City of Portland v. Smith

*194GRABER, J.,

dissenting.

I dissent. The majority reads the Article XI, section llb(3)(a), exception from the property tax limitation to apply only when a specific provision of the Oregon Constitution authorizes bonded indebtedness. It then reads Article IX, section lc, not to authorize bonded indebtedness. I disagree with both points. In my view, the exception applies when a specific provision of the constitution authorizes the imposition of taxes to pay the principal and interest on bonded indebtedness; and the majority agrees that Article IX, section lc, at least does that. Moreover, in my view, Article IX, section lc, authorizes bonded indebtedness as well.

A. INTERPRETATION OF SUBSECTION (3)(a) OF MEASURE 5

Article XI, section lib, of the Oregon Constitution (Measure 5) limits the taxes that may be imposed on any property by limiting tax rates. Article XI, section llb(3)(a) contains the following exception:

“(3) The limitations of subsection (1) of this section apply to all taxes imposed on property or property ownership except[:]
* ‘ (a) Taxes imposed to pay the principal and interest on bonded indebtedness authorized by a specific provision of this Constitution[.]”

That provision is ambiguous. The phrase “authorized by a specific provision of this Constitution” could modify the antecedent noun, “bonded indebtedness,” asthemajority holds, or it could modify the antecedent phrase, “[t]axes *195imposed to pay the principal and interest on bonded indebtedness.” Although both readings are plausible, the latter reading is more correct.

First, the parallel structure between the main part of subsection (3) and paragraph (a) suggests the latter reading. Subsection (3) states that Measure 5’s limitations apply to “all taxes imposed” except those delineated in paragraphs (a) and (b). Paragraph (a) tracks the same wording, excepting “[t]axes imposed to” meet certain specified purposes. The grammatical aim of subsection (3) and paragraph (a) is to describe taxes.

Second, the overriding purpose of Measure 5 is to limit the taxes that may be imposed on any property by limiting tax rates. Coalition for Equit. School Fund. v. State of Oregon, 311 Or 300, 310, 811 P2d 116 (1991). The focus of all of Measure 5 is on taxes. Reading subsection (3)(a) to identify a particular kind of tax as excepted suggests that the phrase “authorized by a specific provision of this Constitution” relates to “[t]axes imposed to” fulfill the specified purposes.

For those reasons, the inquiry should be whether a specific provision of the Oregon Constitution authorizes the imposition of taxes to pay the principal and interest on bonded indebtedness.

B. INTERPRETATION OF ARTICLE IX, SECTION lc

1. Authorizing Taxes Imposed to Pay the Principal and Interest on Bonded Indebtedness.

Article IX, section lc, of the Oregon Constitution (the urban renewal provision) provides:

“The Legislative Assembly may provide that the ad val-orem taxes levied by any taxing unit, in which is located all or part of an area included in a redevelopment or urban renewal project, may be divided so that the taxes levied against any increase in the true cash value, as defined by law, of property in such area obtaining after the effective date of the ordinance or resolution approving the redevelopment or urban renewal plan for such area, shall be used to pay any indebtedness incurred for the redevelopment or urban renewal *196project. The legislature may enact such laws as may be necessary to carry out the purposes of this section.”

The majority holds that “[t]he 1960 amendment [the urban renewal provision] empowers or sanctions a particular form of repayment for debt [tax increment financing], even including by implication bonded debt.” 314 Or at 192. That form of repayment, as the majority correctly explains, is by imposing a tax. Id. at 188 n 2. Under the urban renewal provision, if implemented by legislation, ad valorem taxes levied by any taxing unit containing an urban renewal project may be divided so that the taxes levied against any increase in the true cash value of property “shall be used to pay any indebtedness incurred” for the project. Article IX, § lc (emphasis added). In short, the urban renewal provision relates directly to the subject of tax increment financing to pay for all urban renewal indebtedness, including bonded indebtedness, and the urban renewal provision expressly authorizes the legislature to enact the necessary laws to carry out the purposes of tax increment financing. The urban renewal provision qualifies as a specific provision of the Oregon Constitution that authorizes taxes imposed to pay the principal and interest on bonded indebtedness.

2. Authorizing Bonded Indebtedness.

Even accepting everything that the majority says in Parts A and B of its opinion, it reaches the wrong conclusion. When adopted, the urban renewal provision in fact authorized a form of bonded indebtedness that was not previously used. Stated differently, the voters in 1960 enacted a constitutional amendment to empower or sanction the incurring of a particular form of bonded indebtedness secured by a pledge of property tax increment revenues.

The urban renewal provision expressly authorizes the legislature to enact laws to provide for allocation of urban renewal property tax increment revenues that ‘ ‘shall’ ’ secure the repayment of any urban renewal indebtedness, which term, by definition, includes urban renewal bonded indebtedness. The urban renewal provision thereby expressly authorizes the legislature to enact laws so that localities may issue revenue bonds. The meaning and effect of the express terms of the urban renewal provision are to empower or sanction *197the incurring of indebtedness, specifically the incurring of bonded indebtedness secured by property tax increment revenues (i.e., revenue bonds).1

Indeed, the voters believed that, by enacting the urban renewal provision, they would thereby permit the legislature to enact laws authorizing localities both to engage in tax increment allocation of revenues and to incur debt, including bonded debt, secured by property tax increment revenues. The measure was viewed as a means to “provide the tools to help municipalities to raise their one-third of the cost” of urban renewal projects, approving a method for local governments to raise money for these projects. 314 Or at 190 (emphasis in majority). It is clear, not only that the voters believed that the constitutional amendment was necessary to permit the incurring of bonded indebtedness secured by property tax increment revenues (issuance of revenue bonds), but also that the amendment itself facially purports to authorize the legislature to enact such laws as may be necessary toward that end.

I am aware that the urban renewal provision does not state either that “urban renewal agencies may issue bonds and incur bonded debt” or that “urban renewal agencies may issue bonds and incur bonded debt secured by tax increment financing revenues.” 314 Or at 192. The majority considers this lack of an express facial reference to bonds to be critical. Yet, no one disputes that bonds are the principal form of urban renewal debt. The express term, “any indebtedness incurred for the redevelopment or urban renewal project” *198(Art IX, § lc (emphasis added)), includes its principal component, urban renewal bonds. The majority’s position is that that is not explicit enough, as if a provision authorizing the legislature to ‘ ‘enact such laws as may be necessary to buy any animals with black and white stripes” would not be a provision authorizing the state to own zebras, because it described the intermediate step of purchase and included other black and white striped animals. I am not convinced. The very purpose of Article IX, section lc, is to authorize local utilization of tax increment bonds.

I am also aware that general statutory authority for urban renewal agencies to issue bonds and incur bonded debt preceded the constitutional amendment by three years. 314 Or at 191. It was, however, unclear whether the 1957 general statutory authority to incur debt extended to the issuance of bonds secured by a pledge of property tax increment revenues. The prior existence of general statutory authority in no way precludes the people from enacting a constitutional provision, the purpose of which is to empower or sanction the specific practice of offering bonds. The majority would, inappropriately, add two requirements to subsection (3) (a) of Measure 5, by reading it to except taxes imposed to pay the principal and interest on bonded indebtedness if a specific provision of the constitution authorizes every form o/bonded indebtedness for a given purpose and authorizes bonded indebtedness for that purpose for the first time. Neither requirement appears in Measure 5.

Finally, the majority relies on its view as to what the voters likely would have thought about the issue before us. 314 Or at 193. The majority cites no authority for its view. It bears noting that there is no indication whatever in the text or history of Measure 5 that its effect on taxes imposed to repay urban renewal debt was ever considered, one way or the other, by the sponsors of the measure.

It is just as likely that the voters who adopted Measure 5 did not intend to enact a system that could force a locality to have insufficient funds to repay bonds that were secured by a pledge of dedicated tax revenues and did not intend to cripple the 30-year program of tax increment bond financing that the voters had adopted in 1960. Measure 5 and the urban renewal provision share some common objectives: *199both result in lower taxes in the long run; both favor the use of public funds to benefit particular areas of the taxing jurisdiction that are in need of improvements; and both recognize the importance of government bond programs to the economic health of Oregon.

More importantly, the majority’s and my assertions about what the voters would have thought had they been presented with this issue are beside the point. Our task is to interpret subsection (3)(a) of Measure 5, as written, and then to shift our focus to whether the urban renewal provision, as written, meets the requirements of that exception.

I conclude that property tax increment revenue to repay bonded indebtedness, provided for in Article IX, section lc, is exempt from the limitations of Measure 5 pursuant to Article XI, section llb(3)(a), of the Oregon Constitution. I would reverse the judgment of the Tax Court and, accordingly, dissent.

Richardson, J. pro tempore, joins in this dissent.

Although it appears that the voters and the legislature believed that the amendment empowered the legislature in this area, this court stated in another context that the “Legislative Assembly has plenary authority to legislate within constitutional limits and did not need authorization by Article EX, section lc, except to allay possible doubts about such limits.” Dennehy v. Dept. of Rev., 305 Or 595, 602, 756 P2d 13 (1988). Dennehy does not stand for the proposition that the authorization was unnecessary (it acknowledges the possibility of doubts concerning the limits of the legislative authority), nor does it conclude that the urban renewal provision did not, in fact, authorize or purport to authorize tax increment debt financing. Dennehy does, on the other hand, at least stand for the proposition that, if there were any doubts about the legislature’s authority to provide for tax increment debt financing, then the urban renewal provision clearly sanctioned tax increment debt financing. See also Comment, Tax Increment Financing for Development and Redevelopment, 61 Or L Rev 123, 139 (1982), concluding that the provision is a “reinforcement” of legislative power.