Alco Parking Corp. v. Pittsburgh , 453 Pa. 245 ( 1973 )

Opinion by

Mr. Justice Roberts,

This controversy presents the interesting and novel question of whether the enactment, by a municipal government, of a 20 percent gross receipts tax upon all non-residential, commercial parking facilities in that municipality, combined with direct governmental competition in the form of a public parking authority, charging lower rates, has resulted in an unconstitutional taking and confiscation of private property without due process of law.

Appellants are twelve owners and operators of parking lots and garages representing approximately 71 percent of the total commercial parking spaces in downtown Pittsburgh. On February 20, 1970, appellants filed a complaint in equity in the Allegheny County Court of Common Pleas seeking to restrain the City of Pittsburgh (appellee) from enforcing the provisions of Ordinance No. 704 (Parking Tax Ordinance), and seeking a refund of all taxes paid thereunder. The Parking-Tax Ordinance, approved by the Pittsburgh City Council on December 31, 1969, and enacted pursuant to the Local Tax Enabling Act, Act of December 31, 1965, P. L. 1257, §§1 et seq., 53 P.S. §§6901 et seq., imposed a tax of 20 percent on the gross receipts of all nonresidential commercial parking transactions within the city limits.

This Parking Tax Ordinance (No. 704) superseded and replaced Ordinance No. 675, enacted by the City of Pittsburgh in 1968 establishing a gross receipts tax of 15 percent on all non-residential commercial parking transactions in the city. Ordinance No. 675, in turn, had replaced Ordinance No. 434, which had originally established the gross receipts tax rate of 10 percent.

In their complaint in equity appellants asserted (1) that the Parking Tax Ordinance was so excessive and unreasonable that it amounted to a confiscation of appellants’ property without due process of law, and (2) that the Ordinance violated Article VIII, Section 1 of the Pennsylvania Constitution,¹ and the equal protection clause of the Fourteenth Amendment of the United States Constitution in that the city had no reasonable basis for separately classifying appellants’ commercial parking operations for the purpose of taxation. After a trial the Allegheny County Court of Common Pleas issued a Decree Nisi, on March 19, 1971, dismissing appellants’ complaint, having found no taking of property without due process, and no violation of either the Pennsylvania or the United States Constitutions. Appellants’ timely filed exceptions to the decree were dismissed by the court en banc on July 11, 1971, whereupon a final decree was entered.

Appellants then appealed to the Commonwealth Court which affirmed the decree of the common pleas court on June 8, 1972, by a vote of four to three. Appellants’ petition for rearguinent was granted by the Commonwealth Court on June 29, 1972. However, after reargument the Commonwealth Court adhered to its prior decision, affirming the chancellor’s decree on October 10, 1972. Subsequently, on November 6, 1972, appellants filed a petition for allowance of appeal with this Court. That petition was granted on January 23, 1973. We now reverse and remand.

I.

Appellee, the City of Pittsburgh, contends, initially, that this Court lacks jurisdiction to hear this appeal because appellants’ petition for allowance of appeal was not timely filed. See Nardo v. Smith, 448 Pa. 38, 292 A. 2d 377 (1972). Consequently appellee has moved to quash this appeal. In its motion to quash appellee alleges that appellants’ petition for allocatur was not filed until November 6, 1972, almost five months after the issuance of the final order and opinion of the Commonwealth Court of June 8, 1972—clearly not within the 30-day time limit for perfecting an appeal as provided by statute. See Act of July 31, 1970, P. L. 673, art. Y, §502, 17 P.S. §211.502 (Supp. 1972).

Appellee’s contention is that the grant of the petition for reargument by the Commonwealth Court on June 29,1972 (within the 30-day appeal period), unless accompanied by an order staying the proceedings, does not toll the 30-day period within which appellants must file their appeal. See Francis v. J. A. Brashear M. School Dist. 435 Pa. 589, 258 A. 2d 509 (1969); Smith v. Jones, 369 Pa. 13, 85 A. 2d 23 (1951); Erie v. Piece of Land, 341 Pa. 310, 17 A. 2d 399 (1941). Since no such specific stay of the proceedings was issued by the Commonwealth Court, appellee asserts that the time for perfecting the appeal expired 30 days after the original June 8, 1972 order of the Commonwealth Court, regardless of that court’s grant of reargument within the 30-day period.

Appellants contend that in good faith, after reargument had been granted, they contacted the Prothonotary of the Supreme Court who advised them that a petition for allocatur should not be filed until after the Commonwealth Court’s order, following reargument, had been entered. Relying upon this information appellants did not file their petition until November 6, 1972—a date within 30 days of the Commonwealth Court’s order, after reargument, affirming the decree below.

While appellants may not have been justified in relying on the legal advice of a court official, nevertheless the rule of law urged upon this Court by the appellee is not only contrary to logic but to the laws of physics as well. The granting of a petition for reargument within the 30-day appeal period necessarily indicates an intention by the granting court to stay the proceedings, and is in reality such a stay, in order to keep the record before that court, during reargument, pending any change or modification of the court’s initial order after reargument. In these circumstances to require appellants to file a petition for allowance of appeal within 30 days of the original order of the Commonwealth Court would have the effect of placing them in two courts at the same moment. It is legally and physically impossible for the record in any case to be pending before two separate appellate courts of this Commonwealth simultaneously. Indeed, a reargument is clearly a reconsideration by a court of a particular case. To slavishly adhere, as the appellee insists, to a rule requiring a court to also issue an order staying the proceedings would be needlessly elevating mere form over substance.

Certainly it is illogical, as well as senseless, to require a litigant to file an appeal, or petition for allowance of appeal, to a second appellate court while his case is still pending before the first appellate court, about to reconsider his case. To compel him to do so in advance of the reargument is indeed a useless, wasteful, and premature procedure. Assuming the court’s initial decision is reversed upon reargument, the litigant may not even desire to file an appeal at the later time. If an appeal is desired after the reargument, that is the appropriate time for setting the appeal procedure in motion. This Court will not mandate such a purposeless burden and expenditure of professional and judicial time and effort.

These considerations lead us inexorably to the conclusion that where, as here, the Commonwealth Court granted appellants’ petition for reargument within the prescribed period, the proceedings were thereby stayed, pending a reconsideration upon the merits after reargument. Appellants’ petition, filed within 30 days of the Commonwealth Court’s post-reargument disposition, was therefore timely. The motion to quash the appeal is denied. To the extent that any prior decisions of this Court are inconsistent with this holding they are no longer controlling.

II.

Appellee urges upon this Court one additional procedural objection contending that the Allegheny County Court of Common Pleas sitting in equity was not the proper court to hear this case. Appellee urges that a proceeding in equity is only proper in challenges to taxing statutes or ordinances when there is “a substantial question of constitutionality . . . and the absence of an adequate statutory remedy.” Rochester and Pittsburgh Coal Co. v. Indiana County Board of Assessment, 138 Pa. 506, 266 A. 2d 78 (1970).² The City of Pittsburgli argues that the issues raised by appellants are not “substantia! constitutional questions” and that appellants had a specific statutory remedy of which they failed to avail themselves. See Local Tax Enabling Act, Act of December 31, 1965, P. L. 1257, §6, as amended, 53 P.S. §6908.³

However, appellee did not raise this issue below and may not raise this issue here for the first time. The record clearly discloses that appellee interposed no objection to the propriety of the equity court proceeding either prior to, during, or after the trial below. In fact, one of the chancellor’s express conclusions of law, to which appellee took no exception was: “This court Sitting in equity has jurisdiction of the parties and of the subject matter of this proceeding.” This Court has repeatedly emphasized, and it is now beyond cavil, that “we will not review questions that were neither raised, tried, or considered in the trial court.” Robert J. Felte, Inc., v. White, 451 Pa. 137, 302 A. 2d 347 (1973); Heppe Estate, 440 Pa. 328, 269 A. 2d 687 (1970); Man O’War Racing Ass’n, Inc. v. State Horse Racing Commission, 433 Pa. 432, 250 A. 2d 172 (1969); Brenner v. Sukenik, 410 Pa. 324, 189 A. 2d 246 (1963); Clark v. Rutecki, 408 Pa. 25, 182 A. 2d 687 (1962); Bechler v. Olivia, 400 Pa. 299, 161 A. 2d 156 (1960); Rosenfeld v. Rosenfeld, 390 Pa. 39, 133 A. 2d 829 (1957).

III.

Proceeding to the merits of the case, appellants attack the constitutionality of the Parking Tax Ordinance on two grounds. They first contend that the Ordinance 'violates both the uniformity clause of the Pennsylvania Constitution and the equal protection clause of the Fourteenth Amendment of the United States Constitution. Specifically appellants assert that the Ordinance “constitutes an arbitrary use of the taxing power by [Pittsburgh] City Council in that the imposition of a separate tax on the parking business, in addition to its regular taxes, lacks any reasonable basis.” Moreover, appellants contend that merely because the City could, under its police power, classify the parking business separately for regulatory purposes, it does not necessarily follow that they can separately classify the parking business for purposes of taxation.

This argument, presented to and rejected by this Court on numerous prior occasions, must, once again, be rejected. It is well established that the Commonwealth and its political subdivisions, in the exercise of the taxing power, are subject to the requirements of equal protection and. uniformity. See Allied Stores of Ohio, Inc. v. Bowers, 358 U.S. 522, 79 S. Ct. 437 (1959); Commonwealth v. Life Assurance Co. of Pa., 419 Pa. 370, 214 A. 2d 209 (1965). However, the taxing authority must hy necessity possess wide discretion for purposes of taxation of various businesses or occupations. Commonwealth v. Life Assurance Co. of Pa., supra at 376, 214 A. 2d at 214, and the cases cited therein.

In Life Assurance Co., supra, this Court noted:

“The equal protection clause imposes no iron rule of equality prohibiting that degree of flexibility and variety appropriate to reasonable schemes of taxation. Allied Stores of Ohio, Inc. v. Bowers, 358 U.S. 522, 525, 79 S. Ct. 437, 440 (1959).

“The only constitutional limitation placed upon the power of the Legislature to distinguish between various entities for purposes of taxation is that their basis for doing so be reasonable. See Allied Stores of Ohio, Inc. v. Bowers, supra, at 527, 79 S. Ct. at 441; State Bd. of Tax Comm’rs of Indiana v. Jackson, 283 U.S. 527, 537, 51 S. Ct. 540, 543 (1931); Brown-Forman Co. v. Kentucky, 217 U.S. 563, 572, 30 S. Ct. 578, 580 (1910); Jones & Langhlin Tax Assessment Case, 405 Pa. 421, 433-34, 175 A. 2d 856, 862 (1961); Commonwealth v. Lukens, 312 Pa. 220, 223, 167 Atl. 167, 169 (1933). And the burden of showing that the classification employed by the Legislature is not reasonable is upon the party attacking the tax. Cf. Chartiers Valley Jt. Schools v. Allegheny County Bd. of School Dir's, 418 Pa. 520, 546, 211 A. 2d 487, 501 (1965). ‘Especially is this so in light of the often reaffirmed rule that. . . “ ‘[legislation] will not be declared unconstitutional unless it clearly, palpably and plainly violates the Constitution.”” Ibid. (Citations omitted.)” Id. at 376-77, 214 A. 2d at 214.

Moreover, the burden of proving the classification is unreasonable is a heavy one. Amidon v. Kane, 444 Pa. 38, 51, 279 A. 2d 53, 60 (1971); F. J. Busse Co. v. Pittsburgh, 443 Pa. 349, 359, 279 A. 2d 14, 19 (1971); Philadelphia v. Depuy, 431 Pa. 276, 279, 244 A. 2d 741, 743 (1968). “So long as the classification imposed is based upon some standard capable of reasonable comprehension, be that standard based upon ability to produce revenue or some other legitimate distinction, equal protection of the law has been afforded.” Commonwealth v. Life Assurance Co. of Pa., supra at 378, 214 A. 2d at 215. Merely because “a statute may discriminate in favor of a certain class does not render it arbitrary if the discrimination is founded upon a reasonable distinction, or difference in state policy. American Sugar refining Co. v. State of Louisiana, 179 U.S. 89, 21 S. Ct. 43.” Allied Stores, supra at 528, 79 S. Ct. at 441. Thus a tax based on a reasonable classification is not unconstitutional because one class may be placed at a competitive disadvantage. Williams and Co., Inc. v. Pittsburgh School District, 430 Pa. 509, 514, 244 A. 2d 37, 39 (1968).

The determinative question, then, is whether the classification imposed by the Parking Tax Ordinance is a reasonable one. We said in Commonwealth v. Life Assurance Co. of Pa., supra at 378-79, 214 A. 2d at 215 that: “. . . the essential question in testing the validity of such measures ... is whether the distinctive treatment accorded rests upon substantial differences between the subjects so classified. . . . And where such distinctions rest upon differences recognized and acted upon by the business world, it is not within the province of the courts to intrude. ... So long as the classification is neither capricious nor arbitrary, there is no denial of the equal protection of the law. ...” (Citations omitted).

This Court has in the past sustained numerous types of distinctive tax treatment of a wide diversity of businesses and occupations. See, e.g., Commonwealth v. Lafferty, 426 Pa. 541, 233 A. 2d 256 (1967) (contract carrier taxed differently from common carrier although engaged in similar enterprises); Allentown School District Mercantile Tax Case, 370 Pa. 161, 87 A. 2d 480 (1952) (retailers and wholesalers taxed differently); DuFour v. Maize, 358 Pa. 309, 56 A. 2d 627 (1948) (strip mining of coal taxed differently than deep mining of coal). Moreover, in 1940, this Court sustained the validity of a Philadelphia ordinance which distinguished open parking places from closed garages for the purpose of taxation. Philadelphia v. Samuels, 338 Pa. 321, 12 A. 2d 79 (1940); see also McGillick v. City of Pittsburgh, 415 Pa. 581, 203 A. 2d 480 (1964); Philadelphia v. Eglin’s Garages, Inc., 342 Pa. 142, 19 A. 2d 845 (1941).

Commercial parking lots are without question a proper subject for local, municipal taxation. The City of Pittsburgh has decided, not without reason, that commercial parking operations should he singled out for special taxation to raise revenue because of traffic related problems engendered by these operations. This Court cannot say that placing such businesses in a separate taxable class is, ipso facto, an action so devoid of any reasonable basis as to constitute a violation of either the equal protection clause of the United States Constitution or the uniformity clause of the Pennsylvania Constitution.⁴ . . [W] here the state seeks to raise revenue, it need not justify any distinction drawn between the taxed and nontaxed with respect to the raising of revenue so long as some other reasonable basis for treating the various classes differently exists. Where such distinction exists, the wisdom of the legislative policy of taxing one class and not another is not a matter for the courts. ‘Whether the enactment is wise or unwise, whether it is based on sound economic theory, whether it is the best means to achieve the desired result, whether in short, the legislative discretion within its prescribed limits should be exercised in a particular manner, are matters for the judgment of the legislature, and an earnest conflict of serious opinion does not suffice to bring them within the range of judicial cognizance.’ Chicago, Burlington & Quincy R. Co. v. McGuire, 219 U.S. 549, 569, 31 S. Ct. 259, 263 (1911).” Commonwealth v. Life Assurance Co. of Pa., supra at 377-78 n.11, 214 A. 2d at 215 n.11.

IY.

Appellants’ second avenue of attack is that the Parking Tax Ordinance, coupled with direct economic competition by the Public Parking Authority, created with public funds (see Price v. Philadelphia Parking Authority, 422 Pa. 317, 335, 221 A. 2d 138, 148 (1966)), ¡violates the due process clause of the Fourteenth Amendment of the United States Constitution. Specifically appellants maintain that the ordinance imposes a rate so excessive and unreasonable in light of the direct governmental competition, that it amounts to a confiscation of property without just compensation. Because of the alleged excessive and unreasonable rates, in these circumstances, appellants assert that the vast majority of parking lot owners and operators can no longer afford to remain in business. Additionally they argue that even those owners who are still not operating at a loss are not earning a reasonable return. This compíete inability to earn a reasonable return on investments is allegedly due to the combined effects of the 20 percent gross receipts tax and the competition from the Public Parking Authority, which charges lower rates. For example, the record establishes that the average all-day rate for the Public Parking Authority is about $2.00, while the average all-day rate for private operators is approximately $3.00.

In support of their contention appellants introduced at trial numerous statistical charts and compilations seeking to establish the unconstitutional impact of the gross receipts tax. A brief summary of this evidence shows the following.

After the imposition of the 20 percent gross receipts tax appellants’ projected⁵ figures for 1970 show that out of 34 different parking lot operators in downtown Pittsburgh nine would sustain operating losses. Of the five operators earning a profit only two would achieve a return of one percent or better. The highest return projected for any of the 14 operators in 1970 was 2.9 percent.

Moreover, the evidence produced by appellants indicates that as the gross receipts tax increases from the original 10 percent to the present 20 percent the percentage and number of parking lots unable to achieve any profit doubles. Again based on projections for 1970, when compelled to pay the 20 percent gross receipts tax, 65 percent of the individual lots would sustain operating losses. If the tax had remained at 15 percent, only 37 percent of the lots would fail to earn a profit. If the tax was reduced to its original 10 percent then only 30 percent of the lots would sustain losses.

The chancellor, upon evaluating the evidence presented, held that appellants had failed to meet their heavy burden of establishing the tax was confiscatory.⁶ Therefore, the chancellor concluded the Parking Tax Ordinance was not confiscatory or a taking without due process.⁷ He noted that even though “a few borderline operations may fall by the way” the tax is not necessarily confiscatory. The Commonwealth Court unanimously agreed that the tax was imposed at an unreasonable rate, but the majority concluded that although appellants as a group would sustain an operating loss under the unreasonably high tax, nevertheless “there is no constitutional prohibition of taxation at unreasonable or even confiscatory rates.” Alco Parking v. Pittsburgh, 6 Pa. Commonwealth Ct. 433, 441, 291 A. 2d 556, 561, aff’d on rehearing, 6 Pa. Commonwealth Ct. 433, 295 A. 2d 349 (1972). Moreover, the Commonwealth Court also unanimously agreed, contrary to the chancellor’s findings, that “appellants’ [sic] are unable to pass the tax on to their customers, not only because customers cannot and will not pay higher rates but also because the appellants are in competition with a public authority which, exempt from other taxes, can charge less.” Id. (Emphasis added).

Undoubtedly, if a tax is shown to be confiscatory it is utterly impermissible and a violation of the Constitution. See A. Magnano Co. v. Hamilton, 292 U.S. 40, 54 S. Ct. 599 (1934). This Court has been presented with similar allegedly excessive gross receipt taxes on parking lot operations on two prior occasions: Philadelphia v. Eglin’s Garages, Inc., 342 Pa. 142, 19 A. 2d 845 (1941); Philadelphia v. Samuels, 338 Pa. 321, 12 A. 2d 79 (1940). In both of those instances we held that the evidence presented by the parties attacking the taxing ordinance was insufficient to sustain a claim of confiscation without due process. However, neither case excluded the possibility that, upon a proper showing, a tax could be shown to be confiscatory. In Samuels and Eglin this Court indicated that two essential elements must exist before a tax can be held to be confiscatory. First, the taxpayer must show that more than “an occasional operator cannot afford to continue in business.” Samuels, supra at 327, 12 A. 2d at 82. Secondly, he must show that the tax cannot be passed on to the consumer. Eglin, supra at 144, 19 A. 2d at 845; Samuels, supra.

Appellants, on this record, have shown that more than “an occasional operator cannot afford to continue in business”. However, the chancellor found that appellants have made no significant attempt to pass the tax on to the consumer. As noted previously the Commonwealth Court was of the unanimous opinion that the tax could not be passed on to the consumer because of the competition from the Public Parking Authority. Clearly if the private parking lot operators attempted to pass the full burden of the tax on to the consumers they would only succeed in increasing the disparity in the already disparate rates. Por example, at the all-day rates shown in the record, if appellants were to attempt to pass the tax on to their patrons, their rates would increase from an average of $3.00 to $3.60, while a similar tax pass-on by the Public Parking Authority would increase their average rate from $2.00 to $2.40. Thus the differential in rates would increase from $1.00 to $1.20.

Even if appellants have not fulfilled the dual tests of Samuels and Eglin, nevertheless neither Samuels nor Eglin are completely applicable here, because neither case dealt with the precise issue involved in this case. Samuels and Eglin were disputes involving only one issue—whether a gross receipts tax, by itself, imposed a rate so unreasonable as to be confiscatory. The instant case, on the other hand, presents a significantly different and exceedingly more complex question. Here the allegedly excessive and unreasonable tax is combined with direct competition at lower rates from the Pittsburgh Parking Authority.

It is rare for courts to strike down tax legislation because the tax rate imposed is excessive. Yery few, if any courts have been willing to void a tax solely on the basis of an unreasonably high rale. Thus, in A. Magnano Co. v. Hamilton, 292 U.S. 40, 47, 54 S. Ct. 599, 602 (1934), the Supreme Court emphasized that the question of whether a tax is so excessive that it will bring about the destruction of a business is “a premise which, standing alone, this court heretofore has uniformly rejected as furnishing no juridical ground for striking down a taxing act.” (Emphasis added). See Stewart Dry Goods Co. v. Lewis, 294 U.S. 550, 562, 55 S. Ct. 525, 530 (1935); Alaska Fish Salting & By-Products Co. v. Smith, 255 U.S. 44, 48, 41 S. Ct. 219, 220 (1921). In this area courts have usually deferred to legislative bodies. See Stewart Dry Goods Co. v. Lewis, supra; Fox v. Standard Oil of New Jersey, 294 U.S. 87, 99, 55 S. Ct. 333, 338 (1935).

However, these same courts have acknowledged that in exceptional circumstances the taxing power of the Legislature may be abused, and, if so, it would violate both the Fifth and Fourteenth Amendments. In A. Magnano Co. v. Hamilton, supra, although upholding the constitutionality of a tax on all batter substitutes, the Supreme Court stated: “Except in rare and special instances, the due process of law clause contained in the Fifth Amendment is not a limitation upon the taxing power conferred upon Congress by the Constitution. Brushaber v. Union Pac. R. R., 240 U.S. 1, 24, 36 S. Ct. 236, 60 L. Ed. 493. And no reason exists for applying a different rule against a state in the case of the Fourteenth Amendment. . . . That clause is applicable to a taxing statute such as the one here assailed only if the act be so arbitrary as to compel the conclusion that it does not involve an exertion of the taxing power, but constitutes, in substance and effect, the direct exertion of a different and forbidden power, as, for example, the confiscation of property. . . . Nor may a tax within the lawful power of a state be judicially stricken down under the due process clause simply because its enforcement may or will result in restricting or even destroying particular occupations or businesses . . . unless, indeed, as already indicated, its necessary interpretation and effect be such as plainly to demonstrate that the form of taxation was adopted as a mere disguise, under which there was exercised, in reality, another and different power denied by the Federal Constitution to the state.” Id. at 44, 54 S. Ct. at 601 (emphasis added) (citations omitted). See Fox v. Standard Oil Co. of New Jersey, supra at 100, 55 S. Ct. at 338; Heiner v. Donnan, 285 U.S. 312, 326, 52 S. Ct. 358, 361 (1932); Nichols v. Coolidge, 274 U.S. 531, 541, 47 S. Ct. 710, 713 (1927); McCray v. United States, 195 U.S. 27, 63, 24 S. Ct. 769, 779 (1904).⁸

Moreover, when determining the validity of a tax courts must evaluate the nature and effect of that tax, not merely its name or description. “The substance and not the shadow determines the validity of the exercise of the [taxing] power.” Stewart Dry Goods Co. v. Lewis, supra at 555, 55 S. Ct. at 527. See Senior v. Braden, 295 U.S. 422, 429, 55 S. Ct. 800, 802 (1935).

This Court hag heretofore not had occasion to hold a tax to be so excessive and unreasonable as to compel the conclusion that it was not the proper exertion of taxation, but a confiscation of property. However, this Court has not previously had presented to it a controversy where the taxing body was in direct competition, as here, with private enterprise and simultaneously imposed a burdensome gross receipts tax on all competitors in that activity (including itself).⁹ This is undeniably a “rare and special instance”¹⁰ where the due process clause imposes strict constraints upon the exercise of the legislative taxing power.

As appellants emphasize it is doubtful that the state Legislature ever intended the public parting authorities utilizing public financing advantages, to compete directly with private parting operators in this fashion. In fact, the declaration of policy in the Parting Authority Law of 1947¹¹ specifically provides: “. . . That it is intended that the authority cooperate with all existing parting facilities so that private enterprise and government may mutually provide adequate parting services for the convenience of the public;” Act of June 5, 1947, P. L. 458, §2, as amended, 53 P.S. §342. Nonetheless, Pittsburgh parting operators are now not only denied the cooperation intended in the statute, but are actually confronted with direct, adverse competition from the Public Parting Authority.

Furthermore, the Public Parking Authority is blessed with certain other legislatively bestowed advantages and able, therefore, to charge lower rates. The Parking Authority is exempt from payment of all real estate taxes because of the exclusion given to public property used for public purposes.¹² Because lower interest rates are granted to municipal corporations seeking to borrow money, the Parking Authority is able to arrange cheaper and longer term financing. This also reduces significantly the rates charged by the Authority, and increases in intensity the degree and nature of its direct competition with the private parking lot operators. It is certainly undeniable that the Parking Authority is able to finance its site and construction costs through the attractive medium of long term, lower interest public financing, with all the benefits which attend such governmental arrangements, not available to private businessmen. See Price v. Philadelphia Parking Authority, 422 Pa. 317, 355, 221 A. 2d 138, 148 (1966). It is the combination of these factors which creates the extraordinary competitive advantage which the Public Parking Authority is able to exert over the non-governmental parking lot owners and operators.

Not only is the Parking Authority able to charge lower rates than private operators, but with the enactment of the 20 percent gross receipts tax the taxing-body now appropriates for itself practically all of the earnings of the private parking lot operators. By taking 20 percent of gross revenues “off the top” the City effectively confiscates what were formerly the earnings of the parking lot owners. This confiscation is practically as complete as if the Ctiy had condemned without compensation the private lots to erect public facilities.¹³ In this situation it is unnecessary for private lot operators to prove that they cannot pass the tax on to their customers (although as previously noted the Commonwealth Court found this was not possible). See Samuels, supra; Eglin, supra. Clearly by raising their rates the private operators would greatly increase the already significant rate differential between private and public parking lots. The public competition thus effectively prohibits private lot operators from increasing their rates and passing the tax on to their patrons, while the imposed tax appropriates whatever earnings were formerly produced. Where such an unfair competitive advantage accrues, generated by the use of public funds, to a local government at the expense of private property owners, without just compensation, a clear constitutional violation has occurred.¹⁴

This is admittedly a case of first impression in this Commonwealth. Traditionally governmental activities held to be unconstitutional takings of property without due process of law are restricted, for example, to the realm of zoning and eminent domain. However, no reason has been suggested why unconstitutional takings must necessarily be restricted only to this segment of the law. Indeed, this Court has held that “a ‘taking’ is not limited to an actual physical possession or seizure of the property; if the effect of the zoning law or regulation is to deprive a property owner of the lawful use of his property it amounts to a ‘taking’, for which he must be justly compensated:” Cleaver v. Board of Adjustment, 414 Pa. 367, 372, 200 A. 2d 408, 412 (1964) and cases cited therein.

Moreover, in determining what is a taking this Court may not allow form to prevail over substance. As the Supreme Court noted, “The substance and not the shadow determines the validity of the exercise of the power.” Stewart Dry Goods Co. v. Lewis, supra at 555, 55 S. Ct. at 527. Clearly “whether the government takes title or possession of the subject property is merely a matter of the form in which it chooses to proceed.” Sax, Takings and the Police Power, 74 Yale L.J. 36, 46 (1964). Here the City has appropriated most, if not all, the earnings of the private parking lot owners through the imposition of an excessive gross receipts tax. It has also enhanced the detriment to private property owners by creating its own publicly subsidized competition. This governmental enterprise competing with private industry adds not only a new and most significant dimension to the traditional constitutional problem of what constitutes a taking without due process but also an impermissible one.

It must be concluded that the unreasonably burdensome 20 percent gross receipts tax, causing the majority of private parking lot operators to operate their businesses at a loss, in the special competitive circumstances of this case, constitutes an unconstitutional taking of private property without due process of law in violation of the Fourteenth Amendment of the United States Constitution.

The order of the Commonwealth Court and the decree of the Allegheny County Court of Common Pleas are reversed and remanded to the Allegheny County Court of Common Pleas for proceedings consistent with this opinion to determine the nature and extent of the refund to which appellants may be entitled.

Each party to pay own costs.

Mr. Justice O’Bkien concurs in the result.

1 “All taxes shall be uniform, upon the same class of subjects, ¡within the territorial limits of the authority levying the tax, and ¡shall be levied and collected under general laws.” Constitution of Pennsylvania, Article VIII, Section 1.

2 Even if appeUee could raise this issue here for the first time (see text, p. 253, infra), its reliance upon Rochester and Pittsburgh Coal Co. v. Indiana, County Board of Assessment, 438 Pa. 506, 266 A. 2d 78 (1970), appears to be somewhat misplaced. The seminal case on the question of equity jurisdiction to hear challenges to tax legislation under the Local Tax Enabling Act (Act of December 31, 1965, P. L. 1257, §6, as amended, 53 P.S. §6906), is Lynch v. Owen J. Roberts School District, 430 Pa. 461, 244 A. 2d 1 (1968). In Lynch this Court held that while normally equity is without jurisdiction to enjoin enforcement of a tax not challenged at law under the applicable statute, an exception exists “where a taxing statute is made the subject of a constitutional challenge.” Id. at 465, 244 A. 2d at 3.

Rochester, decided two years later, apparently effected a sub silentio modification of Lynch by holding that equity only has jurisdiction when there is “a substantial question of constitutionality (and not a mere allegation) and the absence of an adequate statutory remedy.” Rochester, supra at 508, 266 A. 2d at 79. However, Rochester appears to have distinguished itself as sui generis. The majority there acknowledged that a different rule was necessary because, unlike Lynch, Rochester involved a real estate tax. The majority felt in those real estate tax situations it would be preferable for an administrative body with some expertise, such as the board of assessment, to assume jurisdiction rather than an equity court. Rochester, supra at 509, 266 A. 2d at 79.

Moreover in Crosson v. Downingtown Area School District, 440 Pa. 468, 475, 270 A. 2d 377, 380 (1970), this Court, while not returning completely to the preferable rule of Lynch, at least modified Rochester in holding that even “ ‘[wjhere there is an adequate remedy at law in this class of case, this Court has repeatedly said that Equity should intervene only where there is . . . an utter disregard of imperative constitutional requirements: [citations of authorities].”’ (Emphasis in original). See also Campbell v. Coatesville Area School District, 440 Pa. 496, 270 A. 2d 385 (1970).

3 It is not altogether clear that appellants could have proceeded under Section 6 of the Local Tax Enabling Act even had they so attempted. That section of the Act provides in pertinent part that: “No tax levied for the first time by any poUtical subdivision to which this act applies shall go into effect until thirty days from the time of the adoption of the ordinance or resolution levying the tax. Within said thirty days, taxpayers representing twenty-five percent or more of the total valuation of real estate in the political subdivision as assessed for taxation purposes, or taxpayers of the political subdivision not less than twenty-five in number aggrieved by the ordinance or resolution shall have the right to appeal therefrom to the court of quarter sessions of the county upon giving bond with sufficient security in the amount of five hundred dollars ($500), approved by the court, to prosecute the appeal with effect and for the payment of costs.” Act of December 31, 1965, P. L. 1257, §6, as amended, 53 P.S. §6906.

Certainly it is arguable whether Ordinance No. 704, merely raising the rate of a gross receipts tax already in existence since 1962, can be classified as “a tax levied for the first time,” under the terms of this section. Secondly, assuming appellants in good faith were unable to muster the requisite 25 aggrieved taxpayers, they were then apparently foreclosed from challenging the tax under this statute and arguably had no statutory remedy.

4 In Commonwealth v. Life Assurance Co. of Pa., 419 Pa. 370, 214 A. 2d 209 (1985), wo hold that the standards of the uniformity clause and of the equal protection clause are identical. The standard for uniformity under the Pennsylvania Constitution was further explicated in F. J. Busse Co. v. Pittsburgh, 443 Pa. 349, 279 A. 2d 14 (1971). There this Court said that the “test of uniformity is whether there is a reasonable distinction and difference between the classes of taxpayers sufficient to justify different tax treatment.” Id. at 358, 279 A. 2d at 19. See Amidon v. Kane, 444 Pa. 38, 46-48, 279 A. 2d 53, 58-59 (1971).

5 Appellants’ statistics for 1970 are based on actual revenues obtained for the first six months of 1970, and projections for the later six months based on revenues for those same months during 1969.

6 See Amidon v. Kane, 444 Pa. 38, 51, 279 A. 2d 53, 60 (1971); F. J. Basse v. Pittsburgh, 443 Pa. 349, 359, 279 A. 2d 14, 19 (1971); Philadelphia v. Depuy, 431 Pa. 276, 279, 244 A. 2d 741, 743 (1968).

7 Among the factors weighed by the cbanceUor in reaching his determination that the tax rate was not confiscatory were the following :

1. Plaintiffs’ statistics failed to include all parking lots in downtown Pittsburgh, serving to distort their financial projection.

2. Plaintiffs’ projection failed to compute net profits.

3. The demand for parking spaces in Pittsburgh exceeds the supply.

4. None of the plaintiffs have increased their rates since February, 1970.

5. Plaintiffs have not attempted to pass on the increased tax to the parking lot patrons.

Moreover, the chancellor noted that plaintiffs failed to carry their heavy burden of proof that there was no reasonable basis for the tax. Specifically, the evidence revealed that gross receipts remained constant between 1969 and 1970 despite the tax increase; peripheral parking lots still operated at a profit; and plaintiffs’ decreased rate of return was due at least in part to increased labor costs as well as increased tax liability.

Finally appellants contended that operating income less than ten percent of total revenues represented a confiscatory rate of taxation. The chancellor held that the court should not be asked to decide the question of what is a reasonable rate of return.

8 In McCray v. United States, 195 U.S. 27, 63, 24 S. Ct. 769, 779 (1904), the Supreme Court admonished that if a legislative power such as the taxing power were abused so as to destroy fundamental rights which no free government could consistently violate, it would be the duty of the judiciary to hold such acts to be void upon the assumption that the Constitution forbade them. “Let us concede that if a case was presented where the abuse of the taxing power was so extreme as to be beyond the principles which we have previously stated, and where it was plain to the judicial mind that the power had been called into play, not for revenue, but solely for the purpose of destroying rights which could not be rightfully destroyed consistently with the principles of freedom and justice upon which the Constitution rests, that it would be the duty of the courts to say that such an arbitrary act was not merely an abuse of a delegated power, but was the exercise of an authority not conferred.” Id. at 64, 24 S. Ct. at 780.

9 As of this writing, the Allegheny County Court of Common Pleas has ruled that the Public Parking Authority is exempt from payment of the challenged gross receipts tax. Public Parking Authority of Pittsburgh v. City of Pittsburgh, No. 687, July Term, 1972. See Allegheny County v. Moon Township, 436 Pa. 54, 258 A. 2d 630 (1969). An appeal is presently pending before the Commonwealth Court.

However, whether the Public Parking Authority is subject to the tax seems to make little real difference in the context of this present dispute. Even if the Authority had to pay the tax to the City it would mean only in reality an accounting transaction, transferring dollars from one pocket of an instrumentality of City government to another. Thus although appellants’ argument would be strengthened by the common pleas court's decision, we need not presently rest our decision upon Public Parking Authority of Pittsburgh v. City of Pittsburgh, supra.

10 A. Magnano Co. v. Hamilton, 292 U.S. 40, 44, 54 S. Ct. 599, 601 (1934).

11 Parking Authority Law, Act of June 5, 1947, P. L. 458, §§1 et seq., as amended, 53 P.S. §§341 et seq.

12 See generally Allegheny County v. Moon Township, 436 Pa. 54, 258 A. 2d 630 (1969).

13 It is noted that while this appeal was pending before this Court the City of Pittsburgh enacted a Parking Tax Ordinance superseding tlie present, challenged Ordinance. The new Ordinance was scheduled to take effect April 1, 1973. This new Ordinance provides for the imposition “of a tax of 20 percentum (20%) upon the consideration paid 6y the patrons of a non-residential parking place for each parking transaction, to he collected from the patron hy the operator of each such non-residential parking place; . . .” Ordinance No. 30, January 26, 1973 (emphasis added).

14 See Sax, Takings and the Police Power, 74 Vale L.J. 36 (1934). Professor Sax has suggested a test for determining when just compensation is due private property owners as a result of governmental activity. In Professor Sax’s view government interacts with the private sector in two ways. First, government “governs,” i.e., “it mediates the disputes of various citizens and groups within the society” and “resolves the conflict among competing and conflicting alternatives.” Id. at 62. Secondly, government acts in an enterprise capacity in which it acquires economic resources for its own account and thereby competes with private industry. Id.

Professor Sax states that: “. . . when economic loss is incurred as a result of government enhancement of its resource position in its enterprise capacity, then compensation is constitutionally required; it is that result which is to be characterized as a taking. But losses, however severe, incurred as a consequence of government acting merely in its arbitral capacity are to be viewed as a non-compensable exercise of the poUce power.” Id. at 63.

More specifically he adds: “. . . when an individual or limited group in society sustains a detriment to legally acquired existing economic values as a consequence of government activity which enhances the economic value of some governmental enterprise, then the act is a taking, and compensation is constitutionally required; but when the challenged act is an improvement of the public condition through resolution of conflict within the private sector of the society, compensation is not constitutionally required.

“To be sure, the acquisition of title or the taking of physical possession will be present in the great majority of taking cases under this theory. But—and this is the important point—the presence or absence of a formal title-acquisition and/or invasion will never be conclusive. These formalities are not necessarily present when the government, as an enterpriser, is acquiring resources for its own account.” Id. at 67.

Such an approach is indeed logical, and facilitates our analysis here. Clearly the City of Pittsburgh is acting in an enterprise capacity by operating a publicly financed parking lot which competes with private industry. To the extent that the Public Parking Authority has gained an unfair competitive edge over private parking lot owners through tax exemptions and lower rates, and more importantly appropriated an unreasonable proportion of their revenues via the gross receipts tax, a taking requiring just compensation has occurred. In the absence of any compensation a taking without due process of law results.

Applying a similar rationale in Hasegawa v. Maui Pineapple Co., 52 Haw. 327, 475 P. 2d 679 (1970), the Supreme Court of Hawaii invalidated a statute requiring private employers to pay their employees any wages they may have lost as a result of service on a jury or a public board or commission. The Court there stated: “In enacting HRS §388-32 the legislature attempted to shift to private employers some of the cost of running the public enterprises of juries and public boards and commissions. In this ease money, instead of realty, is being taken for a public use. However, we see no difference between the taking of money to pay public employees and the taking of realty to house government institutions. In both instances, the State is seeking to enhance the eeonotnio value of a government enterprise at the direct emperne of a particular individual or group. This is precisely the kind of government ‘talcing’ which requires fust compensation.’’ Id. at 334, 475 P. 2d at 684 (footnote omitted) (emphasis added).