Alco Parking Corp. v. City of Pittsburgh

Opinion by

Judge Rogers,

The City of Pittsburgh in December 1969, pursuant to The Local Tax Enabling Act of December 31, 1965, P. L. 1257, 53 P.S. §6901, et seq., enacted an ordinance imposing upon all parking transactions of operators of nonresidential parking places a tax at the rate of twenty per centum of the gross receipts from such transactions received during the year commencing February 1, 1970 and thereafter. The city has imposed a tax identical except as to rate since the year 1962, the ordinance imposing such prior to the year 1965 having been imposed under the Act of June 25, 1947, P. L. 1145, 53 P.S. §6851, repealed and replaced by the Act of December 31, 1965, P. L. 1257. Under said ordinances the tax has been increased from ten per centum in 1962 to fifteen per centum in 1968 and by the ordinance here under attack to twenty per centum.

The appellants, parking lots operators, here sought in equity to restrain the city from enforcing the twenty *436per centum ordinance effective February 1, 1970. The court below, after trial on the merits, made an adjudication nisi dismissing the complaint and, after exceptions filed and dismissed, a decree that its adjudication nisi should be entered as a final decree. This appeal followed.

The subject of municipal taxes upon the gross receipts of parking lot transactions has been the subject of considerable litigation. All save one of the appellants’ contentions here have been conclusively decided against them, and we will not burden this opinion by a lengthy repetition of the reasoning of such definitive holdings.

The appellants suggest that under the equal protection clause of the Fourteenth Amendment of the United States Constitution and uniformity clause of Article VIII, Section one1 of the Constitution of Pennsylvania, their business may not be singled out for this tax. Their fire comes from two barrels: first, that there is no rational basis for distinguishing the commercial parking business from other businesses and second, that there is no such basis for distinction between nonresidential and residential parking. Unfortunately for the appellants the targets at which they aim have been long since removed from the range. In Philadelphia v. Samuels, 338 Pa. 321, 12 A. 2d 79 (1940), the Supreme Court upheld for the purpose of a tax identical to that in the instant case by implication a classification of parking lots as distinguished from other businesses and explicitly the classification of open parking lots as distinguished from closed parking lots, writing: “Another contention is that the ordinance is bad as discriminating against open parking lots in favor of closed *437garages engaged in parking. It has not been shown that the municipal legislature did not have reasonable ground for separating open parking lots from closed garages and placing them in separate classes for the purpose of taxing the parking transaction in the open lot. The growth of such parking in recent years is [a] matter of common knowledge of which the courts take notice. Generally, the operation of such lots involves more extensive use of sidewalk and street than is involved in the operation of the closed garage; land occupied by a closed garage is assessed at the value of land and buildings, whereas the open parking lot is assessed without buildings or buildings of negligible value. Other elements of the same general character suggest themselves. In such circumstances the court cannot say that the municipal authorities had not sufficient reason for the classification.” 338 Pa. at 326, 327, 12 A. 2d at 82. In McGillick v. City of Pittsburgh, 415 Pa. 581, 203 A. 2d 480 (1964), the Supreme Court affirmed per curiam an order of the Allegheny County Court specifically upholding the city’s classification, continued in the present ordinance, of commercial parking places as taxable and residential as not subject to levy. Finally, on this point, lacking better expression of our owm devising, we quote from Commonwealth v. Lafferty, 426 Pa. 541, 550, 233 A. 2d 256, 261 (1967), where the classification upheld was that of taxable nonpublic utilities as distinguished from excluded public utilities. Mr. Justice Eagen there wrote: “Further, it is in the context of the whole Sales and Use Tax statute that we must view the exclusion. Since this statute is one designed to raise revenue, the state need not justify any distinction drawn between the taxed and the non-taxed ‘so long as some other reasonable basis for treating the various classes differently exists. Where such distinction exists, the wisdom of the legislative policy *438of taxing one class and not another is not a matter for the courts.’ Commonwealth v. Life Assurance Co. of Pa., 419 Pa. 370, 377 n.11, 214 A. 2d 209, 215 n.11 (1965). As stated in Commonwealth v. Life Assurance Co. of Pa., Id. at 376-377, 214 A. 2d at 214: ‘By necessity a wide discretion must be conceded to the Legislature in the classification of various businesses or occupations for purposes of taxation. . . .’” As further stated in Commonwealth v. Life Assurance Co. of Pa., 419 Pa. 370, 376, 379, 214 A. 2d 209, 214, 215 (1965) :

“The only constitutional limitation placed upon the power of the Legislature to distinguish between various entities for purposes of taxation is that their basis for doing so be reasonable. . . .

“And where such distinction rests upon differences recognized and acted upon by the business world, it is not within the province of the courts to intrude. ... So long as the classification is neither capricious nor arbitrary, there is no denial of the equal protection of the law. . . The distinction here between parking lots and other businesses and between commercial and residential parking lots, as has been held in Philadelphia v. Samuels, supra, and McGillick v. City of Pittsburgh, supra, satisfy constitutional requirements.

Within the general ambit of equal protection and uniformity, the appellants make two other arguments, one based on what this tax might be named and the other on the asserted inaccuracy of a statement in the preamble of the ordinance concerning the characteristics of the appellants’ enterprises. As to the first, appellant Meyers Brothers contends that because the city at some time in the course of the litigation called the tax a license tax, it is such and under settled principles may not exceed the cost of regulation. As clearly declared in Philadelphia v. Samuels, supra, the measure *439ill question is an excise tax imposed upon the transaction of parking a motor vehicle. It is a revenue measure by terms of the ordinance and by the Act of Assembly by which it was authorized. In Philadelphia Tax Review Board v. Smith, Kline and French Laboratories, 437 Pa. 197, 262 A. 2d 135 (1970), the Supreme Court held that a tax imposed by the City specifically denominated a “License Tax” was nevertheless a revenue measure and not preempted by a state license and regulatory measure.2

The appellants’ argument that the preamble of the ordinance here somehow supports their view that the classification of their enterprises for the tax is unreasonable is difficult to follow because it stems from a misreading of the ordinance. The preamble in question states: “Nonresidential parking places, by reason of the frequency of their use at various hours of the day, their location, their relationship to traffic congestion and other characteristics, present problems requiring municipal services and affect public interest, differently from parking places accessory to the use and occupancy of residences. ...” The appellants say that this seeks to justify the classification of parking lots on the basis that such lots cause congestion and therefore require municipal services, and that because such lots *440in fact alleviate congestion and reduce municipal concern for traffic congestion, the asserted basis for classification disappears. But the quoted portion of the ordinance, as we read it, does not seek to justify the distinction between parking lots and other businesses but between nonresidential and residential lots. Nor does it suggest that parking lots cause congestion; rather, it says that their activities are related to congestion and require municipal services.

We have attempted here to treat all of appellants’ arguments based upon alleged want of equal protection and lack of uniformity. We have carefully considered their thorough briefs and have concluded that the ordinance satisfies these constitutional requirements.

The appellants further vigorously contend that rate of tax here imposed is so high as to result in the taking of their property without due process of law. A tax, they say, which is confiscatory is unconstitutional. Despite the city’s argument and the finding of the court below to the contrary, this tax is indeed imposed at an unreasonable rate. The undisputed evidence on this record is as follows:

1. There are about 24,300 parking spaces in the City of Pittsburgh. Of this number 6100 are served by a public parking authority, subjected to this tax, but exempt from other taxes including those on real estate. Of the balance of about 18,000 spaces, the plaintiffs here owed or operated about 17,000.

2. Based upon six months’ operations and a sound statistical projection for the balance of the year 1970 with expenses computed at 1969 rates, that portion of the industry represented by appellants, would, during the year 1970, earn gross revenues of over $8,000,000, pay $1,600,000 on account of this tax and sustain a loss of $270,000. Of the fourteen appellant enterprises nine would sustain losses and of the others the one *441showing the largest profit would earn an amount equal to only 2.9% of its gross revenues.3

3. The appellants are unable to pass the tax on to their customers, not only because customers cannot and will not pay higher rates but also because the appellants are in competition with a public authority which, exempt from other taxes, can charge less.

4. The rate of tax was increased from fifteen per centum effective in 1969 to twenty per centum, although in 1969 the appellants lost $26,000 on gross revenues of about $7,700,000 on which they paid a tax under this ordinance of more than $1,400,000.

The problem, however, is that there is no constitutional prohibition of taxation at unreasonable or even confiscatory rates. The appellants’ argument upon this point rests primarily upon the following statement by Mr. Justice Linn in Philadelphia v. Samuels, 338 Pa. at 327, 12 A. 2d at 82: “Little need be said on the point that the ordinance is confiscatory. The state expressly authorized the city to levy taxes for general revenue purposes and the ordinance so provides. There is nothing in the record to show that the rate imposed by the ordinance is so high as to result in taking property without due process. The probability is that, in effect, the tax will be passed on to patrons, but if it is not, and if an occasional operator cannot afford to continue in business and pay the tax, it may be unfortunate but will not render the ordinance invalid.” At most this statement supplies no more than an implication that an ordinance which makes it impossible for more than an occasional operator to remain in business might be in*442valid. On the other hand, language used by the Supreme Court in Philadelphia v. Eglin’s Garages, Inc., 342 Pa. 142, 144, 19 A. 2d 845 (1941), one year later indicates second thoughts concerning the quoted portions of the Samuels case: “Proof of the averments of loss . . . would not establish confiscation even if relevant. ... In my view, therefore, the averments of loss referred to are not sufficient to sustain the charge of confiscation assumed to be relevant.” (Emphasis supplied.) It is apparent to us that our Supreme Court had in the interval considered the question in the light of very clear principle that a tax for revenue purposes is subject to no constitutional limitation upon its amount. Hence, writers and the courts have declared:

“The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. .. .” Cooley, Constitutional Limitations, Eighth Ed. (1927) Vol. II, C. XIV, page 986.

“[T]he power of taxing the people and their j>roperty is essential to the very existence of government, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the government may choose to carry it. The only security against the abuse of this power is found in the structure of the government itself. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation.

“The people of a state, therefore, give to their government a right of taxing themselves and their property; and as the exigencies of government cannot be limited, they prescribe no limits to the exercise of this right, resting confidently on the interest of the legisla*443tor, and on the influence of the constituents over their representative, to guard them against its abuse.” Chief Justice John Marshall in McCulloch v. Maryland, 4 Wheat. 316, 428, 17 S. Ct. 579, 607 (1819).

“Except in rare and special instances, the due process of law clause contained in the Fifth Amendment is not a limitation upon the taxing power conferred upon Congress by the Constitution. Brushaber v. Union Pac. R. R, 240 U.S. 1, 24, 36 S. Ct. 236, 60 L. Ed. 493. And no reason exists for applying a different rule against a state in the case of the Fourteenth Amendment. French v. Barber Asphalt Paving Co., 181 U.S. 324, 329, 21 S. Ct. 625, 45 L. Ed. 879; Heiner v. Donnan, 285 U.S. 312, 326, 52 S. Ct. 358, 76 L. Ed. 772. That clause is applicable to a taxing statute such as the one here assailed only if the act be so arbitrary as to compel the conclusion that it does not involve an exertion of the taxing power, but constitutes, in substance and effect, the direct exertion of a different and forbidden power, as, for example, the confiscation of property. Compare McCulloch v. Maryland, 4 Wheat. 316, 423, 4 L. Ed. 579; Child Labor Tax Case, 259 U.S. 20, 37, et seq., 42 S. Ct. 449, 66 L. Ed. 817, 21 A.L.R. 1432; McCray v. United States, 195 U.S. 27, 60, 24 S. Ct. 769, 49 L. Ed. 78, 1 Ann. Cas. 561; Brushaber v. Union Pac. R. R., supra, 240 U.S. 24, 25, 36 S. Ct. 236, 60 L. Ed. 493, L.R.A. 1917D, 414, Ann. Cas. 1917B, 713; Henderson Bridge Co. v. Henderson, 173 U.S. 592, 614, 615, 19 S. Ct. 553, 43 L. Ed. 823; Nichols v. Coolidge, 274 U.S. 531, 542, 47 S. Ct. 710, 71 L. Ed. 1184, 52 A.L.R. 1081. Collateral purposes or motives of a Legislature in levying a tax of a kind within the reach of its lawful power are matters beyond the scope of judicial inquiry. McCray v. United States, supra, 195 U.S. 56-59, 24 S. Ct. 769, 49 L. Ed. 78, 1 Ann. Cas. 561. Nor may a tax within the lawful power of a state be *444judicially stricken down under the due process clause simply because its enforcement may or will result in restricting or even destroying particular occupations or businesses (Citizens’ Sav. & Loan Association v. Topeka, 20 Wall. 655, 663, 664, 22 L. Ed. 455; McCray v. United States, supra, 195 U.S. 56-58, 24 S. Ct. 169, 49 L. Ed. 78, 1 Ann. Cas. 561, and authorities cited; Alaska Fish Co. v. Smith, 255 U.S. 44, 48, 49, 41 S. Ct. 219, 65 L. Ed. 489; Child Labor Tax Case, supra, 259 U.S. 38, 40-43, 42 S. Ct. 449, 66 L. Ed. 817, 21 A.L.R. 1432), unless, indeed, as already indicated, its necessary interpretation and effect be such as plainly to demonstrate that the form of taxation was adopted as a mere disguise, under which there was exercised, in reality, another and different power denied by the Federal Constitution to the state. The present case does not furnish such a demonstration.” Justice Sutherland in A. Magnano Co. v. Hamilton, 292 U.S. 40, 44, 45, 54 S. Ct. 599, 601, 602 (1934). Instructive early Pennsylvania cases to the same effect are Kirby v. Shaw, 19 Pa. 258 (1852) ; Sharpless v. Mayor of Philadelphia, 21 Pa. 147 (1853) ; Washington Avenue, 69 Pa. 352 (1871).

We have examined the cases cited by the appellants as authority for the power of a court to strike down taxing ordinances found to be excessive4 and find them inappropriate to this case. In each the exorbitant exaction was in the form of a true municipal charge for conducting an otherwise lawful business and in each there were overtones of either subservience to a private purpose or lack of uniformity or attempt to regulate. No such conditions exist with regard to this general *445revenue measure. In any event, there are no similar Pennsylvania cases.

Having concluded that there is no constitutional infirmity suffered by the ordinance before us based upon the rate of taxation, it remains for us to consider whether The Local Tax Enabling Act contains a limitation upon the city’s power to impose a tax in the unreasonable amount here levied. Section 5 of the Act, 53 P.S. §6905 i>rovides that: “Any tax imposed under this act shall not be subject to any limitations under existing laws as to rate or amount or as to the necessity of securing court approval or as to budgetary requirements.” However, Section 6, 53 P.S. §6906, authorizes taxpayers to appeal from the taxing ordinance or resolution within thirty days of its enactment and imposes upon the court the duty “. . . to declwre the ordinance and the tax imposed thereby to be valid unless it concludes that the ordinance is unlawful or finds that the tax imposed is excessive or unreasonable; but the court shall not interfere with the reasonable discretion of the legislative body in selecting the subjects or fixing the rates of tax. The cou/rl may declare invalid all or (my portion of the ordinance or of the tax imposed, or may reduce the rates of tax.” (Emphasis supplied.) We take these two sections together to mean that the legislative body is not, except as the Act itself provides limitations on the amounts of certain levies, limited as to the rate it may impose in the first instance; but that, if an appeal is filed pursuant to Section 6, the court may examine into the reasonableness of the tax and order a reduction if it finds that the legislative body has abused a reasonable discretion in fixing the rate. We must also conclude that while the Legislature intended that there should be an opportunity to obtain a judicial determination of the reasonableness of the rate, it intended to foreclose such examination unless made in *446the timely fashion it prescribed. Thus, the Legislature wisely placed a check on the possible excesses of municipalities at the same time ensuring them of the revenue sought in the absence of an attack promptly made. No taxpayer appeal under Section 6 was here taken;5 why, we are not told.

For the foregoing reasons we affirm the order of the court below.

The appellants, Alco Parking Corp., et al., refer, we assume by inadvertence, to Art. IX, Section 1, the place where the so-called uniformity clause was, prior to 1968, located.

The appellants also contend that they are subjected to double taxation because the city levies a six-mill tax on gross receipts upon all businesses in the city, also pursuant to The Local Tax Enabling Act. There is no constitutional prohibition of double taxation, (Puntureri v. Pittsburgh School District, 359 Pa. 596, 60 A. 2d 42 (1948)), provided uniformity is satisfied. Plumly v. Philadelphia School District, 182 Pa. Superior Ct. 122, 126 A. 2d 768 (1956). Not only is the general business tax imposed on the pi'ivilege of engaging in business in the city and the tax here is on the parking transaction, a different subject; but uniformity is, as we have herein held, supplied by the imposition of the same taxes upon all commercial parking establishments.

Omitted from these figures are four operations. The record is clear that one of those omitted would have shown a sizable loss due to unusual factors. The other three were management operations for which the appellants received a fixed fee and the owners took losses.

Hoffman v. Borough of Neptune City, 137 N.J. L. 485, 60 A. 2d 798 (1948) ; Fetter v. City of Richmond, 346 Mo. 431, 142 S.W. 2d 6 (194 ) ; Martin v. Nocero Ice Cream Co., 269 Ky. 151, 106 S.W. 2d 64 (1937) ; Peel v. Dummit, 308 Ky. 399, 214 S.W. 2d 605 (1948).

The appellants could certainly have mustered the twenty-five aggrieved taxpayers necessary for such an appeal. Further, in this connection, we believe that the reenactment of an ordinance required by Section 4 of The Local Tax Enabling Act to be advertised because of a change of rate is a “tax levied for the first time” from which a Section 6 appeal might be taken. Compare Glassmoyer v. Owen J. Roberts School District, 18 Ches. Co. Rep. 85 (1970).