Kratchman v. City of Detroit

400 Mich. 158 (1977) 254 N.W.2d 23

KRATCHMAN
v.
CITY OF DETROIT

Docket No. 59564, (Calendar No. 6).

Supreme Court of Michigan.

Argued May 3, 1977. Decided May 19, 1977.

Ronald J. Prebenda for plaintiff.

Richard E. Craig, Corporation Counsel, and Richard L. Manetta, Victor G. Marrocco, and William B. Beach, Assistants Corporation Counsel, and Stratton S. Brown and David B. Lewis, Special Assistants Corporation Counsel, for defendant.

FITZGERALD, J.

The narrow issue before this Court is whether the City of Detroit's published notice of intent to issue bonds for stadium development meets the requirements set by statute. This case does not concern the merits of such stadium development.

Defendant City of Detroit appeals directly, pursuant to our grant of by-pass, from the trial court's summary judgment enjoining the defendant from issuing general obligation bonds for "Civic Center — Riverfront Stadium Development". At issue is the trial court's holding that the November 3, 1976 published notice of intent to issue such bonds was deficient in light of Alan v Wayne County, 388 Mich. 210; 200 NW2d 628 (1972). We are of the opinion that the trial court erred in granting such relief and therefore it is reversed. The notice of intent as published met all applicable statutory and case-law requirements.

The contested bond issue seeks to finance in part a proposed 20,000-seat sports facility to be located on the Detroit River near Cobo Hall in downtown Detroit. The total cost of the project has been variously estimated at 20-25 million dollars. Five million dollars of the total cost was to be obtained from a Federal grant under the Public Works Employment Act of 1976, Pub L 94-369, 42 USC 6701 et seq. Another $5,865,000 was to be paid directly by the City of Detroit. This money was transferred from the Civic Center Plaza appropriation to an appropriation for a new riverfront arena by a resolution passed by the Detroit City Council on October 27, 1976.

On October 27, 1976, the Detroit City Council also passed a resolution authorizing the issuance and sale of $7,795,000 in General Public Improvement Bonds, Series 77-A, which was subsequently approved by the Mayor on November 1, 1976. Of this $7,795,000, $1,500,000 was designated for "Civic Center — Riverfront Stadium Development" for the purpose of securing funds for architectural plans and specifications.

On November 3, 1976, the City of Detroit, pursuant to MCLA 117.5(g); MSA 5.2084(g), published notice of intent to issue bonds in a one-quarter page advertisement in the Detroit Free Press, at page 11C, "Business Finance Section". See Appendix. The notice stated that these bonds were subject to a referendum petition during a 45-day period between the notice date of November 3, 1976 and December 18, 1976.

After the 45-day period for a referendum petition had passed, the City of Detroit applied to the Municipal Finance Commission for approval of the issue of the bonds. On February 15, 1977, the Municipal Finance Commission issued an order of approval allowing the City of Detroit to issue the total bond package, including the $1,500,000 for Civic Center — Riverfront Stadium Development. The bonds were to have been sold on March 30, 1977, but plaintiff filed a suit on March 14, 1977, in Wayne Circuit Court seeking an injunction.

After this Court denied the Governor's request, sent pursuant to GCR 1963, 797, for an early determination as to whether the notice published was sufficient, the trial court, on March 28, 1977, granted the requested injunction and denied defense motions for accelerated and summary judgment. On April 1, 1977, this Court granted defendant's motion for immediate consideration and application for leave to appeal prior to decision of the Court of Appeals.

I

Defendant contends, and we agree, that this is not an Alan case. The published notice at issue in Alan was found misleading in that it did not indicate: (1) that the full faith and credit of the county was behind the bonds; (2) any interest rate or period of time over which the bonds would mature; (3) that the taxpayers had a right of referendum in relation to the proposed bond issue. Here, the notice of intent cannot compare with the patently defective notice of Alan. This defendant's quarter-page notice unmistakably stated that the bonds would be secured by the city's unlimited taxing power, that they would mature over a period not to exceed 16 years, and that they would bear interest at a rate not to exceed ten percent. The notice gave specific detail regarding the taxpayer's right of referendum and indicated that additional information would be made available by the city clerk or finance director upon request.

At issue in this case is whether defendant has met the requirements provided by statute in publishing its notice of intent to issue bonds. It should be noted that in Alan this Court was concerned with the applicability of a different statute, namely, the Revenue Bond Act, MCLA 141.101 et seq.; MSA 5.2731 et seq. The statute at issue in the instant case is the home rule cities act, MCLA 117.1 et seq.; MSA 5.2071 et seq. The pertinent section of the home rule cities act, MCLA 117.5(g); MSA 5.2084(g), requires, inter alia, that "[t]he notice of intent to issue bonds shall state the maximum amount of the bond issue, purpose thereof, source of payment, right of referendum thereon, and such other information as the legislative body shall determine to be necessary to adequately inform the electors and all other interested persons of the nature of the issue and their rights with respect thereto". We are persuaded that defendant satisfied the statutory requirements with the notice of intent published on November 3, 1976. Defendant's notice of intent to issue bonds stated the maximum amount of the bond issue, the various purposes of the bond issue, its source of payment, the right of the taxpayers to a referendum, and other information in relation to the nature of the issue, including the maximum interest rate and period of maturation.

Plaintiff contends that defendant's notice of intent to issue bonds is defective because it did not adequately inform the taxpayers of the City of Detroit of the nature of the project which is the subject matter of the notice. However, the applicable statute merely requires that the notice of intent to issue bonds state the "purpose thereof" rather than describe the proposed project with great specificity. Defendant's notice of intent did in general terms state just what the purpose of the bonds in question was, namely, "Civic Center — Riverfront Stadium Development". It is our opinion that defendant's notice of intent in the instant case met all the requirements of the statute, including an adequate statement of the "purpose thereof * * * and such other information as * * * to adequately inform the electors and all other interested persons of the nature of the issue and of their rights with respect thereto".

Another factor to be weighed in assessing the specificity with which the purpose of the bond issue was stated is that here the proposed public improvement bond issue had many purposes. The defendant's notice did specify that of the proposed total proceeds, $325,000 was allocated for improvements to the Art Institute, $350,000 for historical purposes, $3,225,000 for recreational-capital improvement purposes, $1,395,000 for environmental protection and maintenance, $1,000,000 for Washington Boulevard-Woodward Avenue community and economic development, and $1,500,000 towards development of a civic center — riverfront stadium. Requiring further particularization in the case of this multi-purpose general public improvement bond issue raises the danger that newspaper publication of a prospectus, rather than reasonable notice, would be required. Some flexibility must be left to the issuing authority as to the disposition of the bond proceeds. Too much detail in the notice of intent could deny to the issuing authority the requisite flexibility, would not appreciably aid taxpayers in determining whether to petition for a referendum on the financing of a given endeavor through bonding, and thus could well be self-defeating.

II

We believe that the trial court erred in finding that Alan required in this case notice of some indication of the total contemplated project cost. This Court in Alan did quite correctly find a stated debt of $126,000,000 to be misleading, when the notice spoke in terms of "acquiring, constructing, furnishing and equipping a new stadium," and the notice said nothing concerning the interest rate nor of the period over which the bonds would mature. These factors would have pushed the potential cost to as high as $371,000,000. Since Alan was a case of financing the total project by one bond issue, the failure in Alan to specify the total project cost amounted to a failure to disclose sufficient facts regarding the nature of the bond issue. However, in the instant case the notice stated the maximum interest rate of the bonds and their maximum period of maturation, and thus provided concerned taxpayers with sufficient information to determine the maximum cost of the bonds.

We are not presented with a situation in which the total project was to be financed by a single bond issue. The City of Detroit may have financed the balance of the project by some means not involving the issuance of bonds. Indeed, there is nothing before us to indicate that defendant would not have had the option of financing actual construction through Federal grants, general fund appropriations or by a combination of both had it decided to go through with the project once the architectural plans and specifications were completed. To be sure, if the city did decide to finance actual construction in whole or in part through additional bonds, notice would again be required.

Accordingly, we hold that it was sufficient for defendant to state the maximum cost of the bond issue in question, rather than make uncertain estimates of the ultimate cost of the project as plaintiff urges.

III

We are of the opinion that the trial court's holding that the notice of intent was misleading because it referred to a stadium rather than an arena was clearly erroneous. Dictionary and encyclopedia definitions aside, facilities designed to house indoor sporting events are commonly referred to as stadiums. The Olympia Stadium is presently the home of the National Hockey League's Detroit Red Wings, while the NHL Chicago Blackhawks and the National Basketball Association's Chicago Bulls play their home games in the facility known as Chicago Stadium. Furthermore, had defendant referred to the development of a civic center arena, there could well have been confusion as to whether bond proceeds would be used towards further development of the already existing 11,000-seat civic center facility known as Cobo "Arena".

IV

The trial court held the notice of intent to be defective because it had not been approved by the Municipal Finance Commission prior to publication. Although there is language in Alan, supra, 388 Mich. 210, 353, to the effect that "proper notice cannot reasonably be accomplished until after the terms of the issue have been approved by the Municipal Finance Commission", this observation relative to Alan should not control the results of this case. MCLA 117.5(g), supra, requires that the legislative body, rather than the commission, determine the contents of the notice of intent. Furthermore, before the commission approves the issue, it must "determine that the proposed bonds comply with the provisions of this [municipal finance] act and other provisions of law". MCLA 135.7; MSA 5.3188(27). Until the notice of intent is published and the referendum period has run, the commission cannot make the determination mandated by the law.

For the foregoing reasons, the judgment of the trial court is reversed, and the cause is remanded with direction to grant the defendant City of Detroit's motion for summary judgment. No costs, this being a public question.

KAVANAGH, C.J., and COLEMAN and RYAN, JJ., concurred with FITZGERALD, J.

LEVIN, J., took no part in the decision of this case.

APPENDIX

WILLIAMS and BLAIR MOODY, JR., JJ. (dissenting).

The difference between this opinion and the majority opinion is the amount of information the pertinent statute prescribes that a citizen is entitled to receive from a bond notice.

The amount of notice is prescribed in MCLA 117.5(g); MSA 5.2084(g) as follows:

"The notice of intent to issue bonds shall state the maximum amount of the bond issue, purpose thereof, source of payment, right of referendum thereon, and such other information as the legislative body shall determine to be necessary to adequately inform the electors and all other interested persons of the nature of the issue and their rights with respect thereto." (Emphasis added.)

The Mayor wrote the Common Council of Detroit on October 20, 1976, to describe the purpose of requesting funds for a project called in the city's application for leave to appeal a "new Riverfront Arena":

"I therefore propose the construction of a 20,000 seat arena, near Cobo Hall * * *

"the entire project will cost $20,000,000 * * *."

This information advised the Common Council the funds requested were for

1) "construction"

2) a new arena, near Cobo Hall

3) "a 20,000 seat arena"

4) "the entire project will cost $20,000,000."

Two days later the City Finance Director requested the Common Council to approve a bond issue including "Civic Center — Riverfront Stadium Development $1,500,000".

The Common Council could make sense of this language because of the Mayor's prior communication.

The question before us, however, is whether such notice would "adequately inform the electors and all other interested persons of the nature of the issue * * *" and in particular, "the purpose thereof," as the statute requires. It is the majority's "opinion that defendant's notice of intent in the instant case met all the requirements of the statute * * *."

It is our opinion that the additional information which was thought appropriate for the Common Council was also appropriate for the citizens of Detroit so they could adequately understand the "purpose" of the bond issuance.

"Civic Center — Riverfront Stadium Development $1,500,000" is at best ambiguous.

Does "development" mean architectural plans? Does it mean preparation of a preliminary proposal? Does it mean site preparation? Does it mean beautification? Does it mean minor construction?

Does "Riverfront Stadium" refer to the existing arena? Does it refer to a new arena? If to a new arena, does it refer to a 20,000-seat arena? A 100,000-seat arena? A $20,000,000 arena? A $200,000,000 arena?

Obviously, without extrinsic information, the reader of the notice cannot answer any of these questions. But the Legislature mandated that the notice itself should "adequately inform the electors and all other interested persons of the nature of the issue" and "state the * * * purpose thereof * * *."

The record, viewed in its entirety, reflects the "purpose" of the bond issue was to cover architectural and engineering fees likely, coupled with initial site preparation expenses relating to the construction of a new 20,000-seat arena or stadium near Cobo Hall at a cost originally estimated to be $20,000,000.

In our opinion the notice did not inform the "electors and all other interested persons" of this "purpose" as required by the statute, and consequently the notice is inadequate.^[1]

What is involved in this case is a proposal to partially finance a public project. In order for citizens to have adequate knowledge of the purpose of this limited bond issuance, and make a fair judgment as to the exercise of their referendum right, the notice must generally describe the nature of the final project then planned. A bond issue which finances only a part of a project must be placed in context with the whole project in order to understand the "purpose" of the issuance, as required by the statute.^[2] To interpret the statute otherwise would violate the Legislature's intent.

In passing, it is only fair to say that the failure to communicate here seems to have been the product of "bureaucratese", rather than any deliberate intent to deceive, for in almost all other respects the lessons of Alan appear to have been well learned and honestly and effectively applied. It is only hoped that, although this opinion is a minority opinion, its spirit will be as well applied in the future as the rest of Alan has in this case so that citizens whom the Legislature has sought to inform, and whom we all serve, will be "adequately" informed in the future.

The trial court should be affirmed for the reasons herein.

NOTES

[1] While it may be objected that it isn't practical to condense into the space of a notice the required information, that, of course, does not justify disregarding the statute. Furthermore, the necessary informative language would not have to be too cumbersome. For example, "Architectural, engineering and initial construction expenses for a new 20,000 seat Riverfront Arena to cost about $20,000,000 — $1,500,000."

[2] The fact that the introduction in the notice states "for the purpose of paying all or part of the cost" does nothing to describe the purpose of the bond issue as far as what the money is being spent for.