 74, 12, SLA 1985.
14 Keane contends the Incorporators' proposal will produce
revenues that will range from $6,679.25 per capita to $10,613.21
per capita. These figures are derived from the DCRA's estimate
of the revenues that will be produced from the proposed tax. The
DCRA estimates that the three percent tax will bring in
approximately $354,000 to $562,500 annually. Keane divides this
amount by 53 (the number of residents according to the 1990
census).
15 The Incorporators contend that the legality of the tax
is outside the scope of this review and that a challenge to the
allegedly illegal tax will not affect the incorporation process.
AS 29.45.710 allows incorporation of a second class city to be
dependent on the passage of a tax proposition.
16 Keane asserts that the language of AS 29.45.090(b)(1)
is clear and, therefore we should not look at extrinsic evidence.
However, this court has rejected such a mechanical application of
the plain meaning rule. Alaska Pub. Employees Ass'n v. City of
Fairbanks, 753 P.2d 725, 727 & n.5 (Alaska 1988). When
AS 29.45.090(b)(1) is read in context, it appears that it applies
to property, not sales, taxes.
The LBC correctly points out that the statutes
addressing municipal property taxation are separate from those
addressing sales taxes. However, the titles of chapters and
articles are not part of the general and permanent law of the
state. AS 01.05.005; see Ketchikan Retail Liquor Dealers Ass'n
v. State, Alcoholic Beverage Control Bd., 602 P.2d 434, 438
(1979), modified, 615 P.2d 1391 (Alaska 1980). Nevertheless, it
seems logical that the legislature would include a limitation on
sales taxes in the article specifically discussing them rather
than in the municipal property article.
17 We are not persuaded otherwise by Keane's argument that
the per capita limit could be administered by exempting
transactions after the taxpayer has paid $1,500 in other local
sales taxes. It would be the taxpayer's responsibility to claim
the exemption and to establish the amount of taxes already paid.
Keane contends that administrative difficulties are not grounds
for departing from the clear language of a statute. See Alaska
Pub. Employees Ass'n, 753 P.2d at 728 n.6 (holding that arguments
that a statute "'leads to too many problems,' is a matter for the
legislature, not this court.").
18 Keane also argues that because the former six percent
limitation on sales taxes has been repealed, AS 29.45.650(g); Ch.
159, 1, 2, SLA 1990, there will be no barrier to excessive
taxation through the device of a sales tax unless this court
construes AS 29.45.090(b)(1) as a limitation on sales taxes.
The LBC and Incorporators respond that (1) if AS 29.45.090(b)(1)
is interpreted to include sales taxes, then the lifting of the
six percent limitation would be meaningless, and (2) if AS
29.45.090(b)(1) and its predecessors applied to "all"taxes, then
they were in irreconcilable conflict with the prior six-percent
sales tax limitation. We agree with the LBC. The absence of a
limitation on sales taxes is a matter for legislative resolution.
See, e.g., Commonwealth Edison Co. v. Montana, 453 U.S. 609, 610
(1981) ("[T]he appropriate level or rate of taxation is
essentially a matter for legislative, and not judicial,
resolution.").
19 Because of the salmon industry, Pilot Point's
population explodes from approximately 80 persons in the winter
to more than 2,500 during the summer.
20 Originally the Incorporators had desired to use some of
the tax revenues for a permanent fund with dividends to be paid
to the citizens of Pilot Point. However, the city's
representative later suggested that the purpose of the permanent
fund would be to generate revenues for the city, not for its
residents. After much debate, the city council has passed an
"Investment Fund Reserve Account"that provides that 25% of any
sales and use taxes collected will be placed in a conservative
investment portfolio to provide revenue during poor fishing
seasons. There is also a provision for an "Educational Endowment
Fund." The ordinances passed by Pilot Point provide for other
funds that may be created as needed by resolution.
The Attorney General has opined that the Alaska
Constitution does not appear to prohibit municipalities from
dedicating public funds to such an account. 1988 Informal Op.
Att'y Gen. No. 663-88-0525 (July 29, 1988).
21 See, e.g., Keystone Servs., Inc. v. Alaska Transp.
Comm'n, 568 P.2d 952 (Alaska 1977). Keystone involved the
superior court's denial of a stay from a final order of the
Alaska Transportation Commission, pending appeal of the order to
the superior court. The Keystone court noted that the issue
presented was similar to the issue addressed in A.J. Industries,
Inc. v. Alaska Public Service Commission, 470 P.2d 537 (Alaska
1970), namely: "whether the superior court had properly denied a
preliminary injunction in connection with an order by another
regulatory agency of the state." Id. at 954. The court then
utilized the test articulated in A.J. Industries to determine
whether the issuance of the stay was proper. Id. at 954. The
A.J. Industries test requires consideration of the following
factors: (1) whether the plaintiff is faced with irreparable
harm, (2) whether the opposing party will be adequately
protected, and (3) whether the plaintiff has raised serious and
substantial questions going to the merits of the case. Id.
22 If the latter part of this standard comes into play,
the court is to use a "balance of hardships"approach. The court
will weigh "the harm that will be suffered by the plaintiff if an
injunction is not granted, against the harm that will be imposed
upon the defendant" if the injunction is granted. A.J.
Industries, 470 P.2d at 540.
23 Because we conclude that the superior court did not
abuse its discretion in denying the stay for the stated reasons,
we do not need to reach the issue of whether the Incorporators
would have been entitled to the equitable defense of laches had a
stay been issued.
24 Approximately 700 fishing vessels and 200 setnetters
participate in the Ugashik District fishery, and anticipated tax
revenues are $500,000 annually. Dividing the $500,000 annual tax
revenue by the 900 taxpayers yields an average tax burden of
$555.55.
25 Although we have never set a dollar amount that either
precludes or establishes public interest status, we opined in
Murphy v. City of Wrangell, 763 P.2d 229 (Alaska 1988), that it
might appear that a party lacked sufficient economic incentive to
bring a lawsuit when the damages are "in the low four figures."
Id. at 233. Nonetheless, we found substantial economic incentive
precluding public interest status because Murphy could have
recovered up to $25,000 plus punitive damages. Id.
26 Because we reverse the awards of attorney's fees, it is
unnecessary to discuss Keane's contention that the awards were
excessive.
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