Town of Ball v. Rapides Parish Police Jury

¶7JOHN R. BROWN, Circuit Judge:

¶8The appellants1 before the Court today2 are the third largest and fastest *1052growing city in Rapides Parish, Louisiana and several of its residents. They complain that each of the incorporated municipalities in the Parish, from the smallest village to the largest city, receives a share of the revenues generated from a parish-wide sales tax — each, that is, except the Town of Ball. The citizens of Ball pay the tax like citizens of the other municipalities. The Town, however, gets no individual share of the resulting funds. Although, as we explain in some detail, the citizens of Ball suffer what would otherwise be regarded as inequitable discrimination we affirm denial of relief by a Federal Court. Applying a rational relationship test we find no basis for the claim of denial of the equal protection of the laws.

¶9The Parish’s Plan

¶10Since 1957 Louisiana has allowed certain of its parishes to levy and collect through their governing bodies a 1% tax on the retail sale and use of tangible personal property and upon the sale of services in the parish.3 The Rapides Parish Police Jury, as the governing body of Rapides Parish, proposed such a sales and use tax for that parish in 1967. The proposal specified the precise percentage distribution of the resulting tax revenues among the Parish Police Jury, the Parish School Board, and, importantly, each of the nine municipalities then incorporated in the Parish.4*1053Further, the proposition detailed the permissible uses of the revenue.5 On September 19, 1967, the proposal was approved in a referendum by a majority of the voting citizens of the Parish.

¶11Ball, as an incorporated Louisiana municipality, came into existence some five years later by proclamation of the Governor6 in June 1972. The tax distribution plan, however, was not drafted to account for a newly-incorporated municipality.7 Consequently, for now over a decade every incorporated city in the Parish has been directly receiving a portion of the Parish tax revenues except the Town of Ball.8 The citi*1054zens of Ball have forked over their share of fiscal fixings for 12 years, but when the annual economic entree is ready to be served the Town has never had a place at the Parish table.9

¶12In May 1976, the appellants brought suit in federal court against the eleven governmental bodies receiving funds under the plan. They asserted that the Parish plan transgressed the right of the Town’s residents to constitutional due process and equal protection.10 They sought, alternatively, the Town’s fair share of all revenue produced from the tax since the Town’s incorporation in 1972; its fair share in all current and future revenue produced from the tax; an injunction barring further collection of the tax so long as its distribution remained unconstitutional; and other general and equitable relief. In March 1977, the District Court held that the action was precluded by 28 U.S.C. § 1341 and dismissed the suit. This Court reversed that judgment in June 1979. See supra, n. 1.

¶13Less than four months later, the Parish Police Jury proposed a revision to the distribution scheme which would have included the Town as a direct recipient of the tax revenues.11 On December 8,1979, a majority of the voting Parish citizens rejected the new plan,12 and the distribution scheme now embodied in section 23-207, see supra, n. 3, remained unchanged.13

¶14Thereafter, the parties agreed to a determination by the Trial Judge on the merits based on stipulated facts and briefs. In September 1982, the District Court held for the Parish and the other defendants. It declined to interfere in “[a] political decision ... made by the citizens of Rapides Parish as to how the tax money should be distributed.” 14 It reasoned that

[T]he tax referendum distribution scheme did not discriminate in any manner against Ball at the time it was passed. If there is any discrimination it is due to the voluntary act of residents of the Town of Ball to incorporate — they created the class. Under Ball’s theory any time a few people decided to incorporate, the entire distribution scheme of the parish sales tax would come to a halt.

¶15The appellants noticed their appeal and reurge their constitutional claims to this Court.15 Before we reach the gist of their *1055complaint, however, we must address two arguments raised by the Parish.

¶16Is There a Right to a Refund?

¶17The Parish first argues that this is merely a suit to force it to refund to Ball the amount of sales tax previously and currently paid by citizens of the Town. It quite accurately points out that the Supreme Court “has repudiated the suggestion, whenever made, that the Constitution requires the benefits derived from the expenditure of public moneys to be apportioned to the burdens of the taxpayer.” 16

¶18This argument misreads the aim of the appellants. They seek only to be treated on equal terms with all other residents of incorporated municipalities in the Parish. Nonetheless, we do not dispute the Parish’s point. As the District Court correctly held, the appellants have no claim to “benefits due from amounts paid.” See supra, n. 16 and accompanying text. But, of course, that well-established principle does not resolve this case.

¶19Does Equal Protection Apply?

¶20More relevant is the Parish’s second and main argument in its defense. It asserts that the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution simply does not apply to a state’s actions or policies in distributing its tax revenues and thus has no bearing on section 23-207.17

¶21Although we find no controlling precedent on this issue,18 our answer to *1056whether a state need conform to the basic requirements of equal protection in distributing tax revenues is instead clearly indicated in the present and historical breadth of the Clause. But, as we point out, this is just the beginning: accepting the idea that equal protection applies, the real question then becomes: did the enacting body have a rational basis for the disputed action?

¶22The Clause was enacted in 1868 as part of the Fourteenth Amendment, which was directed at the destructive continuing racial discrimination after the Civil War. Like many of the fundamental provisions in the Constitution, the terms of equal protection were hardly limited and, at the same time, are less than instructive:19

No state shall make or enforce any law which shall ... deny to any person within its jurisdiction the equal protection of the laws.

¶23But it is clear that, at least on its face, the Clause has no exception for a state when it distributes its tax revenues.

¶24Initially, the Clause was narrowly construed.20 It was given a backseat to the Due Process Clause, which was also enacted in the Fourteenth Amendment. In fact equal protection was so disfavored that, during the heyday of “Lochnerizing,”21 it was called “the usual last resort of constitutional arguments.”22

¶25Despite its hesitant judicial adoption, however, equal protection is no longer an orphan of the Civil War Amendments. The Clause reaches far beyond its original aim of discriminations by race.23 Its language was not limited to racial considerations. Rather, its guarantee is both simple and wide — equal and uniform governmental classifications.24 Since, basically, all laws or rules in some way classify,25 it is *1057not surprising then that the Clause has become so central. Equal protection may even be “an aspect of [a] broader constitutional requirement that there must be a ‘rational’ connection between legislative means and ends.”26

¶26Obviously, the present scope of the Clause is indeed broad. But it is clear that the Supreme Court applied the requirements of equal protection to classifications in what can be termed “economic” legislation long before the emergence of modern equal protection. In fact, we find no instance where the Supreme Court has specifically held a particular form of fiscal lawmaking to be wholly outside the voluminous skirt of equal protection.27 In short, the Supreme Court finds nothing constitutionally sacred about economic lawmaking, and has reviewed the most common state economic regulations.28 Moreover, the Court has long examined tax assessment29 and exemption30 plans. Of crucial if not conclusive relevance, however, is that the Court has routinely subjected state revenue expenditure and financing programs to the requirements of equal protection.31 In these cases there is not the faintest intimation that while a state is restricted to uniformity and equality in deciding how and from whom it will raise state revenues it is loosed of this constitutional tether the moment it begins to spend the funds that it collects.

¶27*1058When equal protection was a constitutional plea of last resort, the Parish’s argument may have had merit. That era has surely passed. Equal protection has become a stout shield for protecting against the discriminatory bite of governmental classification. As the Supreme Court has stated, when a state distributes benefits unequally, the distinctions it makes are subject to the scrutiny of equal protection.32 Here, the benefits sought to be distributed happen to be tax revenues. We hold that in doling out its tax dollars, a state and its subordinate governing bodies stand in no constitutional twilight zone above the elemental commands of equal protection. The Constitution simply leaves no shadow in which such governments may hide, to disburse the public wealth with caprice bounded only by their institutional imaginations.33

¶28What Standard of Review?

¶29Concluding that equal protection applies to the distribution scheme of section 23-207 does not end our initial inquiry. We must next determine which of the levels of equal protection review is warranted here. At the risk of describing a well-mapped landscape, we set out a brief overview of those levels.

¶30Equal protection is now a three-tiered analysis.34 Normally, since governing requires a large amount of classifying, based often on subtle but real differences among classes of persons, the Supreme Court looks no farther than whether the distinctions have some “rational basis.” The formulation of this level of review has varied in the past.35 Basically, though, the Court presumes that the challenged statutory distinctions are constitutional and requires only that they be rationally related to a legitimate state interest.36

¶31*1059Some classifications, however, will almost never be based on legitimate governmental reasons. In those cases the Court employs a piercing “strict scrutiny.”37 Where the challenged law operates to the peculiar disadvantage of a “suspect” class or interferes with the exercise of a “fundamental” right,38 the Court accords the distinction no presumption of constitutionality. On the contrary, such a classification must further a compelling governmental interest39 which cannot be served by an alternative means less burdensome to the suspect class or fundamental right or interest.40

¶32Finally, the Court has fashioned an “intermediate” or “heightened” scrutiny to apply to legislative classifications which, while not facially invidious, nonetheless give rise to recurring constitutional difficulties.41 To pass muster, these classifica*1060tions must serve important governmental objectives and be substantially related to achievement of those objectives.42

¶33We find that section 23-207 or its impact does not create a suspect classification nor infringe rights or interests heretofore recognized as constitutionally fundamental. However, the scheme probably does discourage future incorporation in the Parish.43 It could be argued that, although a municipal corporation has no specific protections in the Constitution,44 joining with nearby state residents to create an incorporated governmental unit may involve personal freedoms which justify greater judicial scrutiny of state action limiting the ability to incorporate.45 However, because we hold the Parish plan satisfies the elemental equal protection requirement of rationality, we do not explore that contention.

¶34Any Rational Basis?

¶35The Supreme Court has long stressed that federal courts must refrain from assuming the role of “superlegislature to judge the wisdom or desirability of legislative policy determinations made in ... the local economic sphere.”46 In addition, it *1061has stated that “[l]egislatures have especially broad latitude in creating classifications and distinctions in tax statutes.”47

¶36In Taxation With Representation, the Court emphasized the deference due tax legislation:

The broad discretion as to classification possessed by a legislature in the field of taxation has long been recognized____ The passage of time has only served to underscore the wisdom of that recognition of the large area of discretion which is needed by a legislature in formulating sound tax policies. Traditionally classification has been a device for fitting tax programs to local needs and usages in order to achieve an equitable distribution of the tax burden. It has, because of this, been pointed out that in taxation, even more than in other fields, legislatures possess the greatest freedom in classification. Since the members of a legislature necessarily enjoy familiarity with local conditions which this Court cannot have, the presumption of constitutionality can be overcome only by the most explicit demonstration that a classification is a hostile and oppressive discrimination against particular persons and classes. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it.48

¶37Thus, the distribution scheme of section 23-207 comes to this Court girded with a strong presumption of constitutional acceptability. Such respect does not relegate equal protection review for rationality to a perfunctory rubber-stamping of legislative whim. The rational-basis standard “is not a toothless one.”49

¶38We have already stated that rational-basis review involves two inquiries. See supra, n. 36 and accompanying text. Thus, we must ask first whether the distribution schedule has a legitimate purpose. If it does, we must determine whether the Parish electorate could rationally believe that denying any share of the revenues to one of ten incorporated Parish cities furthers that purpose.

¶39Rational Basis Available

¶40Turning the table on the burden of one attacking the classification, the problem becomes clearer by looking at it in terms of whether the parish can show any “conceivable basis” for this apparent discrimination.

¶41Elastic as is this standard and as free as it is from any requirement that the ground be legislatively expressed50 in some formal *1062fashion, a number of conceivable grounds readily appear.

¶42One of the most conceivable is the likelihood that either the parish jury, or later on, the electorate, were of the view that the Town of Ball does not need the proceeds as much as do other communities. Additionally, denying the Town of Ball the right to share in the proceeds, assured to the parish jury the freedom to determine in the near or far future the relative needs for other communities, or causes, or both. Along similar lines, the parish jury could have felt that in this parish there was no need for an additional incorporated town and denial of sales tax proceeds would be an effective counterforce. Likewise, since at the time the parish scheme of allocation was proposed to and accepted by the electorate it was obviously a rational one, nothing makes it irrational simply because no contingency was made for new municipalities that might incorporate after the plan was in place. Treating the problem of the Town of Ball would also pose the problem of precedent to the parish jury, electorate, or both. If we afford relief to the Town of Ball, will we have to do likewise as each unincorporated village determines to incorporate? Quite conceivably the parish jury, electorate, or both, could reasonably conclude that such prospective chaos should be avoided.

¶43But whatever concerns might arise as to anyone or all of these legitimate “conceivables” the parish, the electorate, or both had a rational basis for avoiding the hazard that the safety and security of bonds that certain of the participating governmental subdivisions have funded on their shares of the tax revenues would be jeopardized.51 This reflects the legislative desires to ensure bond repayment in authorizing its parishes to levy the 1% sales and use tax.52

¶44*1063A prime objective of the allocation scheme is to secure the repayment of bonds. Consequently, if the participation of new municipal corporations in the scheme would “impair the rights of the holders from time to time of such bonds or ... would in any way jeopardize the prompt payment of principal thereof or interest thereon,”53 prohibiting the inclusion of such cities would clearly promote the desired aim.

¶45Whether the jeopardy to the security— and hence marketability — of funded bonds is real or whether subsequent legislative action54 may — from the standpoint of pure legality — have eliminated this hazard, the fact remains that there is ample basis for the reasonable conclusion that changing the allocation system to accommodate the Town of Ball might imperil the security of funded, issued bonds. There being a rational basis for this very conceivable concern on the part of the parish, the electorate, or both, there has been no denial of the equal protection of the law.

¶46AFFIRMED.