Local Act City of Eden; Preannexation Agreement

November 24, 1993

Mr. Charles L. Nooe Eden City Attorney 607 Washington Street Eden, NC 27288

Re: Advisory Opinion; C. 418, 1993 S.L.; Local Act City of Eden; Preannexation Agreement; Art. I, Sec. 32, N.C. Constitution

Dear Mr. Nooe:

The following is submitted in response to your letter dated September 27, 1993 requesting opinions in regard to Chapter 418 of the 1993 Session Laws entitled "An Act to Allow The City of Eden To Negotiate Annexation Contracts And To Authorize Rockingham County To Participate In The Redevelopment Of Certain Abandoned Property".

Your letter contains the following information. The City of Eden and the Miller Brewing Company are negotiating terms of an agreement to be executed by the two parties pursuant to the authorization set out in Chapter 418. The company is requesting that any agreement entered into between it and the city with respect to payments by it to the city in lieu of annexation contain the following condition precedent:

"(c) the North Carolina Attorney General or his deputy or assistant shall have issued to Eden and Miller a favorable opinion to the effect that: (i) the Act does not contravene any provision of the North Carolina Constitution; (ii) that the Act is a valid enactment of the North Carolina General Assembly; and (iii) this Agreement complies in all respects with the Act; . . . ."

Your letter then requests advice on the following issues:

"Please advise the City of Eden:

(1)

If, in your opinion, the Act contravenes any provision of the North Carolina Constitution; and

(2)

If, in your opinion, the Act is a valid enactment of the North Carolina General Assmbly; and

(3)

Will you render an opinion as to whether or not the agreement between the City of Eden and Miller Brewing Company complies with the Act if the contract is submitted to you?"

The relevant portions of Chapter 418 are:

Section 1. The City of Eden may, by contract, provide that certain property described in the contract may not be annexed by the City under Parts 2 or 3 of Article 4A of Chapter 160A of the General Statutes prior to December 30, 2003. Nothing in this act impairs the right of the General Assembly to annex any such property by specific local act. Sec. 2. The City of Eden may accept, as consideration for such contract, "Payments in lieu of taxes". Sec. 3. Payments in lieu of taxes under this act shall be annually computed based upon the tax valuations of the properties subject to contracts under Section 1 of this act as determined by the Rockingham County Tax Department, with the formula for making the computation being stated in each contract.

It is the opinion of this office that Chapter 418 does not, on its face, contravene any provision of the North Carolina Constitution and is, therefore, a valid enactment of the General Assembly. A starting point in the discussion should be the constitutional authority of the General Assembly in regard to local government boundaries, which is located in Article VII, Section 1 of the Constitution and reads as follows:

The General Assembly shall provide for the organization and government and the fixing of boundaries of counties, cities and towns, and other governmental subdivisions, and, except as otherwise prohibited by this Constitution, may give such powers and duties to counties, cities and towns, and other governmental subdivisions, as it may deem advisable.

Therefore, unless Chapter 418 is "otherwise prohibited by this Constitution", the Act would appear to be a valid exercise of the authority expressly granted to the General Assembly by the Constitution. The establishment of local governmental unit boundaries and the methods by which they are to be changed is under the control of the legislature. The North Carolina Supreme Court in the case of In re. Annexation Ordinances, 253 N.C. 637, 117 S.E. 2d 795 (1960) has discussed the issue at length as follows.

In Lutterloh v. Fayetteville, 149 N.C. 65, 62 S.E. 758, this Court said: "We have held in common with all the courts of this country, that municipal corporations, in the absence of constitutional restrictions, are the creatures of the legislative will, and are subject to its control; the sole object being the common good, and that rests in legislative discretion, Dorsey v. Henderson, 148 N.C. 423, and Perry v. Comrs., ibid., 521; Manly v. Raleigh, 57 N.C. 370.

"Consequently, it follows that the enlargement of the municipal boundaries by the annexation of new territory, and the consequent extension of their corporate jurisdiction, including that of levying taxes, are legitimate subjects of legislation. In the absence of constitutional restriction, the extent to which such legislation shall be enacted, both with respect to the terms and circumstances under which the annexation may be had, and the manner in which it may be made, rests entirely in the discretion of the Legislature. With its wisdom, propriety or justice we have naught to do.

"It has, therefore, been held that an act of annexation is valid which authorized the annexation of territory, without the consent of its inhabitants, to a municipal corporation, having a large unprovided for indebtedness, for the payment of which property included within the territory annexed became subject to taxation." Matthews v. Blowing Rock, 207 N.C. 450, 177 S.E. 429; Dunn v. Tew, 219 N.C. 286, 13 S.E.2d 536.

In Highlands v. Hickory, 202 N.C. 167, 162 S.E. 471, the General Assembly had enacted Chapter 41, Private Laws 1931, an act entitled, "An act for the extension of the corporate limits of the city of Hickory, for an election in furtherance thereof, for the repeal of the charters of other towns within the extended limits, and for other purposes." The validity of the act was challenged on the ground that the General Assembly was without power, because of constitutional limitations, to enact the same. On appeal, this Court said, "This challenge cannot be sustained. There are no limitations in the Constitution of this State or of the United States upon the power of the General Assembly to provide by statute for the extension of the corporate limits of a municipal corporation organized and existing under the laws of this State, or for the repeal of a statute under which a municipal corporation in this State was organized." Chimney Rock Co. v. Lake Lure, 200 N.C. 171, 156 S.E. 542.

It is said in 37 Am. Jur., Municipal Corporations, section 24, page 640, "A municipal corporation or its corporate authorities have no power to extend its boundaries otherwise than provided for by legislative enactment or constitutional provision. Such power may be validly delegated to municipal corporations by the legislature, and when so conferred must be exercised in strict accord with the statute conferring it. The legislature may also prescribe and fix the terms and conditions on which such a law may come into operation. The determination of the requisite facts or expediences, or of acceptance or assent to the annexation, may be given by the legislature to the municipal council or to county commissioners, boards of supervisors, or other public body . . . without violating constitutional provisions against delegation of legislative functions . . . ." 253

N.C. at 647-49, (Emphasis in original).

Chapter 418 delegates to the city part of the General Assembly’s plenary power regarding the establishment of municipal boundaries and the ability of the General Assembly to so delegate is clear, Id. In light of the broad powers of the General Assembly concerning municipal boundaries, there is nothing inherently evil in a legislatively authorized agreement between a city and a private or public entity in regard to the delay of its exercise of its annexation powers. Thrash v. City of Asheville, 95 N.C. App. 457, 383 S.E.2d 657 (1989); McQuillin, Municipal Corporations, § 7.13.50 – Preannexation agreement. See also Lawrence, Popular Government, Summer 1990, pp. 10, 11. Indeed, Part 6 of Article 4A of Chapter 160A (N.C.G.S. § 160A-58.2 et seq.) expressly authorizes cities to enter into agreements not to annex particular areas for periods of up to 20 years.

Because Chapter 418 does not in any manner attempt to regulate trade, it does not violate the prohibition against local acts regulating trade set out in Article II, Sec. 24(j) of the Constitution, Cheape v. Town of Chapel Hill, 320 N.C. 549, 359 S.E.2d 792 (1987). Similarly, because the Act does not attempt to impose taxes, or attempt to appropriate public money, the Act does not implicate Article V, Sec. 2 of the Constitution or the exclusivity provisions of the Machinery Act, N.C.G.S. 105-272. There is, however, a necessity to discuss whether the Act creates "exclusive or separate emoluments or privileges," on behalf of the property owners.

Article I Section 32 of the N.C. Constitution states that "[n]o person or set of persons is entitled to exclusive or separate emoluments or privileges from the community but in consideration of public services." In Town of Emerald Isle v. State of N.C., 320 N.C. 640, 360 S.E. 2d 756, 764 (1987), the Supreme Court makes the following statement regarding Article I, Section 32:

As this Court has repeatedly stated, the limitation on the classification of particular groups of persons intended by the exclusive emolument provision contained in Article I, section 32 of our constitution does not apply to an exemption from a duty imposed upon citizens generally if the purpose of the exemption is the promotion of the general welfare, as distinguished from the benefit of the individual, and if there is a reasonable basis for the Legislature to conclude that the granting of the exemption would be in the public interest. Here, as in questions arising under the exercise of the police power pursuant to the requirement of due process of law, the principle to be applied is that declared by Moore, J., for the Court, in State v. Warren, 252 N.C. 690, 114 S.E. 2d 660 [1960], where it said: "The presumption is that an act passed by the Legislature is constitutional, and it must be so held by the courts unless it appears to be in conflict with some constitutional provision. [Citations omitted.] The legislative department is the judge, within reasonable limits, of what the public welfare requires, and the wisdom of its enactments is not the concern of the courts. As to whether an act is good or bad law, wise or unwise, is a question for the Legislature and not for the courts–it is a political question. The mere expediency of legislation is a matter for the Legislature, when it is acting entirely within constitutional limitations, but whether it is so acting is a matter for the courts. [Citations omitted.]" Lowe v. Tarble, 312 N.C. at 470-71, 323 S.E. 2d at 21. See also Lamb v. Wedgewood South Corp., 308

N.C. 419, 438-39, 302 S.E. 2d 868, 879; State v. Knight, 269 N.C. 100, 108, 152 S.E. 2d 179,

184. 320 N.C. at 653, 360 S.E. 2d at 764.

Therefore, the issue becomes: is there a reasonable basis for concluding that the provisions of Chapter 418, which authorize a contract to exempt described real property from annexation, promote the general welfare. There is a strong presumption in favor of the constitutionality of the enactments of the General Assembly and that such acts are for a public purpose.

In Mitchell and Martin, this Court reviewed in detail the applicable principles to be used in determining whether particular legislation serves a public purpose. We note the salient, relevant principles to be applied on review: The presumption is in favor of the constitutionality of an act, State v. Furmage 250 N.C. 616, 621, 109 S.E. 2d 563, 567 (1959). All doubts must be resolved in favor of the Act., Wells v. Hous. Auth. of Wilmington, 213 N.C. 744, 749, 197 S.E. 693, 696 (1938). The Constitution is a restriction of powers and those powers not surrendered are reserved to the people to be exercised through their representatives in the General Assembly, id.; therefore, so long as an act is not forbiden, the wisdom and expediency of the enactment is a legislative, not a judicial, decision, McIntyre v. Clarkson, 254 N.C. 510, 515, 119 S.E. 2d 888, 891-92 (1961). "The General Assembly, exercising the police power of the State, may legislate for the protection of the public health, safety, morals and general welfare of the people," Martin

v. North Carolina Hous. Corp., 277 N.C. at 45, 175 S.E. 2d at 674. "The General Assembly has the right to experiment with new modes of dealing with old evils, except as prevented by the Constitution," Redev. Comm’n of Greensboro v. Sec. Nat’l Bank of Greensboro, 252 N.C. 595, 612, 114 S.E. 2d 688, 700 (1960). In re. Housing Bonds, 307 N.C. 52, 57, 296 S.E. 2d 281, ___ (1982).

Even though Chapter 418 does not require that the City of Eden make express findings supporting a conclusion that the contract will enhance the general welfare, if such a contract is judicially challenged, a determination that the general welfare is enhanced must be made in order to sustain the validity of the contract.

"If the constitutionality of a statute . . . depends on the existence or nonexistence of certain facts and circumstances, the existence of such facts and circumstances will generally be presumed for the purpose of giving validity to the statute, . . . if such a state of facts can reasonably be presumed to exist, and if any such facts may be reasonably conceived in the mind of the court. This rule does not apply if the evidence is to the contrary, or if facts judicially known or proved, compel otherwise." 16 C.J.S. Constitutional Law § 100b, pp. 454-455. Accord: 16 Am.Jur.2d Constitutional Law § 143. Martin v. Housing Corp. 277 N.C. 29, 44, 175 S.E.2d 665, ___ (1970).

The initial responsibility for determining what is and what is not a public purpose rests with the legislature, and its findings with reference thereto are entitled to great weight. If, however, an enactment is in fact for a private purpose, and therefore unconstitutional, it cannot be saved by legislative declarations to the contrary. When a constitutional question is properly presented, it is the duty of the court to ascertain and declare the intent of the framers of the Constitution and to reject any legislative act which is in conflict therewith. State v. Felton, 239 N.C. 575, 80 S.E.2d 625; Nash v. Town of Tarboro, 227 N.C. 283, 42 S.E.2d 209; 1 Strong, N.C. Index, Constitutional Law § 10 (1957). Mitchell v. North Carolina Indus. Dev. Fin. Auth., 273 N.C. 137, 144, 159 S.E. 2d 745, 750 (1968).

The preceding quote from Mitchell shows that ultimately, if a contract is entered into and is challenged, only a judicial determination that there is a reasonable basis for the Legislature to conclude that the contract enhances the general welfare will save it. Therefore, the issuance of an opinion on whether a contract executed between the company and the city complies with the literal terms of Chapter 418 would be of little value. The underlying question of the validity of such a contract is in essence a judicial determination of the sufficiency of the evidence before the city council to support a conclusion that the contract promotes the general welfare. Such a judicial determination could only be made based upon a thorough review of a complete record of the matters placed before the city council and is outside of the scope of the role of the Attorney General’s Office in regard to local government.

Ann Reed Senior Deputy Attorney General

Charles J. Murray Special Deputy Attorney General