Not so fast Mr. Mayor.
When the Mayor announced that he was interested in using the Affordable Housing Trust Fund, outside the City of Madison, it was a little hard to know how to respond. In fact, I didn’t feel like I had to since I figured that the outrage of the Madison taxpayer would take care of it based on the comments I had heard from across the political spectrum.
This was the second time he tried to raid the fund without regard for the ordinance that the Council has passed. The first time was for Allied Drive. That didn’t go so well. (See Amendment 14 which passed.) And it looks like his second attempt isn’t going very well either. Those pesky laws!
Here’s the City Attorney opinion on the Mayor’s latest attempt to raid the fund and to ignore the committees that deal with this fund. It basically says that its unconstitutional to use tax dollars outside the City jurisdiction and for the other funds you have to change the ordinance and state a public purpose – which I personally think will be very difficult to do:
MEMORANDUM
TO: Mayor Dave Cieslewicz
FROM: Michael P. May, City Attorney
Anne Zellhoefer, Assistant City Attorney
RE: Use of Affordable Housing Trust Fund Outside the City of MadisonYou asked if moneys held in the City’s Affordable Housing Trust Fund (AHTF) could be used outside the municipal boundaries of the City of Madison. As described below, a portion of the Trust Fund moneys may be used to fund housing projects outside of Madison’s corporate boundaries, provided the ordinance establishing the Trust Fund is amended to allow such extraterritorial assistance, and provided a sustainable public purpose for such extraterritorial spending can be articulated. There are serious legal questions about such use of any portion of the Trust Fund that was transferred from the General Fund, because of a legal limitation on using tax funds outside the district in which the taxes were raised.
Trust Fund Ordinance
The Affordable Housing Trust Fund was explicitly established for the City of Madison. It was created in December, 2003 (Ordinance # 13476) through the adoption of Section 4.22, Madison General Ordinances, in order to meet the housing needs of low income “households of the City.” Projects assisted by the Trust Fund are to be “disbursed throughout the City.” These provisions of the ordinance would need to be amended to explicitly permit the City’s use of Trust Fund proceeds outside of Madison’s boundaries. It should be noted that the City of Madison’s code of ordinances would not be applicable to extraterritorial projects unless the recipient of such funds contracted with the City to be bound by them.Public Purpose
The public purpose doctrine is a well-established constitutional tenet that holds that public funds may be expended only for public purposes. Implicit in this doctrine is that the funds are being used to benefit the citizens of the government expending such funds. Madison’s citizens may argue that extraterritorial expenditures of the Trust Fund moneys do not benefit Madison residents and are therefore unconstitutional. In order to counter such arguments, the Common Council should articulate, in its amendment to the Trust Fund ordinance, how an extraterritorial application of Trust Fund moneys benefits Madison’s citizens. It is constitutionally sufficient if any public purpose can be conceived which might reasonably be deemed to justify or serve as a basis for the expenditure. A court can conclude that no public purpose exists only if it is clear and palpable that there can be no benefit to the public. Hopper v. City of Madison, 79 Wis. 2d 120,129 (1977). Another case demonstrating the elastic nature of the public purpose doctrine is Libertarian Party of Wisconsin v. State, 199 Wis. 2d 790, 546 NW 2d 524 (1999) (upholding multi-county tax for new Miller Park as meeting public purpose doctrine).General Fund—Tax Derived Funds
To date, all of the City’s money in the Affordable Housing Trust Fund has come from the sale of land, a TIF equity payment, transfers from the General Fund (general property taxes), and interest income. Information from the Comptroller shows that as of May 1, 2008, the balance in the AHTF is $3,968,610. Of this $1,500,000 came from the General Fund ($400,000 in 2003; $500,000 in 2004; $300,000 in 2005 and $300,000 in 2006.)In order to not run afoul of the constitution, we recommend that the portion of the Trust Fund generated by transfers from the General Fund not be used to assist housing projects outside of the City’s boundaries. Wisconsin has long recognized the theory of equality as regards taxation, which holds that a tax must be spent at the governmental level at which it is raised. Buse v. Smith , 74 Wis. 2d 550, 559 (1976). In other words, City of Madison taxes should be levied for purely City of Madison purposes. This constitutional principle is invoked regardless of the well-meaning expenditure proposed by government. As stated in State ex rel. New Richmond v. Davidson, 114 Wis. 563, 575 (1902), even the demands of charity springing from outside the taxing unit are not a legitimate basis for using tax revenues from one taxing unit for another.
While we might be able to find some way to show that such expenditures outside of Madison still do not run afoul of this rule, the better choice (particularly given that a large part of the AHTF is not subject to the rule) would be to use only that portion of the AHTF that did not originate from general property taxes outside the City of Madison.
