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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Alliance of Concerned Taxpayers, Inc. v. Kenai Peninsula Borough (4/6/2012) sp-6659

Alliance of Concerned Taxpayers, Inc. v. Kenai Peninsula Borough (4/6/2012) sp-6659

        Notice:  This opinion is subject to 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, phone (907) 264-0608, fax (907) 264-0878, email 

        corrections@appellate.courts.state.ak.us. 



                 THE SUPREME COURT OF THE STATE OF ALASKA 



ALLIANCE OF CONCERNED                            ) 

TAXPAYERS, INC.,                                 )       Supreme Court Nos. S-13596/13883 

                                                 )       (Consolidated) 

                        Appellant,               ) 

                                                 )       Superior Court No. 3KN-06-01129 CI 

        v.                                       ) 

                                                 ) 

KENAI PENINSULA BOROUGH,                         )       O P I N I O N 

                                                 ) 

                        Appellee.                )       No. 6659 - April 6, 2012 

                                                 ) 

                                                 ) 

KENAI PENINSULA BOROUGH,                         ) 

                                                 ) 

                        Appellant,               ) 

                                                 ) 

        v.                                       ) 

                                                 ) 

ALLIANCE OF CONCERNED                            ) 

TAXPAYERS, INC.,                                 ) 

                                                 ) 

                        Appellee.                ) 

                                                 ) 



                Appeal from the Superior Court of the State of Alaska, Third 

                Judicial District, Kenai, Carl Bauman, Judge. 



                Appearances: Kenneth P. Jacobus, Kenneth P. Jacobus, P.C., 

                Anchorage, for Appellant/Appellee Alliance of Concerned 

                Taxpayers, Inc.      Colette G. Thompson, Borough Attorney, 

                and Holly B. Montague, Deputy Borough Attorney, Soldotna, 

                for Appellee/Appellant Kenai Peninsula Borough. 


----------------------- Page 2-----------------------

                Before: Carpeneti, Chief Justice, Fabe, Winfree, and Stowers, 

                Justices. [Christen, Justice, not participating.] 



                FABE, Justice. 



I.      INTRODUCTION 



                This   case   concerns   the   validity   of   two   2005   Kenai   Peninsula   Borough 



(Borough) ordinances: one enacted by the Borough Assembly and the second enacted 



by voter initiative.    The Borough Assembly enacted an ordinance in June 2005 that 



increased the sales tax rate from two percent to three percent.  Then in an October 2005 



election, Borough voters passed an initiative that required prior voter approval for all 



Borough capital projects with a total cost of more than one million dollars. 



                The Alliance for Concerned Taxpayers (ACT) challenged the sales tax 



increase and sought to enforce the capital projects voter approval requirement.                ACT 



argued that the sales tax increase was impermissible under state statute because it was 



enacted without ratification by Borough voters. The Borough responded that voters had 



authorized the increase both by approving a three-percent sales tax rate in 1964 and by 



defeating a post-enactment referendum to repeal the increase in 2006.  ACT also sought 



to enforce the capital project voter approval initiative.          The Borough contended that 



requiring prior voter approval for capital projects was unlawful because it delegated 



budgeting authority to the voters in violation of Alaska law and because it violated the 



Alaska Constitution's limits on local initiative power that forbid voters to make or repeal 



appropriations. 



                The superior court granted summary judgment to the Borough on both 



matters: on the sales tax issue, reasoning that the 1964 voter action allowed the increase 



and the 2006 referendum defeat ratified it; and on the capital projects voter approval 



                                                 -2-                                           6659
 


----------------------- Page 3-----------------------

issue, reasoning that Proposition 4 was an unconstitutional use of the initiative power to 



appropriate       a  public    asset.     ACT      appeals     the   merits    of  that   ruling    in   case 



number S-13596.         We affirm the superior court's grant of summary judgment on the 



sales tax issue and the capital project voter approval issue.               We conclude that the 1964 



voter authorization of a three-percent sales tax preserved the Borough's right to raise the 



rate   to   three   percent,   and   that   the   2006   defeat   of   the   referendum   to   repeal   the   rate 



increase   constituted   a   ratification   of   the   increase.   On   the   voter   approval   issue,   we 



conclude      that  allowing     voters    to  veto   any   capital   improvement       projects    of  over 



$1 million has the effect of diluting the Borough Assembly's exclusive control over the 



budget and is therefore an impermissible appropriation. 



                 The superior court awarded the Borough attorney's fees as the prevailing 



party   on   the   sales   tax   issue   but   determined   that   ACT   was   protected   from      paying 



attorney's   fees   on   the   capital   project   approval   issue   under   the   AS   09.60.010(c)(2) 



exception for constitutional litigants. The Borough cross-appeals the latter ruling in case 



number S-13883.  We conclude that ACT has not asserted a constitutional right and that 



it does not fall under the constitutional litigant exception to the attorney's fees rule.  We 



reverse     the  superior    court's   determination      that  ACT     is  protected    from    paying    an 



attorney's fee award to the Borough by AS 09.60.010(c)(2). 



II.     FACTS AND PROCEEDINGS 



        A.       Facts 



                 1.      The assembly-enacted sales tax increase 



                                                                                    1 

                 The Kenai Peninsula Borough, a second-class borough,  enacted Ordinance 



        1        A second-class borough is a "general law" municipality, meaning that it 



only has those powers conferred by statute (as opposed to a home rule borough, which 

may   exercise   all   legislative   powers   not   prohibited   by   law).       Alaska   Const.   art.   X, 

                                                                                            (continued...) 



                                                     -3-                                                 6659 


----------------------- Page 4-----------------------

No. 2005-09 (Ordinance 9) in June 2005.  Ordinance 9 increased the sales tax rate from 



two     percent    to  three   percent.     The     relevant    factual   background       shows     that   in 



October 1964 Borough voters authorized the Assembly to levy a sales tax not to exceed 



three percent, and that the Assembly established a three-percent sales tax in April 1965, 



though it reduced the rate to two percent in August 1975. 



                 In June 1985 the State enacted AS 29.45.670.               That statute provides:  "A 



new   sales   and   use   tax   or   an   increase   in   the   rate   of   levy   of   a   sales   tax   approved   by 



ordinance does not take effect until ratified by a majority of the voters at an election." 



                                                                            2 

The statute was a re-numbered modification of AS 29.53.420,  and it included a "savings 



clause" which directed that "[a] right or liability of a municipality existing on January 1, 



                                                                3 

1986, is not affected by the enactment of this Act." 



                 Twenty   years   later,   on   June   7,   2005,   the   Borough   Assembly   enacted 



Ordinance 9, increasing the sales tax rate from two to three percent.                  The increase was 



to be effective on October 1, 2005, but the effective date was later extended to January 1, 



         1(...continued) 



 11; AS 29.04.010; AS 29.04.020; AS 29.04.030.                     A second-class borough, like all 

municipalities,       has   the   general     power     to   levy   taxes    and    enforce     ordinances. 

AS   29.35.010.      A   second-class   borough   has   certain   additional   powers   conferred   by 

statute, some of which are mandatory and some of which are discretionary.                         See, e.g., 

AS 29.35.150-.180; AS 29.35.210. 



        2        AS 29.53.420 provided in relevant part: 



                 The assembly shall hold a referendum vote on the question of 

                 enacting a sales tax or increasing the rate of levy of sales 

                 taxes.  Borough sales tax propositions may be presented only 

                 once in any 12-month period. A sales tax proposition may be 

                 submitted to the voters at a regular or special election or at a 

                 general election of the state. 



        3        SLA 1985, ch. 74,  89. 



                                                     -4-                                               6659
 


----------------------- Page 5-----------------------

2006.4   On June 8, the day after Ordinance 9 was enacted, members of ACT and others 



filed three applications:   (1) an application for an initiative to set the sales tax rate at two 



percent; (2) an application for an initiative to require 60% voter approval at a regular 



election to approve any sales tax rate over two percent; and (3) an application for a 



referendum   to   repeal   Ordinance   9.      During   the   October   2005   election,   54.17%   of 



Borough   voters   approved   an   initiative   setting   the   sales   tax   rate   at   two   percent   and 



requiring a 60% supermajority voter approval to increase that rate. 



                One year later, in October 2006, the referendum to repeal Ordinance 9 was 



put before the voters.   The explanation of the repeal referendum in the voter's pamphlet 



stated that a "yes" vote would leave the sales tax at two percent, and a "no" vote would 



retain the ordinance and allow the sales tax to be increased to three percent.  A 57.31% 



majority   voted   to   retain   the   Ordinance.    On   April   3,   2007,   the   Assembly   enacted 



Ordinance No. 2007-07 to impose a three-percent sales tax effective January 1, 2008. 



                2.       Prior voter approval for capital projects 



                During   the   October   2005   election,   Borough   voters   approved   Initiative 



Ordinance No. 2005-01 (Proposition 4), which required prior voter approval for Borough 



capital improvement projects with a total cost of more than $1 million.                  As codified at 



Kenai Peninsula Borough Code (KPB) 05.04.110 (2005), Proposition 4 read: 



                (A.)      All capital improvement projects to be constructed or 

                acquired by the borough must be approved by the voters of 

                the borough at a regular or special election, before the project 

                is constructed or acquired if the total project cost is more than 

                $1,000,000, including architectural, engineering, inspection, 

                design, administration or any other cost.  This section applies 

                to all proposed capital improvement projects to be financed 



        4       Under      AS   29.26.180(b),      when    ACT     filed  a  referendum      petition   on 



Ordinance 9, the effective date of Ordinance 9 was suspended pending the results of the 

referendum election. 



                                                   -5-                                                6659 


----------------------- Page 6-----------------------

                with borough funds which are not the proceeds of a bond 

                issue   approved   by   voters.   This   section   does   not   apply   to 

                insurance   proceeds   covering   the   repair   or   replacement   of 

                damaged        borough     capital    improvements.          A   capital 

                improvement project that is proposed to be built in phases 

                shall   include   the   projected   cost   of   all   phases   as   the   total 

                project cost for purposes of this ordinance. 



                (B.)     When the total projected cost of a capital improvement 

                project as defined in this section is more than $1,000,000 it 

                must receive an affirmative vote by no less than 60 percent of 

                the affected voters voting at a borough election for such a 

                project to be approved.[5] 



                ACT alleged that by the time members of ACT filed a complaint against 



Proposition      4  in  December     2006,   the  Borough     had   approved     at   least   two  capital 



improvement projects costing more than $1 million without prior voter approval:                     the 



purchase of a CT scanner for South Peninsula Hospital, and replacement of the Spruce 

Creek bridge.6     ACT also alleged that the Borough intended to continue to undertake 



construction of capital projects without prior voter approval "unless restrained from 

doing so."7 



        5       Proposition 4 was modified in 2008 to exclude grant funds, private gifts, 



and hospital plant expansion and replacement funds.               It was modified again in 2010 to 

raise the expenditure threshold to $2,000,000 and to provide that the threshold would 

increase each year by $50,000.         KPB 05.04.110 (2010). 



        6       The Borough denies that either the CT scanner or the Spruce Creek bridge 



would have been the types of projects properly referred to voters under Proposition 4 

because the CT scanner was not a capital improvement and the Spruce Creek bridge 

replacement was an emergency. 



        7       In its November 1, 2008 motion for summary judgment, ACT alleged that 



eight    other   capital  projects    over   $1  million    had   been   approved     in  violation    of 

KPB 05.04.110 (2008). 



                                                  -6-                                             6659
 


----------------------- Page 7-----------------------

        B.	     Proceedings 



                ACT filed a complaint on December 26, 2006, challenging the sales tax 



increase and seeking to enforce the capital project voter approval requirement.                    ACT 



requested   declaratory   and   injunctive relief.       ACT   argued   the sales tax   increase   and 



alleged     failure   to  follow   Proposition     4   violated   due   process    under    the   Alaska 



Constitution   and   asked for an award of full costs and attorney's fees "in this public 



interest litigation."    The Borough answered on January 23, 2007, asserting affirmative 



defenses including that Proposition 4 violated the constitutional prohibition on making 



or repealing an appropriation through the initiative power.               The Borough also sought 



costs and attorney's fees. 



                 1.	    The     sales   tax   increase    (Ordinance       9)  summary       judgment 

                        proceedings 



                In   May   2007   the   parties   agreed   that   no   material   facts   were   in   dispute 



regarding the sales tax issue, and the superior court confirmed that the issues involved 



were   questions   of   law.    On   December   4,   2007,   ACT   filed   a   motion   for   summary 



judgment on the sales tax issue.  The Borough responded by filing its own cross-motion 



for summary judgment. 



                The superior court determined, in its December 31, 2007 decision, that 



Ordinance 9 was valid and the sales tax rate increase to three percent would be effective 



on   January   1,   2008.   The   decision   cited   our   direction   that   AS   29.45.650(a),   which 



authorizes boroughs to levy and collect a sales tax, must be interpreted "in favor of the 

broad   power   of   municipal   governments."8         Noting   that   Borough   voters   had   twice 



approved a sales tax rate of up to three percent at a general election, first in 1964 and 



again in 2006, the superior court concluded that "the voters' action in 1964 approving 



        8        City of St. Mary's v. St. Mary's Native Corp., 9 P.3d 1002, 1007 (Alaska 



2000). 



                                                   -7-	                                              6659 


----------------------- Page 8-----------------------

a sales tax rate up to three percent has continuing legal force and effect sufficient to 



authorize the increase to three percent in [Ordinance 9] notwithstanding AS 29.45.670." 



In addition, the superior court concluded that even without the 1964 approval the sales 



tax   rate increase to   three percent was valid because the October 2006   majority vote 



defeating the referendum on Ordinance 9 "satisfie[d] the voter approval requirement in 



AS 29.45.670."       The superior court granted summary judgment to the Borough. 



                2.	     The   capital   project   voter   approval   (Proposition   4)   summary 

                        judgment proceedings 



                After the parties and superior court agreed in March 2008 that only issues 



of law remained in the dispute over Proposition 4, ACT filed a motion for summary 



judgment on the capital projects approval issue on November 8, 2008.                     The Borough 



again responded with a cross-motion for summary judgment on the issue. 



                The   superior   court   issued   a   decision   on   March   10,   2009,   ruling   that 



Proposition   4   was   invalid   both   as   to   the   supermajority   requirement   and   the   voter 



approval requirement.  Regarding the supermajority issue, the superior court stated that 



"a mere majority cannot impose a supermajority obligation on other voters for approval 



of future Borough ordinances." But the superior court determined that the supermajority 



provision of the initiative ordinance was severable, and so went on to address the validity 



of the remainder of Proposition 4.          The superior court concluded that "[t]he initiative 



ordinance crafted by ACT restricts the appropriation power of the Borough Assembly 



for capital projects to prior approval by voting residents" and that "Article XI, section 7, 



of the Alaska Constitution makes it clear that the initiative power cannot be used to make 



or   repeal   appropriations."      The    superior   court   granted   summary      judgment     to  the 



Borough. 



                                                   -8-	                                           6659
 


----------------------- Page 9-----------------------

                3.      Attorney's fee proceedings 



                Final judgment on all issues relating to the sales tax and capital projects 



issues was entered on July 30, 2009.          On August 13, 2009, the Borough filed a motion 



for attorney's fees.    ACT opposed the motion, arguing that it is a "public interest non- 



profit corporation" and that it was "attempting to protect [citizens' and residents'] right 



of initiative - a right granted to them under the Constitution and the laws of the [S]tate 



of Alaska."      In a March 18, 2010 decision, the superior court found that the capital 



project   approval   issue   "implicat[ed]   federal   and    state   constitutional   concepts"   and 



concluded that ACT was protected pursuant to AS 09.60.010(c)(2) from having to pay 

an attorney's fee award on that issue.9         On March 31 the Borough filed a motion for 



reconsideration, arguing that the superior court failed to consider this court's rulings 



establishing that the municipal initiative power is statutory, not constitutional, and that 



to be protected by AS 09.60.010(c)(2) a litigant must fail to prevail in "asserting" a 



constitutional right rather than simply lose a case "where any constitutional concepts are 



implicated."    The superior court denied the Borough's motion for reconsideration on 



May 3, 2010, explaining that ACT "did raise state constitutional issues regarding the 



initiative restrictions on the capital projects and supermajority issues," and adding that 



the superior court had referenced numerous constitutional provisions in its decision on 



the capital project approval issue. 



                ACT appeals the superior court's July 30, 2009 final judgment denying 



ACT summary judgment on the merits of both the sales tax and capital project voter 



approval issues (case number S-13596). The Borough cross-appeals the superior court's 



        9       The superior court found that the sales tax issue "did not turn on federal or 



state   constitutional   issues"   and   awarded   the   Borough     costs   and   attorney's   fees   of 

$2,544.75 on that issue. 



                                                  -9-                                              6659 


----------------------- Page 10-----------------------

March 18, 2010 decision awarding ACT attorney's fees on the capital project approval 



issue (case number S-13883). 



III.    STANDARD OF REVIEW 



                We review grants of summary judgment de novo, "draw[ing] all factual 



inferences in favor of, and view[ing] the facts in the light most favorable to, the party 

against whom summary judgment was granted."10 



                Questions of law and questions of statutory interpretation are reviewed de 



novo, adopting the rule of law which is "most persuasive in light of precedent, reason, 

and policy."11    We interpret the meaning of a statute "according to reason, practicality, 



and common sense, considering the meaning of the statute's language, its legislative 

history, and its purpose."12  We use a "sliding-scale approach" when interpreting statutes, 



"under   which   the   clearer   the   statutory   language   is,   the   more   convincing   legislative 

history must be to justify another interpretation."13 



                When reviewing initiatives, we  "construe voter initiatives broadly so as to 



preserve them whenever possible.  However, initiatives touching upon the allocation of 



        10      Interior   Cabaret,   Hotel,   Rest.   &   Retailers   Ass'n   v.   Fairbanks   N.   Star 



Borough , 135 P.3d 1000, 1002 (Alaska 2006) (internal footnotes omitted). 



        11      Kohlhaas   v.   State,   Office   of   Lieutenant   Governor ,   147   P.3d   714,   717 



(Alaska 2006) (citing Alaska Action Ctr., Inc. v. Municipality of Anchorage , 84 P.3d 989, 

991 (Alaska 2004)). 



        12      Lot 04B & 5C, Block 83 Townsite v. Fairbanks N. Star Borough , 208 P.3d 



188, 191 (Alaska 2009) (internal quotation marks omitted). 



        13      Interior Cabaret , 135 P.3d at 1002. 



                                                 -10-                                            6659
 


----------------------- Page 11-----------------------

public revenues and assets require careful consideration because the constitutional right 

of direct legislation is limited by the Alaska Constitution."14 



IV.	    DISCUSSION 



        A.	     The Sales Tax Voter Ratification Requirement Is Satisfied By The 1964 

                Authorization Of A Three-Percent Sales Tax And The 2006 Defeat Of 

                The Repeal Referendum. 



                Alaska Statute 29.45.670 provides that "an increase in the rate of levy of 



a sales tax approved by ordinance does not take effect until ratified by a majority of the 



voters at an election."   ACT argues that Ordinance 9, which increased the sales tax rate 



from two to three percent without direct ratification by the voters, is contrary to the 



requirements of AS 29.45.670.           The Borough agrees voter ratification is required by 



AS     29.45.670,    but   argues   that  the   requirement     was   satisfied   by   both   the   1964 



authorization   of   a   sales   tax   rate   of   up   to   three   percent   and   the   2006   defeat   of   the 



referendum that would have repealed Ordinance 9.                ACT argues on appeal that neither 



of these events fulfilled the statutory requirement. 



                We     generally   "give   'liberal   construction    .   .   .   to  the  powers  of   local 

government units.' "15 In regard to municipalities' power to levy and collect taxes, we 



have cautioned that we will "not be quick to [infer] limitations on the taxing authority 

of a municipality where none are expressed."16           And in reviewing AS 28.45.670 in City 



        14      Anchorage Citizens for Taxi Reform v. Municipality of Anchorage , 151 P.3d 



418, 422 (Alaska 2006) (quoting Pullen v. Ulmer , 923 P.2d 54, 58 (Alaska 1996)). 



        15	     Interior Cabaret , 135 P.3d at 1002 (quoting Alaska Const. art. X,  1). 



        16      Bookey v. Kenai Peninsula Borough , 618 P.2d 567, 569 (Alaska 1980) 



(quoting Liberati v. Bristol Bay Borough , 584 P.2d 1115, 1121 (Alaska 1978)); see also 

Fannon v. Matanuska-Susitna Borough , 192 P.3d 982, 984 (Alaska 2008) (referencing 

a   superior   court's   comment   that   there   is   "a   long   history   of   Alaska   Supreme   Court 

                                                                                        (continued...) 



                                                  -11-	                                           6659
 


----------------------- Page 12-----------------------

of St. Mary's v. St. Mary's Native Corp., we observed that "Alaska's constitution and our 



prior case law require us to interpret AS 29.45.650(a) in favor of the broad power of 

municipal governments."17         Moreover, there is a "presumption that proceedings of the 



governing body of a municipality have been conducted in accordance with the law."18 



                ACT contends that the 1964 ordinance authorizing a sales tax rate of three 



percent did not satisfy the voter ratification requirement of AS 29.45.670 because the 



"rate of levy" referred to in the statutory text refers to the actual rate of levy in place at 

the time an increase is contemplated, not some earlier authorized rate of levy.19                    The 



statute   specifies,   however,   that   only   "an   increase   in   the   rate   of   levy   of   a   sales   tax 



approved by ordinance" must be submitted to voters for ratification.                In 1964 Borough 



voters approved a proposition that authorized the Borough "to the extent provided by law 



. . . to levy a . . . sales and use tax subject to such exemptions as the Assembly may 



prescribe and not exceeding three percent."           In 1975 the Borough Assembly found that 



        16(...continued) 



precedent broadly interpreting municipal taxation powers"). 



        17      9 P.3d 1002, 1007 (Alaska 2000);           AS 29.45.650(a). 



        18      McCormick v. City of Dillingham , 16 P.3d 735, 738 (Alaska 2001) (quoting 



Liberati , 584 P.2d at 1118). 



        19      ACT adds in its reply brief that the 1964 authorization dictated that the 



sales tax was to be used for school improvements and thus does not authorize a general 

sales tax levy of three percent.          But because ACT did not raise this argument in the 

superior court or in its opening brief, it has waived it.  See Braun v. Alaska Commercial 

Fishing   &   Agric.   Bank ,   816   P.2d   140,   145   (Alaska   1991)   ("Attention   to   the   issue 

[omitted from points on appeal and insufficiently briefed in an opening brief] in a reply 

brief does not resuscitate it.").      Moreover, it appears that the proceeds from the three- 

percent sales tax levy now in effect under KPB 05.18.100 are also to be used exclusively 

for   borough     school   purposes,     as  ACT    appeared     to  admit   at  oral  argument.     See 

KPB 05.18.110 (1990). 



                                                  -12-                                             6659
 


----------------------- Page 13-----------------------

"a   reduction   in   taxes   [could]   be   made   without   interferring   [sic]   with   any   essential 



services."  The Assembly therefore enacted an ordinance "lev[ying] a consumers' sales 



tax of two percent."       No voter action was taken regarding this reduction.              The public 



voted to allow the Borough to levy a sales tax of up to three percent and the Borough has 



adjusted that rate over the years without voter ratification. 



                Because the three-percent rate of levy in Ordinance 9 was not an increase 



from the rate previously "approved by ordinance," no additional voter ratification was 

required.20   In addition, the savings clause included in the same chapter as AS 29.45.670 



specifically preserves any "right" of the Borough as it existed in 1986.21  As the Borough 



points out, when AS 29.53.420, the precursor to AS 29.45.670, was enacted in 1972, the 



Borough sales tax rate of levy was three percent.           If the Borough had the right to impose 



        20      Similarly, ACT's argument that the "rate of levy of sales tax was actually 



set at 2% by ordinance several times" is unpersuasive because the rate of levy was also 

set at three percent by ordinance in 1965. 



        21      There is no question that municipalities and boroughs have the power to 



levy taxes.  See AS 29.35.010 ("All municipalities have the following general powers, 

subject to other provisions of law . . . (6) to levy a tax . . ."); AS 29.45.650(a) ("[A] 

borough may levy and collect a sales tax on sales, rents, and on services provided in the 

borough."); see also Stevens v. Matanuska-Susitna Borough , 146 P.3d 3, 7 (Alaska App. 

2006) ("All municipalities, including second-class boroughs, have general powers to, 

among   other   things,   establish   salaries   for   municipal   employees,   levy   taxes,   enforce 

ordinances, and acquire and dispose of property."); Bookey , 618 P.2d at 568 (Alaska 

1980) ("Boroughs and cities may levy and collect a sales tax.").                 In fact, this power is 

arguably "mandatory" for boroughs pursuant to AS 29.35.170.  See AS 29.35.170(a) ("A 

borough   shall   assess   and   collect   property,   sales,   and   use   taxes   that   are   levied   in   its 

boundaries, subject to AS 29.45."). 



                And this court has referred to a municipality's "right" to tax in at least two 

prior cases.   See Cool Homes, Inc. v. Fairbanks N. Star Borough, 860 P.2d 1248, 1253 

(Alaska 1993); Alascom, Inc. v. N. Slope Borough, Bd. of Equalization , 659 P.2d 1175, 

1180 (Alaska 1983). 



                                                  -13-                                             6659
 


----------------------- Page 14-----------------------

a sales tax at a rate of levy of three percent in 1972, there does not appear to be any 



reason that the savings clause would not have preserved that right. 



                California considered a similar issue in AB Cellular LA, LLC v. City of Los 

Angeles .22  The California court of appeals considered AB Cellular's contention that the 



City was required to submit an increased cell phone tax to voters for approval pursuant 



to a proposition giving voters the right to approve any increase of local tax before it goes 

into effect.23  The language of that proposition stated in part that "[n]o local government 



may impose, extend, or increase any general tax unless and until that tax is submitted to 

the electorate and approved by a majority vote."24          Initially, the court noted that a tax is 



not deemed "increased" under California's statutory definition if it "[i]mplements or 



collects a previously approved tax, . . . so long as the rate is not increased beyond the 

level previously approved."25        The California court then explained:         "[A] local taxing 



entity can enforce less of a local tax than is due under a voter-approved methodology, 



or a grandfathered methodology, and later enforce the full amount of the local tax due 



under that methodology without transgressing [the voter approval proposition] . . . .  The 



evil   to  be  counteracted     is  the  increase  of  local  taxes   beyond    what   was   formerly 

approved."26 



                We   agree   with   the   California   court's   reasoning   in  AB   Cellular .   The 



Borough voters expressly authorized the Borough to enact a sales tax of up to three 



        22      150 Cal. App. 4th 747 (Cal. App. 2007). 



        23      Id. at 752-53. 



        24      Id. at 760. 



        25      Id. 



        26      Id. at 763-64. 



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----------------------- Page 15-----------------------

percent, and the savings clause at AS 29.45.670 preserved the Borough's right to do so. 



Although the Borough subsequently reduced the tax rate to two percent, it did not need 



to seek further voter ratification to raise the tax rate to the amount approved by voters in 



       27 

1964. 



        B.	      Requiring Prior Voter Approval For All Capital Projects With A Cost 

                 Of   Over $1 Million Is An Impermissible Appropriation. 



                 Proposition 4 required prior voter approval for Borough capital projects 



with a total cost of more than $1 million.           It was approved by Borough voters in 2005. 



As it appeared codified at KPB 05.04.110 (2005), it provided: 



                 (A.)     All capital improvement projects to be constructed or 

                 acquired by the borough must be approved by the voters of 

                 the borough at a regular or special election, before the project 

                 is constructed or acquired if the total project cost is more than 

                 $1,000,000, including architectural, engineering, inspection, 

                 design, administration or any other cost. . . . 



                 (B.)     When the total projected cost of a capital improvement 

                project as defined in this section is more than $1,000,000 it 

                 must receive an affirmative vote by no less than 60 percent of 

                 the affected voters voting at a borough election for such a 

                project to be approved. 



The question presented here is whether Proposition 4 is an appropriation and therefore 



an impermissible initiative.        Alaska Statute 29.26.100 grants the power of lawmaking 



by initiative on the local level to municipal residents.            But the statute also restricts the 



        27       Because the 1964 authorization gave the Borough the authority to set the 



sales tax rate at up to three percent without need for further ratification, we do not need 

to reach the question of the 2006 defeat of the referendum to repeal Ordinance 9.  But 

we   note   that   voters   rejected   the   referendum   on   Ordinance   9's   repeal.    The   voter's 

pamphlet   states   that   if   the   referendum   failed,   "a   3   percent   sales   tax   would   become 

effective," so the voters' rejection of the referendum was an approval of the three-percent 

tax. 



                                                   -15-	                                             6659
 


----------------------- Page 16-----------------------

initiative power, directing that "[t]he powers of initiative and referendum . . . do not 



extend to matters restricted by art. XI,  7 of the state constitution."  Article XI, section 7 



of   the   Alaska   Constitution,   in   turn,   states   that   "[t]he   initiative   shall   not   be   used   to 



dedicate revenues, [or to] make or repeal appropriations." 



                 The superior court found that Proposition 4 was invalid because a voter 



approval   requirement   would   "restrict   the   budget   and   capital   program   appropriation 



power vested by the Legislature in the assembly," and that in light of the constitutional 



restrictions   on    the  initiative   power    "[i]mposing      a  prior  voting    resident   [approval] 



threshold by initiative would improperly restrict the power of the assembly to make 



appropriations."  ACT argues that the ordinance does not violate article XI, section 7 of 



the Alaska Constitution because it does not explicitly make or repeal an appropriation. 



ACT   distinguishes   Proposition   4   from   other   initiatives   "whose   primary   object   is   to 



require the outflow of government assets" because it "does not dispose of public assets 



nor does it involve the making of an appropriation of public assets." 



                 ACT argues that we have narrowly construed the constitutional prohibition 



on initiatives making or repealing an appropriation. The Borough contends that we have 



read the prohibition more broadly, to reach any initiative that restricts the government's 



authority     to  "allocate    funds    between     competing      needs,"    thereby    "arrest[ing]    the 



assembly's control over the budget." 



                 While the term "appropriation" is not defined in the statute or in the Alaska 



Constitution, we have held that an initiative "proposes to make an appropriation if it 



'would set aside a certain specified amount of money or property for a specific purpose 



or object in such a manner that is executable, mandatory, and reasonably definite with 



                                                    -16-                                              6659
 


----------------------- Page 17-----------------------

no further legislative action.' "28 We have described in detail the two-part inquiry to 



determine   whether   a   particular   initiative   is   an   improper   appropriation.  First,   "we 

determine whether the initiative deals with a public asset."29          There is no question that 



the municipal funds involved are public assets; no item is more clearly a public asset than 

public revenue.30 



                Second, "we determine whether the initiative would appropriate [the public] 



asset,"   which    involves   looking    to  the  "two  core   objectives"   of  the  constitutional 

limitation.31   The first objective is to prevent " 'give-away programs' that appeal to the 



self-interest of voters and endanger the state treasury" by allowing "rash, discriminatory, 

and   irresponsible"   appropriations.32     The   second,   related   objective   is   to   "preserv[e] 



legislative discretion by ensuring that the legislature, and only the legislature, retains 

control over the allocation of state assets among competing needs."33 



        28     Alaska Action Ctr., Inc. v. Municipality of Anchorage , 84 P.3d 989, 993 



(Alaska 2004) (quoting City of Fairbanks v. Fairbanks Convention & Visitors Bureau, 

818 P.2d 1153, 1157 (Alaska 1991)); see also Fairbanks Convention & Visitors Bureau , 

818 P.2d at 1156-57 (noting that "appropriation" may be defined more narrowly when 

considering whether an initiative or referendum repeals an appropriation than when it 

makes an appropriation). 



        29     Anchorage Citizens for Taxi Reform v. Municipality of Anchorage , 151 P.3d 



418, 422 (Alaska 2006). 



        30      See, e.g., Thomas v. Rosen, 569 P.2d 793, 796 (Alaska 1977) (defining 



"appropriation" as involving setting aside "public revenue"). 



        31     Anchorage Citizens for Taxi Reform , 151 P.3d at 423. 



        32     Id. (internal quotation marks omitted). 



        33     Id. at 423 (internal quotation marks omitted) (emphasis in original). 



                                                -17-                                           6659
 


----------------------- Page 18-----------------------

                 This second core objective was recognized in our decision in McAlpine v. 

University of Alaska.34      The initiative in McAlpine dictated the creation of a community 



college system separate from the University of Alaska and required the university to 

transfer a specified amount of property to the community college system.35                  We held that 



the   initiative   was   impermissible   not   because   it   was   a   "give-away"   of   resources   but 

because it "designate[d] the use of" state assets.36 



                 We have since clarified that the constitutional restriction on the initiative 



power      is  meant    to  retain   the   legislature's    control    of  the   "process"     of   making 

appropriations.37     We held that an initiative is unconstitutional when it causes the voters 



to "essentially usurp the legislature's resource allocation role."38               Finally, we recently 



explained that the "primary question" in assessing the second core objective "is whether 



the initiative narrows the legislature's range of freedom to make allocation decisions in 

a manner sufficient to render the initiative an appropriation."39                This case presents the 



question   whether   an   initiative   may   run   afoul   of   the   core   objectives   underlying   the 



initiative restrictions when it allocates public assets away from a particular purpose.  We 



hold that it can. 



        34       762 P.2d 81 (Alaska 1988).
 



        35       Id. at 87-88.
 



        36       Id. at 89.
 



        37       Staudenmaier v. Municipality of Anchorage, 139 P.3d 1259, 1263 (Alaska
 



2006) (quoting City of Fairbanks v. Fairbanks Convention & Visitors Bureau, 818 P.2d 

1153, 1156 (Alaska 1991)). 



        38       Id. 
 



        39
      Pebble Ltd. P'ship ex rel. Pebble Mine Corp. v. Parnell , 215 P.3d 1064, 



1075 (Alaska 2009) (citing Pullen v. Ulmer , 923 P.2d 54, 64 n.15 (Alaska 1996)). 



                                                    -18-                                              6659
 


----------------------- Page 19-----------------------

               We conclude that Proposition 4 sufficiently narrows the Borough's ability 



to make allocation decisions to render it an appropriation.      ACT relies heavily on our 

decision in City of Fairbanks v. Fairbanks Convention & Visitors Bureau.40         There, we 



upheld an initiative that repealed a city code designating a certain portion of bed tax 



revenues for purposes of tourism development, and instead deposited the revenues in a 

discretionary fund.41   We reasoned that the initiative did not reduce the city council's 



control    over  the   appropriations   process   but   rather increased   its   discretion  in 

appropriating funds.42  In addition, we explained that a measure was not an appropriation 



where it did "not reflect an action taken by the governing body after annual approval of 

the budget."43  ACT argues that there is no prohibition against allowing voters to approve 



a major project in advance of the budget approval. 



               Referring capital projects to voters, however, will almost invariably result 



in voters "vetoing" certain projects, at which point there is nothing the Borough can do 



to go forward with the project.    In ACT's view this means that the municipal funds are 



still available to be used at the Borough's discretion.     But the voters' ability to veto a 



capital project, even prior to budget approval, infringes on the assembly's ability to 



allocate resources among competing uses because there is nothing that the assembly can 



do to appropriate money for that project. 



               In Pullen v. Ulmer , we struck down an initiative that established a salmon 



harvest priority system as contravening both of the "core objectives" of the constitutional 



provision because it would lead to the "very real possibility that [some groups] will be 



       40      818 P.2d 1153 (Alaska 1991). 



       41     Id. at 1154-55. 



       42     Id. at 1157-58. 



       43     Id. at 1157. 



                                             -19-                                        6659
 


----------------------- Page 20-----------------------

excluded" from using the resource.44           Under our decision in Pullen , an initiative may 



make an impermissible appropriation not only when it designates public assets for some 



particular use, but also when it allocates those assets away from a particular group or 

purpose.45   Proposition 4 dictates the same result, although in a less direct fashion: While 



the ordinance itself does not allocate public assets, it requires that voters be permitted to 



allocate those resources.  Practically, when voters refuse to approve a capital project they 



allocate municipal funds away from the particular project, which interferes with the 



Borough's exclusive power to allocate funds among competing uses.  Proposition 4 thus 



violates the underlying purposes of the constitutional restrictions on municipal citizens' 

initiative power.46 



        C.	     ACT   Does   Not   Fall   Under   The   AS   09.60.010(c)(2)   Attorney's   Fee 

                Exception For Constitutional Litigants. 



                Alaska Statute 09.60.010(c)(2) provides that "[i]n a civil action or appeal 



concerning the establishment, protection, or enforcement of a right under the United 



States Constitution or the [Alaska] Constitution," a litigant "may not [be ordered] to pay 



the attorney fees of the opposing party devoted to claims concerning constitutional rights 



        44	     923 P.2d at 64. 



        45      See also 2 Proceedings of the Alaska Constitutional Convention (PACC) 



941 (Dec. 16, 1955) (discussing that the initiative should not be used to "try[] to nullify" 

"functions of the government that have to be carried on . . . by cutting off appropriations 

for them"). 



        46      The superior court also determined on summary judgment that the 60% 



supermajority voter approval requirement of Proposition 4 could not be imposed by 

initiative.  ACT did not identify this issue in its points on appeal, its statement of issues 

presented, or its discussion in its opening brief. ACT has therefore waived the issue. See 

Gunderson v. Univ. of Alaska, Fairbanks, 902 P.2d 323, 327 n.5 (Alaska 1995) (holding 

that   issue   not   included   in   points   on   appeal   is   waived).  Moreover,   it   appears   that 

KPB 05.04.110 was recently amended with the supermajority provision deleted. 



                                                  -20-	                                            6659
 


----------------------- Page 21-----------------------

if the claimant as plaintiff . . . did not prevail in asserting the right."47 The superior court 



determined that AS 09.60.010(c)(2) "preclude[d] a fee award in favor of [the Borough] 



against ACT on the capital spending issues." 



               The Borough argues in its cross-appeal that ACT is not entitled to statutory 



protection from an attorney's fee award for at least three reasons:         (1) the case did not 



involve the "protection of the right to enact local laws by initiative" because the initiative 



was, in fact, placed on the ballot and later challenged as contrary to   statute; (2) the 



initiative was local and thus based on statutory authority rather than the federal or state 



constitutions; and (3) any constitutional concepts implicated in the case were "collateral 



at best" and so ACT did not actually prevail on a constitutional claim.  ACT counters that 



the superior court's decision was correct because the Alaska Constitution protects the 



municipal     initiative  power    and   the  capital  project   approval   issue   did  concern 



constitutional rights. ACT also asks this court to conclude that "[a]ll municipal initiative 



cases should be treated as . . . arising under the Constitution of Alaska." 



               We will construe a statute "so that effect is given to all its provisions, so 

that no part will be inoperative or superfluous, void or insignificant."48          The text of 



AS 09.60.010(c)(2) provides that the protection against attorney's fees only applies if the 



action "concern[ed] the establishment, protection, or enforcement of a [constitutional] 

right."49 Thus, the correct inquiry is whether this case concerned a constitutional right. 



The only right at issue here was the right of municipal citizens to legislate by initiative. 



        47     This second provision is the corollary to section (c)(1), which provides that 



full reasonable attorney's fees and costs shall be awarded to a "claimant, who, as plaintiff 

. . . has prevailed in asserting the right." 



        48     2A NORMAN J. SINGER & J.D. SHAMBIE  SINGER , SUTHERLAND  STATUTES 



AND  STATUTORY CONSTRUCTION  46:6, at 231-42 (7th ed. 2007). 



        49     AS 09.60.010(c). 



                                              -21-                                          6659
 


----------------------- Page 22-----------------------

We have definitively concluded that the local initiative power is statutory rather than 

constitutional.50  In Griswold v. City of Homer, we determined that "because the initiative 



was   local,   and   not   statewide,   the   power   to   initiate   .   .   .   was   directly   derived   from 

AS 29.26.100," not the Alaska Constitution.51  And in Carmony v. McKechnie, we again 



addressed the origins of the municipal initiative power in the context of a public interest 



litigant.  We held that the plaintiff seeking review of a municipal ballot initiative did not 

qualify as a public interest litigant.52    Citing Griswold, we explained that because the case 



"did not involve a constitutional claim, but rather concerned the statutory power of the 



local initiative," the plaintiff "could not be protected by AS 09.60.010(c)(2) from an 

award of attorney's fees."53 



                 We reaffirm our earlier rulings that the local initiative power is statutory in 



origin.  Article X of the Alaska Constitution, which concerns local government, does not 



discuss   the   initiative   and   referendum   power.      Article   XI,   which   concerns   initiative 



powers, does not expressly reserve a local initiative right. Delegates to the Constitutional 



Convention did not indicate that article XI was intended to preserve a local initiative 



power.    Two delegates did discuss a local initiative power, but their exchange implied 



that local governments could include in the charter the referendum power or not, as they 



chose.    As delegate Victor   Fischer stated, "When [the people of a borough] adopt a 



charter, they will get together, just as we're doing here, and write the constitution or 



        50       Carmony v. McKechnie, 217 P.3d 818 (Alaska 2009); Griswold v. City of 



Homer , 186 P.3d 558 (Alaska 2008). 



        51       Griswold, 186 P.3d at 563. 



        52       Carmony, 217 P.3d at 823-24. 



        53      Id. at 824. 



                                                   -22-                                              6659
 


----------------------- Page 23-----------------------

charter for that borough.  And they can put in referendum or they can leave them out."54 



Had the delegates thought the constitution guaranteed a local initiative right, it would not 



have been necessary to discuss local choice. 



              Here, the constitutional limitations on the statutory right for local citizens 



to legislate by initiative are still incorporated into and imposed by AS 29.26.100, even 



though an analysis of the limitations necessitates an analysis of constitutional case law. 



We therefore hold that ACT did not raise issues concerning the establishment, protection, 



or enforcement of a right under the Alaska Constitution and therefore is not entitled to 



protection from an attorney's fee award under AS 09.60.010(c)(2). 



V.     CONCLUSION 



              For the foregoing reasons, we AFFIRM the decision of the superior court 



with respect to the grants of summary judgment in favor of the Borough on the merits 



of Ordinance 9 and Proposition 4.  We REVERSE the superior court's determination that 



ACT qualifies as a constitutional litigant under AS 09.60.010. 



       54     4 PACC 2677 (Jan. 19, 1956). 



                                            -23-                                         6659 

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