in the supreme court of the state of oregon …file/sc064608brop2.pdf · in the supreme court of...
Post on 23-Apr-2018
217 Views
Preview:
TRANSCRIPT
IN THE SUPREME COURT OF THE STATE OF OREGON
INTERNATIONAL LONGSHORE AND WAREHOUSE UNION,Plaintiff-Appellant,
v.
PORT OF PORTLAND; COMMISSIONERS OF THE PORT OFPORTLAND, in their individual and official capacities; BILL WYATT, in his
individual and official capacity; and BRUCE A. HOLTE,Defendants-Respondents.
United States Court of Appeals for the Ninth CircuitCase No. 1435376
Oregon Supreme Court Case No.: S064608
APPELLANT’S OPENING BRIEF
Certification Order from the United States Court of Appeals for the NinthCircuit filed December 27, 2016.
The Honorable Circuit Judges Richard R. Clifton,Mary H. Murguia, and Jacqueline H. Nguyen
March/2017
Robert H. Lavitt (OSB #40083)lavitt@workerlaw.comSCHWERIN, CAMPBELL, BARNARD,IGLITZIN AND LAVITT, LLP18 West Mercer Street, Suite 400Seattle, WA 98119-3871 | T: (206) 257-6004
Emily M. Maglio (Cal. SB #267190)emaglio@leonardcarder.comAndrew J. Ziaja (Cal. SB #262283)aziaja@leonardcarder.comLEONARD CARDER, LLP1188 Franklin Street, Suite 201San Francisco, CA 94109 | T: (415) 771-6400Attorneys for Appellant
Randolph C. Foster (OSB #784340)rcfoster@stoel.comJeremy D. Sacks (OSB #994262)jeremy.sacks@stoel.comSTOEL RIVES LLP760 SW Ninth Avenue, Ste. 3000Portland, OR 97205 | T: (503) 224-3380Attorneys for Appellees Port of Portland,et al.
Gregory J. Miner (OSB #86247)gminer@batesmanseidel.comBATEMAN SEIDEL MINERBLOMGREN CHELLIS & GRAM, PC888 SW Fifth Avenue, Suite 1250Portland, OR 97204 | T: (503) 972-9932Attorney for Defendant Bruce A. Holte
April 7, 2017 03:30 PM
ii
TABLE OF CONTENTS
Nature of Action ......................................................................................................1
Nature of Judgment to be Reviewed.......................................................................1
Statutory Basis for Jurisdiction ...............................................................................1
Question Presented ..................................................................................................2
Summary of the Arguments ....................................................................................2
Statement of the Facts..............................................................................................5
I. Carrier Programs ............................................................................................7
2012 Terminal 6 Carrier Retention Program.........................................8A.
2013 Container Carrier Incentive Program............................................9B.
II. ICTSI Programs ..........................................................................................9
2012 Cost Sharing Program..................................................................10A.
2013 Rent Rebate Program...................................................................13B.
III. Undisputed Facts From the Port’s Financial Records and Port Deposition
Testimony ....................................................................................................14
Argument ................................................................................................................15
I. Article XI, Section 9 of the Oregon Constitution Prohibits the Investment
of Public Financial Resources in Private Enterprise, And Carruthers
Remains the Appropriate Standard for Evaluating the Port’s Subsidy
Programs. ......................................................................................................17
II. Because Their Design From the Outset Failed to Comply With
Carruthers, the Port’s Subsidy Programs Violated Article XI, Section
9………………………………………………………………………… 24
III. The Port’s After-the-Fact Implementation of Certification or Waiver
Language Could Not Have Cured the Subsidy Programs’ Violation of
Article XI. .....................................................................................................29
iii
Absent Statutory Preauthorization, Certifications Do Not SufficientlyA.
Guard Against a Charge Being Made Upon Tax Revenue, and Thereby
Fail to Guard Against Violation of Article XI, Section 9.........................30
Waivers of the Right to Claim Against Tax Revenue Do Not AdequatelyB.
Guard Against Violation of Article XI, Section 9, Whether by
Themselves or in Combination With Certifications. ................................33
IV. The Lack of Legislative Preauthorizations for the Port’s Subsidy
Programs Further Invalidate Them Under Article XI, Section 9, as it
Frustrates Judicial Review..........................................................................36
V. The Port’s Carrier and ICTSI Subsidy Programs Additionally Violated
Article XI, Section 9 Because They Actually Drew on Tax Revenue.....39
The Port’s Subsidy Programs Drew on its General Fund, Which IncludedA.
Tax Revenue. ...............................................................................................40
Assuming Arguendo That the Port Adequately Segregated its PropertyB.
Tax Revenues, the Port’s Operating Income is Nonetheless Insufficient to
Offset its Operating Expenses and, Thus, the Port Must Have Used Other
General Fund Monies, Which Included Commingled Taxes, to Pay for
thePrograms……………………………………………………………. 44
1. Operating Income Statements are the Proper Documents for
Determining Whether or Not the Port Could Fund the Programs
Completely From its Non-Tax Operating Revenues. ..........................44
2. Operating Expenses Exceeded Operating Revenue in All Relevant
Levels of Analysis Identified by the Port: (1) the Port’s Marine
Division, (2) the Port’s Container Business Line, and (3) the Port’s T6
Business Units. ......................................................................................46
3. The Port’s T6 Fund Did Not Represent a Source of Funding for the
Programs Separate From Property Taxes.............................................48
4. The Port Could Have Drawn on Further Tax Revenues to Fund the
Programs. ...............................................................................................49
Conclusion..............................................................................................................51
iv
TABLE OF AUTHORITIES
Cases
Adams v. Bargaining Unit Benefits Bd.,
103 Or. App. 288 (1990) ....................................................................................18
Carruthers v. Port of Astoria,
249 Or. 329 (1968) ... 2, 3, 4, 16, 17, 18, 19, 20, 21, 22, 24, 25, 26, 27, 28, 29,
31, 32, 33, 35, 36, 38, 39, 51
DeFazio v. Wash. Pub. Power Supply Sys.,
296 Or. 550 (1984) .............................................................................................18
Holder v. Humanitarian Law Project,
561 U.S. 1 (2010) ...............................................................................................37
Homebuilders Ass’n of Metropolitan Portland v. Tualatin Hills Park and
Recreation District,
185 Or.App. 729, 741 (2003).............................................................................37
Humanitarian Law Project v. U.S. Treasury Dept.,
578 F.3d 1133 (9th Cir. 2009) ...........................................................................37
Hunter v. City of Roseburg,
80 Or. 588 (1916) ................................................ 2, 3, 18, 22, 23, 24, 31, 33, 36
ILWU v. Port of Portland,
No. 14-35376 (9th Cir., December 27, 2016) ................................. 1, 3, 5, 7, 21
Johnson v. Sch. Dist. No. 1,
128 Or. 9 (1929) .................................................................................................18
Lane Cnty. v. Paulus,
57 Or. App. 297 (1982) ................................................................................36, 41
Lucas v. Department of Revenue,
Or. Tax Magistrate Div., 2001 WL 1735066 (2001)........................................38
Mattel, Inc. v. Walking Mountain Prods.,
v
353 F.3d 792 (9th Cir. 2003) .............................................................................43
Miles v. City of Eugene,
252 Or. 528 (1969) .................................2, 3, 18, 20, 21, 22, 23, 24, 31, 33, 36
Poole v. Textron, Inc.,
192 F.R.D. 494, 504 (D. Md. 2000) ..................................................................44
Ransom v. FIA Card Services, N.A.,
562 U.S. __ (2011) .............................................................................................37
State ex rel. Kane v. Goldschmidt,
308 Or. 573 (1989) .............................................................................................17
Turner Constr. Co. v. Nat’l Am. Ins. Co., Inc.,
2004 WL 6066675, at *4 (N.D. Cal. Sept. 20, 2004).......................................43
United States v. Garcia,
37 F.3d 1359 (9th Cir. 1994) .............................................................................37
United States v. Sperry Corp.,
493 U.S. 52, 62 n.9 (1989)................................................................................36
United States v. Ward,
197 F.3d 1076 (11th Cir. 1999) .........................................................................37
Statutes
Or. Const. Art. XI
§ 9 ........................................................................................................ 5, 17,18, 19
29 U.S.C. § 152........................................................................................................6
Or. Rev. Stat.
§ 174.116(2)(hh) ...................................................................................................5
§ 198.605...............................................................................................................5
§ 778.101...............................................................................................................5
vi
Rules
Fed. R. Civ. P. 30(b)(6) ...................................................................................42, 43
1
NATURE OF ACTION
This is a civil action for declaratory relief, injunctive relief, damages, and
attorney fees and costs under Article XI, section 9 of the Oregon Constitution.1
NATURE OF JUDGMENT TO BE REVIEWED
The United States Court of Appeal for the Ninth Circuit certified a
question of Oregon law to this Court on an appeal from a grant of summary
judgment before the United States District Court for the District of Oregon.
ILWU v. Port of Portland, No. 14-35376, slip op. (9th Cir., December 27, 2016)
(ER 1856-67).
STATUTORY BASIS FOR JURISDICTION
On certification from a Court of Appeal of the United States,
[t]he Supreme Court may answer questions of law [. . .], whenrequested by the certifying court if there are involved in anyproceedings before it questions of law of this state which may bedeterminative of the cause then pending in the certifying court andas to which it appears to the certifying court there is no controllingprecedent in the decisions of the Supreme Court and theintermediate appellate courts of this state.
ORS 28.200. In this case, the Ninth Circuit Court of Appeals concluded that
“this court has been unable able to find, and the parties have not identified, any
Oregon Case law that discusses whether [the Port’s] accounting methods may
1 Appellant’s Opening Brief was filed on March 17, 2017 and is being refiledon April 6, 2017 per the Court’s March 24, 2017 directive.
2
allow the Programs to survive Section 9 scrutiny.” ILWU, No. 14-35376, slip
op. at *4 (ER 1866-67).
QUESTION PRESENTED
The United States Court of Appeals for the Ninth Circuit certified the
following question to the Oregon Supreme Court:
Does a municipal corporation that holds its tax and non-taxrevenues in the same bank account but that segregates the revenuesthrough financial management and accounting techniques violatearticle XI, section 9, of the Oregon Constitution when themunicipal corporation uses its funds to finance programs thatbenefit private enterprise if the programs contain neither, one, orboth of the following two contractual provisions: (1) the municipalcorporation certifies that it will not use tax revenue to fund theprograms; (2) the program beneficiaries waive any right to make aclaim against the municipal corporation’s tax revenue to satisfy themunicipal corporation’s program obligations?
ILWU, slip op. at *11. The issue before this Court, therefore, is whether the
measures taken by the Port after it implemented its subsidy programs for the
benefit of private enterprise would be sufficient to remedy a violation of article
XI, section 9, of the Oregon Constitution. See id.
SUMMARY OF THE ARGUMENTS
Article XI, section 9 of the Oregon Constitution prohibits the investment
of public financial resources in private enterprise. In Carruthers v. Port of
Astoria, 249 Or. 329 (1968), Miles v. City of Eugene, 252 Or. 528 (1969), and
Hunter v. City of Roseburg, 80 Or. 588 (1916), this Court set out its framework
3
for compliance with Article XI, section 9. To satisfy Article XI, section 9, local
governmental entities must act in accordance with authorizing legislation and
then implement specific provisions to insulate tax revenue from expenditures
for private benefit. Although those cases involved revenue bonds for
infrastructure development, the principles they establish are equally applicable
when, as here, the purpose of public spending is to subsidize a private company
that contracted to operate public infrastructure at the Port of Portland and other
private companies that do business with that company. The principles set out in
Carruthers and its sibling cases invalidate the Port’s Subsidy Programs, and
answer the question certified to this Court by the Ninth Circuit Court of
Appeals.
From the outset due to their design, which failed to comply with
Carruthers, the Port’s Subsidy Programs violated Article XI, section 9.
Whether Article XI, section 9 is violated where neither certifications nor
waivers are in place essentially asks whether a public entity’s own internal
accounting and financial management mechanisms suffice to guard against
violation of the Oregon Constitution. Nothing in Carruthers, Miles, or Hunter
supports the view that a public entity may self-assess whether it has complied
with Article XI, section 9 based purely on its internal accounting and financial
management practices. Accounting and financial management mechanisms are
only one of four requirements of public-private investment programs under
4
Article XI, section 9 and Carruthers. They do not adequately protect public
revenues.
Where certifications, waivers, or both were in place, the Port’s Subsidy
Programs also violated Article XI, section 9 because they are expenditures for
private benefit amounting to “a general obligation of the [local governmental
entity], [or] a charge upon the tax revenue of such [entity] . . . .” Carruthers,
249 Or. at 337. Carruthers accordingly requires inter alia that a constraint on
the public entity’s ability to draw on tax revenue be written into the spending
program’s design from the outset, before the public entity spends a single dollar
for private benefit. Id. at 339 (requiring four safeguards to be expressly written
into the design of public expenditure programs for private benefit). Carruthers
also requires the presence of pre-authorizing legislation as a check against a
local governmental entity’s ability to “charge upon tax revenue.” 249 Or. at
337, 339. The question certified by the Ninth Circuit Court of Appeals asks
whether the use of certifications, waivers, or both are adequate constraints on
the Port’s subsidy programs. See also id. The Port’s use of certifications and
waivers nevertheless failed to cure a violation of Article XI, section 9, because
the Port introduced such language into the Programs’ design only after they had
been implemented, and because there was no legislation in place to constrain
the Port’s ability to “charge upon tax revenue.” See 249 Or. at 337.
5
Additional considerations, discussed below, also urge the conclusion that
the Port’s Programs failed under Article XI, section 9. The absence of
authorizing legislation frustrates judicial review of public financial management
practices due to inherent difficulties in reviewing the movement of fungible
assets. Undisputed facts, furthermore, demonstrate that the Port actually did
draw upon tax revenue to fund the Subsidy Programs at issue in this case.
STATEMENT OF THE FACTS
Appellant ILWU represents longshoremen and marine clerks employed
by waterfront companies who are members of a multiemployer association, the
Pacific Maritime Association (“PMA”), at all West Coast ports including
Portland, Oregon. ILWU has hundreds of members who reside and work in
Oregon, and whose interests are affected by the Port’s conduct described herein.
(ER 3, para. 4).
Appellee Port of Portland is, and at all times herein mentioned was, a
port district in the State of Oregon, which owns marine terminals located on the
Columbia River, including Terminal 6. The Port is, and at all times mentioned
herein has been, “a political subdivision” of the State of Oregon and a
municipal corporation under Oregon law. Or. Const. Art. XI, § 9; Or. Rev. Stat.
§§ 778.101; 174.116(2)(hh), 198.605; (ER 1820-21; ER 3, para. 5).
6
The ILWU and PMA are parties to a single, coastwise, collective
bargaining agreement covering all commercial ports along the West Coast of
the United States from San Diego, California to Bellingham, Washington. The
collective bargaining agreement is known as the “Pacific Coast Longshore and
Clerks Agreement” (“PCL&CA”), which is set forth in two documents, (1) the
Pacific Coast Clerks Contract Document, which governs the wages, hours, and
terms and conditions of employment for marine clerks employed by PMA
member companies, and (2) the Pacific Coast Longshore Contract Document
(“PCLCD”), which governs the terms and conditions of employment of all
longshoremen, including longshore mechanics, employed by PMA member
companies, including ICTSI Oregon, Inc. (“ICTSI”). ICTSI is an Oregon
corporation and wholly owned subsidiary of International Container Terminal
Services Inc., a private company or corporation based in the Philippines. PMA
and ICTSI are, and at all times mentioned herein have been, each an employer
within the meaning Section 2(2) of the NLRA, 29 U.S.C. § 152(2). (ER 4, para.
8).
In 2012 and 2013, the Port implemented programs to provide substantial
tax dollars to certain private companies due to a labor dispute at Terminal 6.
One set of programs provided millions of dollars to shipping companies Hanjin
Shipping Co. Ltd., Hamburg-Sud, Hapag-Lloyd (America), Inc., and Westwood
Shipping Lines (together “Carriers”). (ER 636-666). The other set of programs
7
provided millions of dollars to Terminal 6’s operator, ICTSI, who leases
Terminal 6 from the Port. (Id. at 577-635). ICTSI is the “fourth-largest
independent marine terminal operating company in the world.” (Id. at 589-600).
The Port explained its motivation to provide millions of dollars to these
companies as follows:
The cost sharing [ICTSI] program was developed in 2012 and itwas essentially an effort by the Port to share in what were theconsiderable losses being incurred by ICTSI as a result of theintentional slowdown and the resulting productivity creating atremendous loss for ICTSI. (ER 158-59).
The current carrier program is a – is similar intent, basically, but itwas created to help induce the carriers to continue calling atTerminal 6 and, you know, the – in essence, it represents a subsidyof $10 per container to the calling carriers at Terminal 6. (Id. at179).
Together the programs benefiting both ICTSI and the Carriers will be referred
to as the “Programs” or “Subsidy Programs.” The 2012 and 2013 programs
benefiting the Carriers will be referred to as the “Carrier Programs.” The 2012
and 2013 programs benefiting ICTSI will be referred to as the “ICTSI
Programs.”
I. CARRIER PROGRAMS
The Port implemented two subsidy programs for the benefit of carrier
lines calling at the Port of Portland. The 2012 Terminal 6 Carrier Retention
Program paid carriers a flat incentive fee for one call per week. The 2013
8
Container Carrier Incentive Program paid carriers $10 per container moved
through Terminal 6.
2012 Terminal 6 Carrier Retention ProgramA.
On June 26, 2012, the Port implemented its first program to “provide
temporary assistance to” Carriers calling on Terminal 6, called the “Terminal 6
Carrier Retention Program.” (ER 1982-89). This program was not approved by
the Commissioners of the Port because the Port Director claimed that he could
enter the agreement without Commissioner approval where the total
expenditures of the program were under $500,000. (Id. at 1514). This initial
program was in effect from June 21, 2012 through July 24, 2012. During this
period, the Port agreed to pay Hanjin $70,000 per call, Hamburg-Sud and
Hapag-Lloyd $35,000 per call, and Westwood $20,000 per call, with a
maximum of one incentivized call per week.2 (Id. at 1982-89). This program
was also in effect during the same fiscal year of the initial ICTSI cost sharing
program, which would not exceed the total amount of ICTSI’s annual rent.
Neither the agreements with the Carriers nor the Commission minutes where
Mr. Wyatt reported to the Commissioners about the expenditures provided any
2 The maximum total expenditures under the first Carrier Program was$640,000, suggesting that the Port Director lacked the authority to implementthe program without Commissioner approval.
9
information as to the source of these payments or any steps taken to shield use
of tax monies. (Id. at 636-55).
2013 Container Carrier Incentive ProgramB.
On January 9, 2013, the Port approved a second subsidy program
targeting carriers called the “Container Carrier Incentive Program” in an
amount not to exceed $1,000,000. (Id. at 656-666). Under this program, which
lasted throughout 2013, the Port paid Carriers $10 per container moved through
Terminal 6. (Id.; see also id. at 482-548). Again, the documentation of this
program contains no reference to the source of funds for the Port’s payments to
the Carriers nor to any steps taken to shield tax monies from use. (Id. at 656-
666).
II. ICTSI PROGRAMS
The Port implemented its ICTSI Programs under different names in 2012
and 2013. In 2012, the Port implemented the first ICTSI Program, which it
called a “Cost Sharing Program.” In 2013, the Port implemented a revised
ICTSI Program, entitled a “Rent Rebate Program.” Although they bore different
names, both ICTSI Programs provided subsidies to the Port’s private-sector
tenant, ICTSI.
10
2012 Cost Sharing ProgramA.
On August 8, 2012, the Port approved a “Cost Sharing Program” with
ICTSI. (Id. at 572-88, 601-06). The stated purpose of the Cost Sharing
Agreement was for the Port to share in purported costs of an on-going labor
dispute involving ICTSI. (Id. at 601). The Cost Sharing Program provided that
“the Port will reimburse ICTSI [. . .] a ‘Labor Dispute Recovery Amount’ or
‘LRDA’. The LDRA shall be in the amount of fifty percent (50%) of Shared
Costs incurred by ICTSI during the period between June 1, 2013, and
[December 31, 2012],” unless ICTSI defaulted on its lease, and up to a
maximum of approximately $4,664,356. (Id. at 601). The “Shared Costs” were
defined as pertaining to ICTSI labor relations and operations. (Id. at 602).
Although it purported to constitute a “legal, valid and binding obligation” on
each party, the only obligation imposed by the Shared Cost Agreement on
ICTSI was to reimburse the Port in the event it was able to recover the Port’s
portion of the “Shared Costs” from any third party. (ER 603). The Shared Cost
Agreement also specified that nothing in it “shall be deemed a waiver of any
rights or obligations of the parties under the Lease.” (Id. at 605).
The Shared Costs Agreement did not in any way address the funding
source for the Shared Cost Program. (See id. at 601-06.) The Port
Commissioners’ Meeting Agenda describing the program clarified, however,
11
that “[t]he source of funds for this financial commitment will come from the
Port’s General Fund.” (Id. at 588). At the August 8, 2012, Port Commission
meeting at which the Port approved this program, the sole argument made as to
whether tax revenues would be used to fund the Programs is that, of the Port’s
$260-270 million General Fund revenues, only about $9.1 million derive from
property tax collections. (Id. at 595). However, it is undisputed that this grossly
overstated the amount of the Port’s General Fund revenues as compared to tax
revenues. (Id. at 164). It is equally undisputed that the Port took no specific
steps to ensure tax monies were shielded or removed from the funding of the
Program.3 (Id. at 172-73).
On August 10, 2012, the Port and ICTSI signed a letter modifying
ICTSI’s rent obligations under its lease with the Port (“Rent Deferral Letter”).
(Id. at 607-08). The lease required ICTSI to remit an annual lump-sum rent
payment for Fiscal Year 2012/2013 (“FY 12/13”) on July 1, 2012, which ICTSI
had failed to do. (See id. at 607). Rather than requiring a lump-sum annual rent
payment, the Port agreed to an extension as well as a payment structure. (Id.)
ICTSI would pay the Port installments of $388,696.33 by August 31,
September 30, October 31, and November 30, 2012, before paying the
3 Bill Wyatt, Port Executive Director, asserted at his Rule 30(b)(6)deposition that property tax revenues were not used to fund the ICTSI Programbecause: (1) the ICTSI Program was funded solely with ICTSI’s rent revenueand (2) the Port’s policies limiting the use of property taxes. (ER 1494-95). Theundisputed facts, as detailed herein, show otherwise.
12
remaining $3,109,571 by December 31, 2012. (Id.) The Port further agreed to
waive interest charges it could claim under the terms of the lease. (Id.)
On September 28, 2012, the Port and ICTSI signed a First Amendment to
the Cost Sharing Agreement. (Id. at 1943-44). The First Amendment revised
and expanded certain elements of the definition of “Shared Costs”. (Id.). The
First Amendment to the Cost Sharing Agreement did not impose any additional
obligation on ICTSI. (See id. at 609-611).
On October 26, 2012, the Port and ICTSI entered into a Supplemental
Agreement, which referenced the August 8, 2012, Cost Sharing Agreement and
the August 10, 2012, rent deferral letter. (Id. at 612-14). The Supplemental
Agreement also purported to specify for the first time that “the intent of [the]
parties was for the reimbursement from the Port to ICTSI to effectively act as
an offset against annual rent payments for Fiscal Year 2012/2013 under the
Terminal 6 Lease Agreement . . . .” (Id. [parentheticals omitted]).
The Supplemental Agreement additionally sought to identify the funding
source for the Cost Sharing Program. (Id. at 613). Neither the August 8, 2012,
Cost Sharing Agreement, Rent Deferral Letter, nor the First Amendment to the
Cost Sharing Agreement had previously addressed the Cost Sharing Program’s
funding source. (See id. at 601-611). The Supplemental Agreement claimed that
///
13
ICTSI understands and agrees that (i) the Port’s tax revenues havenot been pledged or dedicated to support or finance the CostSharing Program and (ii) only FY 12/13 Annual Rent paymentswill be used to fund the payments or credits by the Port under theCost Sharing Program. ICTSI expressly waives any rights to makeany claim under the Cost Sharing Agreement against the Port’s taxrevenues.
(Id.). The Supplemental Agreement did not identify any constitutional or
statutory provision authorizing this funding arrangement. (See id.). By its terms,
the Cost Sharing Program terminated on December 31, 2012. (See id.).
2013 Rent Rebate ProgramB.
On February 13, 2013, the Port approved another, similar program to
provide money to ICTSI called the Rent Rebate Agreement for Calendar Year
2013 (“Rent Rebate Agreement”). (Id. at 1949-62, 1963-69). The Rent Rebate
Agreement provided that,
Pursuant to the Lease, ICTSI will make the regular Annual Rentpayment due to the Port on or before July 1, 2013 in the amountand as called for in the Lease. The Port will rebate to ICTSI aportion of Annual Rent in the amount of $308,333.00 per month(“Rebate Payment”), for each calendar month during 2013, subjectto the terms and conditions set forth in this Agreement.Notwithstanding anything to contrary under this Agreement, thetotal amount of Rebate Payments to ICTSI by the Port under thisAgreement will not exceed $3,700,000.
(Id. at 630). Further, the Rent Rebate Agreement contained new provisions that
were not included the 2012 Cost Sharing Agreement:
14
The sole source of funds for the Rebate Payments described abovewill be the Annual Rent payments paid to the Port from ICTSIunder the Lease. None of the Port’s tax revenues will be used tofund the Rebate Payments. ICTSI understands and agrees that (i)the Port’s tax revenues have not been pledged or dedicated tosupport or finance the Rebate Payments called for under thisAgreement; and (ii) that only ICTSI’s Annual Rent payment dueon July 1, 2012 (as extended to December 31. 2012 pursuant to theterms of that letter agreement between the parties dated August 10.2012), and ICTSI’s Annual Rent payment due on July 1, 2013 willbe used to fund the Rebate Payments to be provided under thisAgreement. ICTSI expressly waives any rights to make any claimunder this Agreement against the Port’s tax revenues.
(Id.) The Rent Rebate Agreement obligated ICTSI to maintain a level of
continuous container service during calendar year 2013 in order to be eligible
for monthly rent rebate payments. (Id. at 630-31). This “waiver,” however,
provided no actual protection from such usage of taxes because it left the Port
unrestricted to spend tax revenue at its election. As detailed below, the Rent
Rebate Agreement further failed, as a matter of undisputed fact, to prevent the
Port’s use of at least some tax monies to pay for the Programs.
III. UNDISPUTED FACTS FROM THE PORT’S FINANCIALRECORDS AND PORT DEPOSITION TESTIMONY
The Port’s financial documents and deposition testimony established the
following undisputed facts: (1) General Fund monies which include property
taxes were used to subsidize in part the cost of the Programs; (2) Even
assuming that the Port had properly segregated its property taxes in the General
15
Fund, the Port did not have sufficient operating income to conclude that non-tax
revenues provided a funding source for the Programs; (3) The disclaimer by
ICTSI that it could not recover from property tax monies affords the Port no
protection because property tax funds have already been expended in support of
operational expenses, including payments of the Programs; (4) The Port’s so-
called, “T6 Fund” does not represent a source of funding for the programs
separate from property taxes; and (5) To the extent that the Port has diverted
funds, which it had initially set aside in the T6 fund for future capital
expenditures, to cover the costs of the Program, it may have less money to
cover those future expenditures, and given that the Port’s policy calls for use of
property taxes to fund capital expenditures, the current use of T6 Funds for
Program costs could cause additional expenditures of property taxes in the
future.
ARGUMENT
The Ninth Circuit has asked this Court to analyze the Port’s subsidy
programs in view of four contexts with different sets of provisions in place. The
question is whether the Port’s subsidy programs violated Article XI, section 9
of the Oregon Constitution, (1) where neither the Port certified that it would not
use tax revenue, nor the private enterprises waived their rights to claim against
16
tax revenue (i.e. the 2012 and 2013 Carrier Programs and most of the 2012
ICTSI Cost Sharing Program; and (2) where the Port either certified that it
would not use tax revenue, or the private enterprises waived their rights to
claim against tax revenue, or there were both certifications and waivers in place
(i.e. at most part of the 2012 ICTSI Cost Sharing Program and 2013 ICTSI Rent
Rebate Program).
None of the originating documents for the Carrier Programs in 2012 or
2013 contain certifications as to the Port’s commitment not to spend tax
revenue or waivers of the Carriers’ ability to claim against tax revenue. (See ER
648-666). As for the ICTSI Programs, similarly, the Port implemented most if
not all of the 2012 Cost Sharing Program without any attempt at a tax-
protective certification or waiver in place. (Id. at 601-06). The October 26,
2012, Supplemental Agreement added provisions to the 2012 Cost Sharing
Program purporting to specify that the Program’s funding source was not tax
revenue, as well as to waive ICTSI’s right to claim against tax revenue. (Id. at
612-25). The 2013 Rent Rebate Program included similar language asserting
that tax revenue would not be a source of funds for the Program, and that ICTSI
waived its right to claim against tax revenue. (Id. at 630).
The Port’s Subsidy Programs violated Article XI, section 9 in all these
circumstances under Carruthers v. Port of Astoria, 249 Or. 329 (1968).
Carruthers required that the Port’s Subsidy Programs (1) prohibit the Port from
17
drawing on and the private companies from claiming against tax revenue; (2)
provide that only the Port’s enterprise revenue generated from stevedoring
operations would be used to fund the subsidies, (3) wholly and unconditionally
assume financial liability for third-party claims under the Subsidy Programs,
and (4) provide for accounting for payments through a “special fund” to
insulate Carrier-related revenue and subsidies. See id. at 337-39. Because the
design of the Port’s Subsidy Programs failed to comply with these
requirements, as well as for the additional reasons that follow, they violated
Article XI, section 9.
I. ARTICLE XI, SECTION 9 OF THE OREGON CONSTITUTIONPROHIBITS THE INVESTMENT OF PUBLIC FINANCIALRESOURCES IN PRIVATE ENTERPRISE, AND CARRUTHERSREMAINS THE APPROPRIATE STANDARD FOREVALUATING THE PORT’S SUBSIDY PROGRAMS.
Article XI, section 9 of the Oregon Constitution provides that the Port
shall not “raise money for, or loan its credit to, or in aid of, any [joint]
company, corporation or association.” Or. Const. Art. XI, s 9. “To ‘lend the
credit of the state’ is to invest or otherwise promise public funds for the benefit
of private persons or to promote private schemes.” State ex rel. Kane v.
Goldschmidt, 308 Or. 573, 591 (1989).
In the first major ruling on the matter, the Oregon Supreme Court
described the provision as follows:
18
The written Constitution of Oregon is the most solemn declarationof the people in regard to the powers of the state and its agencies ormunicipalities. It has their unqualified approval. The authorizedofficers in the state are required to take an oath to support it beforethey are qualified to enter upon their work. It is not a pleasurableduty to curb the action of the municipal officers of an enterprisingcity when they transcend the limits of their municipal charter or ofour organic law, yet the courts cannot shirk such duty when thecase demands. In determining a question under the Constitution,the scope and effect of an act or contract are proper forconsideration. The view of the court is never limited to the mereletter.
Hunter v. City of Roseburg, 80 Or. 588, 603 pet. rehearing denied, id. at 605-07
(1916) (invalidating contracts as “inimical to” Art. XI, § 9). Since then, Oregon
state courts have described Article XI, section 9, as being “the fundamental law
of the state to prevent the investment of public funds in private enterprises.”
Miles v. City of Eugene, 252 Or. 528, 535 (1969) (quoting Johnson v. Sch. Dist.
No. 1, 128 Or. 9, 12 (1929)); see also DeFazio v. Wash. Pub. Power Supply
Sys., 296 Or. 550, 578-79 (1984) (“No doubt those who drafted the prohibitions
had in mind the practice of aiding private enterprise . . . .”); also Adams v.
Bargaining Unit Benefits Bd., 103 Or. App. 288, 294 (1990), recons. & rev.
denied (legally plausible claim under Article XI, section 9 where challenged
public payments to private health care center, to offset cost of labor dispute,
were derived partially from taxes).
The parties and the Ninth Circuit Court of Appeals agree that Carruthers
v. Port of Astoria, 249 Or. 329 (1968) supplies the fundamental standard under
19
Article XI, section 9. Carruthers tested the constitutionality of the Port of
Astoria’s sale of revenue bonds to private investors in order to finance
construction of an aluminum ore refinery operated by a private company under
a port lease. 249 Or. at 330-32. The issuance of revenue bonds for that purpose
was enabled by an Oregon state statute, ORS 777.130. Id. at 331. In exchange
for the Port of Astoria’s sale of the bonds, the private company “committed
itself to lease and operate the entire plant for a period of 25 years, with an
option to purchase it for $50,000 at the end of that period. Consideration for the
lease would be rentals in a sum to insure repayment of the revenue bonds and
interest thereon over their life span, which also is to be 25 years.” Id. at 331.
The Carruthers Court upheld the revenue bond program and established the
foundational Article XI, section 9 standard: A commitment or expenditure to
benefit a private entity must risk “no possibility of involving an expenditure of
public funds.” Id. at 340 (emphasis added).
To satisfy this “no possibility” standard, the Carruthers court held that
four restrictions must be quoted in “the applicable ordinance and the revenue
bonds [. . .] in order not to run counter to § 9, Art. XI”. Id. at 339. First, no port
may issue bonds that amount to “a general obligation of the port issuing the
bonds, nor a charge upon the tax revenue of such port . . . .” Id. at 337. Second,
any such “bonds are to be paid solely from the rentals or other moneys derived
from [a] lease” between the port and a private company. Id. Third, the private
20
company’s obligation to pay rent must “be unconditional until the bonds are
paid in full or adequate provision has been made for such payment.” Id. at 338.
Fourth, accounting for such bonds must be done through “a special fund into
which rental and other payments will be made by [the private entity] and from
which the moneys to pay the principal of and interest on the bonds will be
drawn.” Id. Each of these restrictions must furthermore be set out in the
program’s design formally in explicit language. See id. The Court upheld the
disputed program in Carruthers, but only after it was satisfied that any
possibility that tax dollars would be used for the program would “be foreclosed
in the event of default of these bonds . . . .” Id. at 340.
Shortly after Carruthers, the Oregon Supreme Court returned to Article
XI, section 9 in Miles v. City of Eugene, 252 Or. 528 (1969). Miles considered a
partnership between a private utility and the Eugene Water & Electric Board
(“EWEB”), a department of the City of Eugene, to issue revenue bonds to fund
the development of a nuclear power plant. Id. at 529. This type of partnership
was expressly preauthorized by an act of the Oregon Legislature in 1967. Id. at
529 (citing ORS 225.450 et seq.). In accordance with that statute, the terms of
the revenue bonds specified:
///
///
21
That they do not in any manner constitute a general obligation ofthe Eugene Water & Electric Board, or of the City of Eugene, norcreate a charge upon the tax revenues of said city nor of anyrevenues or property of said city or property of said Board but arepayable solely from the general revenues of the electric utilitysystem of the city.
Id. at 531-32. Unlike the Port of Portland, furthermore, EWEB was not
empowered to spend tax revenue, but rather depended solely on its own
enterprise revenues. Id. at 530. Confronted with a claim that the revenue bond
program nevertheless violated Article XI, section 9, the Miles Court explained
part of its holding in Carruthers to have been, in the context of revenue bond
provisions that insulate tax revenue, “that the funds obtained from the sale of
revenue bonds are not public funds within the meaning of the prohibition.” Id.
at 532. The Miles Court also addressed Article XI, section 9’s bar against local
governmental entities becoming stockholders in private corporations, finding no
violation in the revenue bonds at issue. Id. at 534. In Miles, EWEB would
jointly own and operate the power plant to be built with revenue-bond
financing. Id. at 533-34. The Miles Court held that “[t]he omission of the phrase
‘joint owner’ from [Article XI, section 9] is another indication that [Article XI,
section 9] is intended only to prohibit a city from being a stockholder.” Id. at
537.
Carruthers and Miles thus together establish how tax revenue must be
insulated from a public expenditure under Article XI, section 9. Carruthers
22
involved the use of revenue bonds to finance the construction of port
infrastructure, payable on future rents earned from such infrastructure. 249 Or.
at 330-32. Miles similarly involved the use of revenue bonds to finance the
construction of a nuclear power plant, payable on future rate payments earned
from the power plant. Id. at 534-37. An essential feature of the revenue bond
programs in both cases was that no public monies of any kind were used up
front; instead, the revenue bonds, by their very nature, called for the solicitation
and use of monies solely from private investors purchasing the bonds. Rigorous
and pre-established financial instruments furthermore directed that the public
works’ future revenue streams alone would satisfy the bondholders, who could
not in turn make claims against tax revenue. The Miles Court recognized, by
contrast, that “[i]n this case and in [Carruthers] the parties attacking the
constitutionality of the proposals relied strongly upon Hunter v. Roseburg, 80
Or. 588 (1916).” Id. at 537. The Court distinguished Hunter, however “because
in that case the city was proposing to finance the construction of a railroad with
general obligation bonds payable from general tax levies.” Id.
Hunter, indeed, is instructive as a counterfactual: a bond issuance
violated Article XI, section 9 because it failed to comply with a preauthorizing
city charter amendment. In Hunter, the Oregon Supreme Court invalidated and
enjoined a contract between the City of Roseburg and a private railroad
company to issue $300,000 in bonds for the construction of a railroad to help
23
promote the local sawmill industry. 80 Or. at 599. Voters had approved an
amendment to the city charter preauthorizing the issuance of bonds to fund the
railroad, on the condition that the city would own the entire railroad once it was
constructed. Id. at 599-600. The bond program, however, provided that the
private railroad company could purchase the entire railroad from the city for
$300,000—the same amount invested by the city, without interest—at any time
during the following 60 years, despite the fact that “the interest on $300,000 at
5 per cent. [sic] per annum for 60 years would be treble that amount, or
$900,000.” Id. at 604. The bond program further authorized an annual tax levy
to pay the principal and interest on the bonds, while failing to ensure that the
bond principal and interest would be paid only out of future revenue from the
operation of the railroad. Id. at 599, 604. Taxpayers brought suit, challenging
the bond issuance under the city charter amendment and Article XI, section 9.
Id. at 598.
The Hunter Court saw it as “not a pleasurable duty to curb the action of
the municipal officers of an enterprising city when they transcend the limits of
their municipal charter or of our organic law, yet the courts cannot shirk such
duty when the case demands.” Id. at 603. The Oregon Supreme Court
nevertheless invalidated and enjoined the bond issuance, regardless of the
City’s public policy reasons for it, “inimical to article 11, § 9, and . . . so
declared.” Id. at 603; see also Miles, 252 Or. at 537 (explaining that the
24
constitutional infirmity in Hunter derived from the public entity “proposing to
finance the construction of a railroad with general obligation bonds payable
from general tax levies.”).
In Carruthers, Miles, and Hunter this Court set out its framework for
compliance with Article XI, section 9. To satisfy Article XI, section 9, local
governmental entities must act in accordance with authorizing legislation and
then implement specific provisions to insulate tax revenue from expenditures
for private benefit. Although those cases involved revenue bonds for
infrastructure development, the principles they establish are equally applicable
when, as here, the purpose of public spending is to subsidize private companies
that are contracted to operate public infrastructure like a marine terminal. As
discussed below Carruthers and its sibling cases invalidate the Port’s Subsidy
Programs, and answer the question certified to this Court by the Ninth Circuit.
II. BECAUSE THEIR DESIGN FROM THE OUTSET FAILED TOCOMPLY WITH CARRUTHERS, THE PORT’S SUBSIDYPROGRAMS VIOLATED ARTICLE XI, SECTION 9.
The question of whether Article XI, section 9 is violated where neither
certifications nor waivers are in place essentially asks whether a public entity’s
own internal accounting and financial management mechanisms suffice to
guard against violation of the Oregon Constitution. Nothing in Carruthers,
Miles, or Hunter supports the view that a public entity may self-assess whether
25
it has complied with Article XI, section 9 based purely on its internal
accounting and financial management practices. Accounting and financial
management mechanisms are only one of four requirements of public-private
investment programs under Article XI, section 9 and Carruthers. They do not
suffice to protect public revenues.
Carruthers imposes four requirements on public-private investment
partnerships. First, no expenditure for private benefit may amount to “a general
obligation of the [local governmental entity], nor a charge upon the tax revenue
of such [entity] . . . .” Id. at 337. Second, any payment of public funds for
private enterprise must come solely from the revenue generated by the public-
private investment project. See id. Third, the private beneficiary of the public-
private investment partnership must wholly and unconditionally assume
financial liability for claims by third parties relating to the investment program.
See id. at 338. Fourth, accounting for payments for the benefit of private
enterprise must be done solely through “a special fund” into which revenues
from the public-private project are received and from which payments to private
interests are made. See id. Each of these restrictions must furthermore be set out
in the program’s design formally in explicit language. See id.
Here, it is undisputed that the Port operated both 2012 and 2013 Carrier
Programs and much if not all of the 2012 ICTSI Cost Sharing Program without
any semblance of certifications or waivers in place that could arguably have
26
protected tax revenue. The Port’s own accounting and financial management
techniques were the only arguable safeguards in place during those times for
those programs. Under Carruthers, the Port’s accounting and financial
management techniques by themselves fail to satisfy Article XI, section 9.
Article XI, section 9 required formal language setting out the Port’s
Subsidy Programs that included all four Carruthers requirements. (ER 587-88,
594-609, 601-611, 648-55, 656-666). Far from complying with Article XI,
section 9, the 2012 Carrier Program language merely provided, e.g., “[u]nder
the Program, the Port will pay to Vessel Operator a ‘Program Payment’ in the
amount of $70,000 per call by Vessel Operator’s vessels calling at Terminal 6,
not to exceed one Vessel Call per week during the four-week period
commencing on June 21, 2012, and ending July 24, 2012.” (Id. at 648; see also
id. at 650, 652, 654). The 2012 Carrier Program language did not, as Carruthers
requires, (1) prohibit either the Port or the Carriers from drawing on or claiming
against tax revenue; (2) provide that only the Port’s enterprise revenue
generated from the Carriers would be used to fund the subsidies, (3) wholly and
unconditionally assume financial liability for third-party claims under the
Subsidy Programs, or (4) provide for accounting for payments through a
“special fund” to insulate Carrier-related revenue and subsidies. (See id.; also
249 Or. at 337-39). The 2013 Carrier Program meanwhile generated no formal
originating document, let alone one satisfying Carruthers. (See id. at 666).
27
The August, 8, 2012, agreement establishing the ICTSI Cost Sharing
Program also made no mention of any of the four Carruthers requirements. The
2012 ICTSI Cost Sharing Program was defined almost exclusively by the
provision that the Port would pay to ICTSI “fifty (50%) of Shared Costs
incurred by ICTSI during the period between June 1, 2012 and the End Date . . .
.” (Id. at 601). Neither the August 10, 2012, rent deferral agreement nor the
September 25, 2012, First Amendment to the Cost Sharing Agreement cured the
Cost Sharing Agreement’s deficiencies under Carruthers. (See id. at 607-11).
To the contrary, the rent deferral agreement actually documents a violation of
Carruthers by indicating that the Port agreed to pay Shared Costs to ICTSI
while simultaneously deferring rent payments. (See id.). By design, the Port
could not have paid ICTSI solely out of project revenues as required by
Carruthers for at least the months of July and August, 2012, since no annual
rent would have been paid for the 2012-2013 lease term until August 31, 2012.
(Id. at 607). Even if there were a “special fund” as required by Carruthers, it
would have run a negative balance during periods when the Port paid subsidies
to ICTSI while also deferring its rent.
The October 26, 2012, ICTSI Cost Sharing Supplemental Agreement,
entered into the same day the Port filed its motion for summary judgment
before the District Court, might appear to address the Carruthers requirements,
though it was still inadequate on its face to save the Cost Sharing Program
28
under Article XI, section 9. (Id. at 612-13). The Supplemental Agreement
provided that “the intent of parties was for the reimbursement from the Port to
ICTSI to effectively act as an offset against annual rent payments for Fiscal
Year 2012/2013 under the Terminal 6 Lease Agreement dated May 12, 2010.”
(Id. at 612 [parentheticals omitted]). It provided that “the Port’s tax revenues
have not been pledged or dedicated to support or finance the Cost Sharing
Program” and “ICTSI expressly waives any rights to make any claim under the
Cost Sharing Agreement against the Port’s tax revenues.” (Id.)
The Supplemental Agreement further recognized, though, that “the Port
has paid ICTSI amounts under the Cost Sharing Program that are advances
against rent installment payments ICTSI is obliged to make no later than
October 31, 2012 and November 30, 2012 under the Rent Deferral Agreement.”
(Id. at 612). The Port and ICTSI thus acknowledged by contract that the Port
had already paid substantial sums to ICTSI without any certification or waiver
as to tax revenue in place. (Id. at 612-13). Carruthers does not allow constraints
on public spending to be imposed retroactively; the restrictions must be explicit
in the program’s design prior to any expenditure being made. See 249 Or. at
337-38.
Ultimately, whatever accounting and financial management mechanisms
the Port implemented for the 2012 and 2013 Carrier Programs and the 2012
ICTSI Cost Sharing Program, it is undisputed that those techniques were not
29
explicitly set out, by design, in any authorizing legislation or resulting program
document. Neither were such mechanisms sufficient in the absence of the other
three Carruthers requirements. See id. at 337-38. The Port’s accounting and
financial management mechanisms furthermore did not conform with the
Carruthers requirement that they demonstrate that payments for private
investment be made from a “special fund,” whose sole purpose would have
been to fund such investment with a segregated revenue stream. 249 Or. at 338.
The Port’s subsidy programs therefore violated Article XI, section 9,
where neither certifications nor waivers as to tax revenue were in place.
III. THE PORT’S AFTER-THE-FACT IMPLEMENTATION OFCERTIFICATION OR WAIVER LANGUAGE COULD NOTHAVE CURED THE SUBSIDY PROGRAMS’ VIOLATION OFARTICLE XI, SECTION 9.
Article XI, section 9 is violated when any expenditure for private benefit
amounts to “a general obligation of the [local governmental entity], [or] a
charge upon the tax revenue of such [entity] . . . .” Carruthers, 249 Or. at 337.
Carruthers accordingly requires that this constraint, among three others, be
written into the spending program’s design from the outset, before the public
entity spends a single dollar for private benefit. Id. at 339 (requiring that four
safeguards be expressly written into the design of public expenditure programs
for private benefit). The question certified by the Ninth Circuit essentially asks
30
whether the Port’s after-the-fact implementation of certifications, waivers, or
both adequately integrated these two constraints into the design of the Port’s
subsidy programs. See also id. Only the 2012 ICTSI Supplemental Agreement
and the 2013 ICTSI Rent Rebate Agreement arguably included any certification
or waiver.
Absent Statutory Preauthorization, Certifications Do NotA.Sufficiently Guard Against a Charge Being Made Upon TaxRevenue, and Thereby Fail to Guard Against Violation of Article XI,Section 9.
By its terms, Article XI, section 9 imposes symmetrical prohibitions on
private and public entities: an expenditure must neither constitute a general
obligation, nor a charge upon tax revenue. Id. A private recipient of a public
expenditure conceivably could waive its right to assert a general obligation
claim against a local governmental entity as a condition of that expenditure, as
discussed below. See id. It is not apparent, by contrast, that a private recipient
could contractually bind a local governmental entity to not elect to “charge
upon tax revenue” in order to fund such an expenditure. Even if a private
recipient could bind a public entity to that effect, there is no case law under
Article XI, section 9 holding that such a contractual provision would provide
taxpayers with sufficient constitutional safeguards. There is likewise no support
31
for the view that a public entity can self-certify that it will not “charge upon tax
revenue.” See id.
Instead, the bar against charging upon tax revenue came from statutory
law in Carruthers and its related cases Miles and Hunter. A common
requirement in Carruthers, Miles, and Hunter is the presence of statutory pre-
authorizations setting limits on specific uses of public funds. In Carruthers, an
Oregon statute authorized ports within the state to issue revenue bonds to
develop infrastructure projects in partnership with private entities. 249 Or. at
331 (quoting ORS 777.130). The statute prohibited such bonds from being “a
general obligation of the port issuing the bonds, [or] a charge upon the tax
revenues of such port, nor a charge upon any other revenues or property not
specifically pledged thereto.” Id. (marks omitted). In Miles, the enabling act
was also an Oregon statute, requiring that any bonds issued under its
authorization include a statement on their face:
That they do not in any manner constitute a general obligation ofthe [EWEB] or of the City of Eugene, nor create a charge upon thetax revenues of said city nor of any revenues or property of saidBoard but are payable solely from the general revenues of theelectric utility system of the city.
Id. at 531-32 (quoting ORS 225.450). In Hunter, the authorizing legislation was
a city charter amendment permitting the issuance of municipal bonds for
railroad development, provided that the city owned the entire railroad once
constructed. 80 Or. at 599-600. Oregon law thus unambiguously requires
32
specific external statutory constraints on the investment of public funds for
private enterprise as a precondition. Carruthers, 249 Or. at 339 (holding that
“the applicable ordinance and the revenue bonds [must] quote each of these
restrictions [. . .] in order not to run counter to” Article XI, section 9).
Here, it is undisputed that there was never any legislative
preauthorization. The first attempt to impose any sort of constraint on the Port’s
use of tax revenue came in the October 26, 2012, Supplemental Agreement,
which stated merely that “ICTSI understands and agrees that (i) the Port’s tax
revenues have not been pledged or dedicated to support or finance the Cost
Sharing Program and (ii) only FY 12/13 Annual Rent payments will be used to
fund the payments or credits by the Port under the Cost Sharing Program.” (ER
613). By its own terms, this is not even a self-certification by the Port, but
rather an expression of ICTSI’s understanding. (See id.) Yet even to the extent
it reflects any sort of binding agreement between the Port and ICTSI, it is silent
as to taxpayers’ constitutional rights under Article XI, section 9. (Id.)
The Port’s 2013 ICTSI Rent Rebate Program adopted similar language,
which suffers similar flaws. The Rent Rebate Agreement claimed to provide
that “[t]he sole source of funds for the Rebate Payments [. . .] will be the
Annual Rent payments paid to the Port from ICTSI under the Lease. None of
the Port’s tax revenues will be used to fund the Rebate Payments.” (ER 630).
Although this language purports to specify that the funding source for the Rent
33
Rebate Program would be ICTSI’s annual rent payments in 2012 and 2013,
Carruthers, Miles, and Hunter do not support the view that the Port may satisfy
Article XI, section 9 by contract with a private entity. To the contrary,
Carruthers requires that specific contractual restrictions be paralleled in
preexisting authorizing legislation. 249 Or. at 339.
Neither the 2012 Supplemental Agreement nor the 2013 Rent Rebate
Agreement contain certifications that could satisfy Article XI, section 9 because
their language is not paralleled in any enabling legislation, as Carruthers
requires. 249 Or. at 339-40. There is furthermore no support for the notion that
the Port could certify by way of contract with a private entity or otherwise that
it had complied or would comply with Article XI, section 9.
Waivers of the Right to Claim Against Tax Revenue Do NotB.Adequately Guard Against Violation of Article XI, Section 9,Whether by Themselves or in Combination With Certifications.
Accompanying the requirement that no public expenditure for private
benefit may “charge upon tax revenue” is the requirement that it also not
amount to a general obligation of the public entity’s finances. Carruthers, 249
Or. at 337. As mentioned above, it is conceivable that a private recipient of
public funds could waive its right to assert a general obligation claim, given that
“[a]ny claim or right arising out of an alleged breach can be discharged in
34
whole or in part without consideration by a written waiver or renunciation
signed and delivered by the aggrieved party.” ORS 71.1070.
The 2012 Supplemental Agreement and 2013 Rent Rebate Agreement
appear to include language that ostensibly could waive ICTSI’s ability to claim
against tax revenue. The 2012 Supplemental Agreement provided:
ICTSI understands and agrees that (i) the Port’s tax revenues havenot been pledged or dedicated to support or finance the CostSharing Program and (ii) only FY 12/13 Annual Rent paymentswill be used to fund the payments or credits by the Port under theCost Sharing Programs. ICTSI expressly waives any rights to makeany claim under the Cost Sharing Agreement against the Port’s taxrevenues.
(ER 612-13). The 2013 Rent Rebate Agreement similarly provided:
ICTSI understands and agrees that (i) the Port’s tax revenues havenot been pledged or dedicated to support or finance the RebatePayments called for under this Agreement; and (ii) that onlyICTSI’s Annual Rent payment due on July 1, 2012 (as extended toDecember 31, 2012 pursuant to the terms of that letter agreementbetween the parties dated August 10, 2012) and ICTSI’s AnnualRent payment due on July 1, 2013 will be used to fund the RebatePayments to be provided under this Agreement. ICTSI expresslywaives any rights to make any claim under this Agreement againstthe Port’s tax revenues.
(ER 630). The Supplemental Agreement further indicated, however, “that the
Port has paid ICTSI amounts under the Cost Sharing Program that are advances
against rent installment payments ICTSI is obliged to make no later than
October 31, 2012 and November, 30 2012 under the Rent Deferral Agreement.”
(ER 612-613.) Any such advance payment necessarily could not have been
35
made out of rent the Port had not yet received, thus the soonest the ICTSI
waiver could have entered into effect was November 30, 2012. (See id.)
Even if the ICTSI waiver in the 2012 Supplemental Agreement and 2013
Rent Rebate Agreement wholly foreclosed ICTSI’s ability to claim against Port
tax revenue, that alone would not satisfy the Oregon Constitution. As discussed
above, Article XI, section 9 requires symmetrically that private beneficiaries
not be able to claim against tax revenue and that public entities not be able to
“charge upon tax revenue.” Carruthers, 249 Or. at 337-39. The ICTSI waivers
in the 2012 Supplemental Agreement and 2013 Rent Rebate Agreement are
only half of one requirement under Carruthers. Pairing the ICTSI waivers with
the purported certifications in those agreements that the Port would not “charge
upon tax revenue” would not, nevertheless, satisfy Article XI, section 9 either.
As discussed above, the Port’s certifications are inadequate as they were not
paralleled by any statutory authorization, as required under Carruthers. 249 Or.
at 339. Additionally, as discussed above, the Port’s subsidy programs failed to
satisfy the other three Carruthers requirements.
The ICTSI waivers in the 2012 Supplemental Agreement and 2013 Rent
Rebate Agreement therefore are not adequate under Article XI, section 9,
whether on their own or paired with the certifications in those same agreements.
36
IV. THE LACK OF LEGISLATIVE PREAUTHORIZATIONS FORTHE PORT’S SUBSIDY PROGRAMS FURTHER INVALIDATETHEM UNDER ARTICLE XI, SECTION 9, AS IT FRUSTRATESJUDICIAL REVIEW.
The absence of external legal pre-authorizations for public-private
investment programs frustrates judicial enforcement of Article XI, section 9.
See Carruthers, 249 Or. at 330-32; Miles, 252 Or. at 534-37; Hunter, 80 Or. at
599-600. As the Oregon Legislature explained in an analysis of local
government finances:
[W]hen investments are made from a general pool of moniescomprised of many and various funds flowing in and out of thepool, remaining therein for different lengths of time and indiffering proportions, it becomes an obvious impossibility todetermine what part of which fund was invested for how long andat what rate of interest.
Lane Cnty. v. Paulus, 57 Or. App. 297, 301 n.4 (1982) (emphasis added)
(quoting minutes of the House Committee on Local Government for April 3,
1963). The Oregon Legislature’s discussion of local government general funds
echoes the judicial understanding of money as fungible: “Unlike real or
personal property, money is fungible.” United States v. Sperry Corp., 493 U.S.
52, 62 n.9 (1989).4
4 The Sperry Court made this observation in holding that the takingsclause does not apply to government user fees, whether imposed as a deductionfrom a monetary award or as a separate charge. Id.
37
The phrase “money is fungible” has guided a wide range of decisions
since the Supreme Court’s ruling in Sperry. The Supreme Court has applied it
to assessing entitlement to a car allowance under bankruptcy law. Ransom v.
FIA Card Services, N.A., 562 U.S. __, slip op. at *17 (2011) (“[m]oney is
fungible: The $14,000 that Ransom spent to purchase his Camry outright was
money he did not devote to paying down his credit card debt, and Congress did
not express a preference for one use of these funds over the other.”). It has also
been applied to criminal prohibitions against funding terrorist organizations.
Holder v. Humanitarian Law Project, 561 U.S. 1 (2010) (“[m]oney is fungible .
. . [t]hus funds raised ostensibly for charitable purposes have in the past been
redirected by some terrorist groups to fund the purchase of arms and
explosives.”) (internal quotation marks and citations omitted); also e.g.
Humanitarian Law Project v. U.S. Treasury Dept., 578 F.3d 1133 (9th Cir.
2009). In the context of money-laundering seizures, “money is fungible, the
government must prove only that the tainted proceeds were commingled with
other funds.” United States v. Ward, 197 F.3d 1076 (11th Cir. 1999) (citing
United States v. Garcia, 37 F.3d 1359, 1365 (9th Cir. 1994)).
Oregon courts have also adopted this concept in a range of contexts. E.g.,
Homebuilders Ass’n of Metropolitan Portland v. Tualatin Hills Park and
Recreation District, 185 Or.App. 729, 741 (2003) (quoting Sperry, 493 U.S. at
62 n.9, and upholding government user fees under takings analysis). Indeed,
38
this rule has been adopted in Oregon tax court. Lucas v. Department of
Revenue, Or. Tax Magistrate Div., 2001 WL 1735066 (2001).
In Lucas, the court examined whether a delinquent tax payer owed a
penalty for unpaid taxes in 1992, a year for which he instead later received an
erroneous tax refund. Id. at *2. Upon receiving the refund check in 1995, the
delinquent tax payer endorsed the check back to the state for payment against
subsequent tax liabilities, which the state did. Id. Once it became clear that he
would owe a penalty for tax-year 1992, however, the delinquent tax payer
attempted to have the state go back and apply the erroneous refund to his
liabilities for that tax-year. Id. The delinquent tax payer attempted to escape the
application of a state tax rule through an artificial accounting technique, arguing
that there had not been a tax refund for 1992 since his liabilities exceeded his
payments once they had been adjusted post-hoc. See id. The court rejected this
argument, ruling that “money is fungible, what Plaintiff did with the check after
he received it is largely irrelevant . . . .” Id.
Here, the judicial treatment of money as fungible underscores the need
for legislative preauthorization and all four Carruthers requirements, and also
argues against accepting the Port’s accounting and financial tracking techniques
by themselves as sufficient. Carruthers, 249 Or. at 337-38 (holding accounting
mechanisms to be only one of four requirements). The Port’s own position in
this case illustrates the problem: The Port claims that it can freely move tax
39
revenue from one spreadsheet fund to another. (ER 1834 [quoting Burket Dep.
102:3-20]; see also ER 49, n. 112). Rather than showing that this saves its
Subsidy Programs from violating Article XI, section 9, it shows that the Port is
unconstrained in maneuvering tax revenues. Carruthers requires four specific
rigorous legal restrictions to guard against such fiscal maneuvering. See 249 Or.
at 337-38. Carruthers ensures compliance with Article XI, section 9 by
providing clear guidelines for judicial review of government action.
V. THE PORT’S CARRIER AND ICTSI SUBSIDY PROGRAMSADDITIONALLY VIOLATED ARTICLE XI, SECTION 9BECAUSE THEY ACTUALLY DREW ON TAX REVENUE.
Not only were the Port’s Subsidy Programs flawed by design, but
undisputed facts demonstrate that the Port’s Programs also violated Article XI,
section 9 in practice by actually drawing on tax revenue. It is undisputed that
the Programs drew on the Port’s General Fund, which included property tax
dollars. As discussed below, the Port furthermore necessarily used this
percentage of tax monies to fund the ICTSI Program because its operating
expenses exceed its operating income, under any of the Port’s theories. The fact
that the Port drew on tax revenue is made further evident by including capital
depreciation in an assessment of the Port’s finances.
40
The Port’s Subsidy Programs Drew on its General Fund, WhichA.Included Tax Revenue.
It is undisputed that Program expenses were paid from the Port’s General
Fund and that property taxes commingled with other resources in the General
Fund. The Port took no specific action to actually implement the 2012
Supplemental Agreement certification and waiver language. As the Port
Executive Director explained:
Q Is there any reason why this document was executed on thesame day that the Port moved for summary judgment in thislawsuit?
A Well, I’m sure, you know, give yourself some credit. Byraising the issue, we wanted to be absolutely clear that taxrevenues were not going to be used in the execution of thisagreement and we felt and continue to feel that we havesufficient internal controls in place to avoid that, but just toavoid even the slightest appearance, this language wasincorporated.
. . .
Q . . . Did the Port implement any changes in how itadministered its -- the property tax revenues in itsaccounting funds as a result of this supplemental agreement?
A I don’t believe so.
Q And you didn’t instruct anybody to do so?
A No. We felt that we had already.
(ER 173). What the Port had “already” done was simply to have the monies
transferred from the General Fund, which includes commingled tax monies, to
41
ICTSI and the Carriers. (See, e.g., ER 1935-45, 1946-48, 1963-69, 1982-2000).
The Port’s certification language, therefore, failed to shield or screen out
property taxes, which made up a percentage of the General Fund, from being
used to make payments to the private companies under the programs.
While it may be “an obvious impossibility” to identify tax revenues as
separate from other sources, (Lane Cnty., 57 Or. App. at 301 n.4 (1982); ER
1445-45), the evidence allows for estimation of the portion or percentage of the
General Fund that came from taxes. Specifically, the evidence shows:
(1) The expenses of the Programs were paid from the General Fundand recorded in business units that are part of the Port’s GeneralFund. (ER 1351-1400, 2302). In fact, the Port adjusted its GeneralFund appropriations to pay for the Programs. (Id. at 2001-08).
(2) ICTSI’s “annual rent is in the General Fund.” (Id. 1497).
(3) The checks and wire transfers issued to make payments to theprivate companies under the Programs were drawn from the Port’smain cash account. (ER 1364-66, 1428-29).
(4) For fiscal year 2012, property taxes made up 14% of the totalrevenues for the General Fund. Consideration of the percentage ofGeneral Fund revenues is the appropriate matrix because propertytax revenues are part of the General Fund, which pays for thePrograms. (ER 1364-66; 1678-1746).
(5) Alternatively, under the cash approach—the percentage of net cashsources to the commingled cash account—expenditures from thePort’s main cash account were made up of 2.3% and 5.6% propertytaxes for the fiscal year 2012 and the first 9 months of fiscal year2013, respectively. (ER 1364-66).
42
This undisputed evidence shows that the Port used the General Fund, a portion
of which derived from property tax revenues, in its payments to the private
companies under the Programs.
Despite the clarity and undisputed nature of these facts on the eve of trial,
the Port attempted to muddy the picture during litigation with after-the-fact
explanations. In July 2012, for instance, the Port purportedly budgeted its
property tax revenue into the Bond Construction Fund as opposed to the
General Fund. On this basis, it thus supposedly shielded its property tax
revenues from the Program payments. (ER 1834 [quoting Burket Dep. 102:3-
20]; see also ER 49, n. 112). In November 2012, the Port then revised its budget
appropriations to provide that property taxes are initially accounted for in the
Port’s Bond Construction Fund instead of the General Fund, backdated to the
start of its fiscal year, July 1, 2012. (ER 670-74.) During his Rule 30(b)(6)
deposition, however, the Port’s Controller explained how this change in
appropriations had no effect on whether property tax revenues were transferred
to the General Fund, but rather the change was, essentially, a change in the
“landing point” of the funds—previously the first landing point was the General
Fund, with some revenues going to the Bond Construction Fund—currently, the
first landing point is the Bond Construction Fund, with some revenues going to
the General Fund:
43
The—moving the property taxes to record the revenue in the bondconstruction fund versus the—the General Fund essentiallychanges the landing point on the books where that goes to.Regardless of which one—which fund it goes into, we then have todo an allocation, because the debt service is paid in the GeneralFund, the capital is paid in the bond construction fund. Sodepending on what that allocation that the financial analysis andprojects folks do in the—in the coverage fund, they determinewhat that split is, so one way or another we have to make atransfer, either under the old system where it was recorded in theGeneral Fund, we had to transfer the capital piece over toCompany 150 [Bond Construction Fund], or now what we do is wecalculate the debt service piece and we can transfer that out of 150over into 100 [General Fund]. So we’re still doing a transfer andwe’re still paying for both types of costs, we’ve just changed thatlanding point, essentially.
(ER 1834 [quoting Burket Dep. 102:3-20]; see also ER 49, n. 112).
Despite this explicit disavowal of any significance to the budgeting of the
Port’s property tax revenues in his deposition, the Port and Mr. Burket came to
contend that the change in budgeting shields property tax revenues from
General Fund expenditures. Not only is this contrary to the Port’s prior Rule
30(b)(6) testimony, but it is also at odds with its other theory that the Port’s tax
revenues are somehow shielded within the Coverage Fund, an internal
management cash tracking fund within in the General Fund.
The Port is nevertheless bound by its Rule 30(b)(6) testimony and, thus,
its contrary arguments concerning the Bond Construction Fund fail as a matter
of law. See Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792, 798 n. 4
(9th Cir. 2003) (citing Fed. R. Civ. P. 30(b)(6)); Turner Constr. Co. v. Nat’l
44
Am. Ins. Co., Inc., 2004 WL 6066675, at *4 (N.D. Cal. Sept. 20, 2004) (quoting
Poole v. Textron, Inc., 192 F.R.D. 494, 504 (D. Md. 2000)). For this reason, the
Port has failed to refute in any way the essential, undisputed facts that the
Program payments were drawn from the General Fund, which contained
commingled property taxes.
Assuming Arguendo That the Port Adequately Segregated itsB.Property Tax Revenues, the Port’s Operating Income is NonethelessInsufficient to Offset its Operating Expenses and, Thus, the PortMust Have Used Other General Fund Monies, Which IncludedCommingled Taxes, to Pay for the Programs.
1. Operating Income Statements are the Proper Documents forDetermining Whether or Not the Port Could Fund thePrograms Completely From its Non-Tax OperatingRevenues.
The Port asserted at trial that the Programs have been or will be funded
completely from and expensed against the Port’s non-tax operating revenues.
(ER 1390). In determining the validity of this assertion, the principal evidence
to be examined includes the operating income statements produced by the Port
during discovery. (See id. 549-574, 341-54, 365-365). Operating income
statements measure “whether the proprietary fund is economically better off as
a result of the events and transactions that have occurred during the fiscal
period reported,” or, in other words, whether the Port made a profit or net
income, which is needed to have a source of money to fund the Programs. (Id.
45
40, 984-88). In considering whether an entity is better off, “transactions and
events that improve the economic position of proprietary funds are reported as
revenues or gains, and transactions and events that diminish the economic
position . . . are reported as expenses or losses.” (Id. 985) (emphasis original).
Thus, to determine whether the Port drew on other sources in its General
Fund, which includes commingled property taxes, the Port must generate
positive operating income (revenue minus expenses). (Id. 40). If operating
income is negative (an operating loss), the losses must be made up from the
Port’s other General Fund monies, which include property taxes and other non-
operating revenues. In other words, if net income or profit is insufficient to fund
an expense, then whatever cash source is used must ultimately be made up from
other monies in the General Fund. Accordingly, the Port needed to have proved,
to support its theory, that it had sufficient net income from its operating
activities in order to avoid the inevitable conclusion that it drew, will draw, and
could draw on its property tax dollars within the General Fund to pay for the
Programs. (See id. at 21). There was no evidence at trial for the Port to show
this.
46
2. Operating Expenses Exceeded Operating Revenue in AllRelevant Levels of Analysis Identified by the Port: (1) thePort’s Marine Division, (2) the Port’s Container BusinessLine, and (3) the Port’s T6 Business Units.
The Port’s stated claim of funding the Programs from non-tax operating
income flies in in the face of the financial data for the relevant three levels of
business operations in question: (1) Marine Division operating revenue, the
broadest level; (2) Container Business Line; and (3) T6 Business Units, the
most narrow level. It has produced Operating Income Statements for all three
levels. The Container Business Line includes the expenses and revenues
relating to the Terminal 6 leasehold with ICTSI as well as other expenses
relating to container operations at Terminal 6 that the Port contends do not
relate directly to the leasehold. (ER 201). The T6 Business Units include the
expenses and revenues the Port contends solely relate to the ICTSI leasehold.
(Id. at 967).
Regardless of which level is analyzed, however, the undisputed evidence
shows that the Port lacked sufficient operating revenue to cover its total
operating expenses, which include the disputed payments under the Programs,
and thus, the Port must draw on other General Fund monies, which include
commingled property taxes.
The Operating Income Statements for the Port’s Marine Division show a
negative operating income for 2010-2013. (Id. at 1375). Specifically, expenses
47
exceeded revenues by $13,758,605, $7,497,424, $6,014,817, and $7,566,082,
respectively for 2010, 2011, 2012, and 2013. (Id.). Thus, no operating income
was generated in the Marine Division from which the Port could expense all of
its payments under the Programs.
Similarly, the Operating Income Statements for the Port’s Container
Business Line, also show negative operating income for 2011-2013.5 (Id. at 41,
64). Expenses for this business line exceeded revenues by $8,574,250,
$3,584,268, and $8,651,862 respectively for 2011, 2012, and 2013. Likewise,
no operating income was generated in the Container Business Line from which
the Port could expense all of its payments under the Programs.
Finally, the Operating Income Statements for the Port’s T6 Business
Units, which assess “ongoing operating expenses directly related to the T6
container leasehold that are not reimbursed by ICTSI,” show negative operating
income for 2011-2013.6 (Id. at 41, 65). Expenses for the T6 Business Units
exceeded revenues by $1,379,554, $1,070,818, and $7,371,216, respectively,
for 2011, 2012, and 2013. (Id.). Because “the ICTSI leasehold generates less
revenue to the Port than the expenses the Port bears in connection with the
5 No data is available for 2010.6 No data is available for 2010.
48
lease, [] there is no operating income from the leasehold itself with which to
fund the Programs.”7 (Id. at 40).
For this reason, under any level of analysis, the Port lacked sufficient
income to fund the Programs without drawing upon its other General Fund
monies, which include property taxes.8
3. The Port’s T6 Fund Did Not Represent a Source of Fundingfor the Programs Separate From Property Taxes.
Late in the course of litigation, the Port began to assert that the Programs
are funded solely from non-tax, operating revenues from the so-called, “T-6
fund.” However, the following undisputed facts, (see generally ER 31-32),
establish that the Port’s T6 fund does not represent a source of funding for the
programs separate from property taxes:
(1) The T6 Fund is not an accounting record and not subject toaccounting rules or any other documented set of rules, guidelines,or conventions. (Id. at 43-48).
(2) The T6 Fund is an informal or “management tracking” fund not alegal fund. (Id.).
(3) The T6 Fund was set up to fund capital expenditures, not operatingcosts. (Id.).
7 Even the General Fund in the Port’s audited financial statementsreflects net losses for the period 2010 through 2012. (ER 66.) Because theGeneral Fund includes the property tax revenues, the Port’s operating expensesexceeded both its operating and non-operating revenues. (Id.)
8 A financial management fund, like the T6 Fund, only looks at cashflows and does not establish whether the source of the case was earnings fromoperating activities as opposed to property taxes. (ER 43-52).
49
(4) There is a lack of consistency in the mechanics that determine thesources and uses of the T6 Fund. (Id.).
(5) The $8 million initial deposit to the T6 Fund was from the sale ofcapital assets, which, according to the Port’s policy regarding theuse of property taxes, were likely funded at least in part withproperty tax monies. (Id. at 47-50).
(6) The T6 Fund tracks cash flows, not operating income, and istherefore not relevant to determining whether the Port hadsufficient revenues to fund the Programs. (Id. at 47-52).
In sum, the “T-6 Fund” does not exist in the audited accounting records of the
Port, does not represent a segregation of assets within the financial statements
of the Port, and does not represent operating revenues that the Port has
discretion to spend. It simply is whatever the Port wants it to be on any given
day, which changes as the Port chooses. Thus, the “T-6 fund” utterly fails to
serve as any meaningful protection or screen from the use of the portion of tax
revenues that comprise the General Fund.
4. The Port Could Have Drawn on Further Tax Revenues toFund the Programs.
Assuming the Port, as it claims, somehow used monies from the so-called
“T-6 Fund” to pay for the Programs, this would still necessarily have exposed
the Port to likely having to draw from tax revenues to back-fill such lost monies
given to the private companies. The Port’s stated policy is that it uses its
property taxes for capital expenditures, including the rolling stock sold to ICTSI
and the other assets it leases to ICTSI. (See, e.g., ER 675-77). The Port has
50
further stated that it initially set aside monies obtained from ICTSI transactions
and rent, the so-called “T-6 fund” to pay to replace or repair the rolling stock,
which it intends to purchase back from ICTSI at the end of the lease, and other
assets it leases to ICTSI. (Id. at 46-48, 50-51, 136, 137, 565, 678-685, 968-73).
It is these monies that the Port claims to be shifting from possible future capital
expenditures to current payments under the Program. (Id. at 47, 51). As Mr.
Wyatt explained:
Q Did you consider that the revenue from the lease itself may have—may need to be used for other purposes?
A Certainly. We would much prefer to have used those revenues forother purposes, but those other purposes are going to have to wait.
(Id. at 168).
The Programs have, therefore, prevented the Port from saving monies
earned from its ICTSI lease to cover these likely future expenses of repair and
replacements of its capital investments. In other words, for every dollar it takes
from savings for capital expenditures in order to cover the payments to the
private companies under the Programs, the Port will eventually have to
replenish the depleted savings for the eventual cost of replacement and repair of
the rolling stock and other assets. When the Port makes these expected capital
expenditures, it will then have to use other monies from the General Fund,
which include tax revenues, to cover the expenses. The potential of having to
draw on tax monies is heightened by the Port’s established policy of using tax
51
monies to fund capital expenditures. Thus, the Port was at risk of drawing on its
tax revenue as a consequence of it using T-6 capital expenditure savings for the
Programs.
CONCLUSION
For the foregoing reasons, the ILWU respectfully asks this court to
reaffirm the principles it established in Carruthers. Irrespective of whether
there are certifications or waivers in place, in whatever combination, all four
Carruthers requirements must be written into authorizing legislation and
contracts with private recipients of public monies. The Port’s Subsidy Programs
did not, as Carruthers requires, (1) prohibit both the Port and the private
companies from drawing on and claiming against tax revenue; (2) provide that
only the Port’s enterprise revenue generated from its business with the private
companies would be used to fund the subsidies, (3) wholly and unconditionally
assume financial liability for third-party claims under the Subsidy Programs,
and (4) provide for accounting for payments through a “special fund” to
insulate Carrier-related revenue and subsidies. 249 Or. at 337-40. All four
requirements must be satisfied to survive Article XI, section 9 scrutiny and to
provide adequate assurances to taxpayers that tax revenue is not exposed for
private benefit. None were met here, and, thus, the Port’s subsidy programs
violated the Oregon Constitution.
52
Respectfully Submitted,
Date: April 7, 2017 SCHWERIN, CAMPBELL, BARNARD,IGLITZIN AND LAVITT, LLP
By: s/Robert H. LavittRobert H. Lavitt (OSB No. 40083)18 West Mercer Street, Suite 400Seattle, WA 98119-3871T: (206) 257-6004F: (206) 257-6039lavitt@workerlaw.com
LEONARD CARDER, LLP
By: s/Andrew J. ZiajaAndrew J. Ziaja (Cal. SB 262283 )Emily M. Maglio (Cal. SB 267190)1330 Broadway, Suite 1450Oakland, CA 94612T: (510) 272-0169aziaja@leonardcarder.comemaglio@leonardcarder.com
53
COMBINED CERTIFICATE OF COMPLIANCE WITH BRIEF
LENGTH AND TYPE SIZE REQUIREMENTS, AND CERTIFICATES
OF FILING AND SERVICE
I certify that this brief complies with the word-count limitation in ORAP
5.05, which word count is 12,385, excluding the items listed in ORAP
5.05(1)(a).
I certify that the size of the type in this brief is not smaller than 14 point
for both the text of the brief and footnotes.
I certify that I filed this brief with the Appellate Court Administrator on
this date.
I certify that service of a copy of this brief will be accomplished on the
following participant(s) in this case, who is a registered user of the appellate
courts’ eFiling system, by the appellate courts’ eFiling system at the
participant’s email address as recorded this date in the appellate eFiling system:
Randolph C. Foster, OSB No. 784340rcfoster@stoel.comJeremy D. Sacks, OSB No. 994262jeremy.sacks@stoel.comSTOEL RIVES LLP760 SW Ninth Avenue, Suite 3000Portland, OR 97205T: (503) 224-3380
Attorneys for Defendants Port of Portland, Commissioners of the Port of
Portland and Bill Wyatt
///
///
54
Gregory J. Miner, OSB No. 86247gminer@batesmanseidel.comBATEMAN SEIDEL MINER BLOMGREN CHELLIS & GRAM, PC888 SW Fifth Avenue, Suite 1250Portland, OR 97204T: (503) 972-9932Attorneys for Defendant Bruce A. Holte, in his individual official capacity as a
commissioner for Defendant Port of Portland
Signed,
Date: April 7, 2017 SCHWERIN, CAMPBELL, BARNARD,IGLITZIN AND LAVITT, LLP
By: s/Robert H. LavittRobert H. Lavitt (OSB No. 40083)18 West Mercer Street, Suite 400Seattle, WA 98119-3871T: (206) 257-6004F: (206) 257-6039lavitt@workerlaw.com
LEONARD CARDER, LLP
By: s/Andrew J. ZiajaAndrew J. Ziaja (Cal. SB 262283 )Emily M. Maglio (Cal. SB 267190)1330 Broadway, Suite 1450Oakland, CA 94612T: (510) 272-0169aziaja@leonardcarder.comemaglio@leonardcarder.com
top related