Local Government Law - Ken E. Jarrard

• Publication year: 2011

Local Government Law

by Ken E. Jarrard*

I. Municipalities

A. Contracts

During the survey period from June 1, 2010 through May 31, 2011, the Georgia Supreme Court reinforced its willingness to strike a contract believed to unduly prohibit a present or future council from retaining full legislative and budgetary discretion. In City of McDonough v. Campbell,¹ it was an employment severance provision that ran afoul of the prohibition on binding future councils.² The city, by resolution, authorized an employment contract that included twelve months severance upon termination, plus insurance and retirement benefits.³ The supreme court, citing section 36-30-3(a) of the Official Code of Georgia Annotated (O.C.G.A.),⁴ which prohibits councils from binding

* Founding Partner, Jarrard & Davis, LLP, Cumming, Georgia, a local government boutique serving as general counsel to Forsyth, Cherokee, and Barrow Counties, and the City of Milton, Georgia. Middle Tennessee State University (B.S., 1990); University of Tennessee, Knoxville (M.P.A., 1992; J.D. cum laude, 1995). Member, State Bars of Georgia and Tennessee.

1. 289 Ga. 216, 710 S.E.2d 537 (2011).

2. Id. at 219, 710 S.E.2d at 540. For additional discussion on the prohibition against binding future councils, a practitioner should consider Buckhorn Ventures, LLC v. Forsyth County, 262 Ga. App. 299, 585 S.E.2d 229 (2003), where the court "strongly encourage[d] parties to enter contracts and to resolve disputes through settlement agreements, consent orders, and the like," while nonetheless declaring that a settlement agreement intended to bind, in perpetuity, a parcel of property to a particular zoning classification and worked to "deprive ... a succeeding commission in the exercise of its legislative power by the device of entering into a contract," is void ab initio. Id. at 302, 585 S.E.2d at 232-33; see also Brown v. City of East Point, 246 Ga. 144, 144, 268 S.E.2d 912, 913 (1980) ("A contract which restricts governmental or legislative functions of a city council has been traditionally held to be a nullity, ultra vires and void . . . .").

3. Campbell, 289 Ga. at 217, 710 S.E.2d at 538.

4. O.C.G.A. § 36-30-3(a) (2006).

themselves or successors "so as to prevent free legislation,"⁵ held that the employment contract was ultra vires and void "because the severance provision render[ed] the cost of terminating the contract exorbitant."⁶ The court noted that

the contract at issue is both governmental and financial. That being so, the reasonableness of the contract is not determined solely by the length of time it continues beyond the term of the officers entering into the contract. Rather, under the circumstances of this case, we must also consider whether the contract places a substantial financial obligation on the part of the city. Because the contract is renewed automatically and the severance package requires the city to pay Campbell his salary and benefits for an entire year after the year in which the contract is terminated, we hold that the contract is ultra vires and void.⁷

The survey period revealed little hesitation by the appellate courts in enforcing city contract obligations and granting mandamus ifwarranted, as illustrated in City of Hoschton v. Horizon Communities.⁸ Hoschton involved an agreement (distilled into a city ordinance) where a developer (Horizon) agreed to build a sewer pump station while reserving the right to seek reimbursement from future tap fees by third parties requiring sewer access. However, when a third party sought to connect, the city, instead of Horizon, demanded and received payment for the sewer access. Litigation ensued, with Horizon pursuing and receiving mandamus by the trial court to compel payment.⁹ The city responded that the ordinance did "not create a legal obligation requiring the city to act, and therefore, mandamus relief was improperly granted."¹⁰ Although the ordinance reserved to Horizon merely the "right to recoup a portion of the investment," the Georgia Supreme Court held that this language was sufficient to impose "upon the city the concomitant obligation to reimburse Horizon for its investment from sewer connection and tap fees . . . ."¹¹ The grant of mandamus was affirmed.¹²

Local governments were likewise warned against imposing overly pedantic or strained interpretations on contracts, particularly by demanding that a party undertake a futile act. In Mayor & Aldermen

5. Id.

6. Campbell, 289 Ga. at 218, 710 S.E.2d at 539.

7. Id. at 219, 710 S.E.2d at 540.

8. 287 Ga. 567, 697 S.E.2d 824 (2010).

9. Id. at 567-68, 697 S.E.2d at 825.

10. Id. at 568-69, 697 S.E.2d at 826.

11. Id. at 567, 569, 697 S.E.2d at 825-26.

12. Id. at 570, 697 S.E.2d at 826.

of Savannah v. Batson Cook Co.,¹³ the Georgia Court of Appeals held a general contractor's failure to comply with certain contract requirements for final payment on a parking deck project¹⁴ did not, under the circumstances, preclude the contractor from petitioning for such payment.¹⁵ It was undisputed that the contractor had not fulfilled all of the prerequisites necessary to make such demand.¹⁶ Nonetheless, the court noted, "at least some of the conditions with which [the contractor] did not comply depended on resolution of the issues of this lawsuit."¹⁷ The court then stated that "it would have been futile for [the contractor] to comply with these procedural requirements for final payment," noting that "[t]he law does not require a futile act."¹⁸

B. Regulation

In City of Atlanta v. Hotels.com,¹⁹ the issue was whether online travel companies (OTCs) were obligated to remit excise taxes based upon retail versus wholesale lodging rates.²⁰ The Georgia Supreme Court, reviewing the city's hotel excise tax ordinance²¹ in toto and in pari materia with O.C.G.A. §§ 48-13-50 to -63,²² determined that "the amount that is taxable is the retail amount paid for occupancy by someone who will occupy the room," as opposed to the lower wholesale rate negotiated between the OTC and city hotels for the right to broker rooms.²³ The court likewise agreed with the lower court's striking of those portions of OTC contracts with private hotels, which authorized "hotel occupancy

13. 310 Ga. App. 878, 714 S.E.2d 242 (2011).

14. The city and contractor were in a dispute over a change order related to arguably unanticipated soil conditions. Id. at 879, 714 S.E.2d at 244-45.

15. Id. at 883, 714 S.E.2d at 247. The city argued that final payment was appropriately denied because the contractor "failed to comply with contract provisions requiring [it] to request a final inspection, to submit a final accounting, to submit certain affidavits and the consent of its surety to demonstrate that it had paid its subcontractors, and to submit a final application for payment." Id.

16. Id.

17. Id.

18. Id.

19. 289 Ga. 323, 710 S.E.2d 766 (2011).

20. Id. at 324, 710 S.E.2d at 768.

21. "The City of Atlanta requires the payment of hotel occupancy taxes pursuant to O.C.G.A. § 48-13-50 [to -63] (the 'Enabling Statute') which provides for municipalities to impose an excise tax 'at the applicable rate on the lodging charges actually collected.'" Id. at 323, 710 S.E.2d at 767-68; O.C.G.A. § 48-13-51(a)(1)(B)(i) (Supp. 2011).

22. O.C.G.A. §§ 48-13-50 to -63 (2009 & Supp. 2011).

23. Hotels.com, 289 Ga. at 325-26, 710 S.E.2d at 769.

taxes [to] be collected and remitted based on the negotiated wholesale rate."²⁴

A challenge to occupation taxes was also briefly considered and swiftly rebuffed by the supreme court. The case of Magby v. City of Riverdale²⁵ involved a challenge to a city's duly imposed occupation tax by an in-home day care operator.²⁶ The supreme court rejected outright the operator's argument that the city's occupation tax ordinance was not authorized by Georgia law or the city's charter.²⁷ The court also rejected an "as-applied challenge,"²⁸ concluding that any concern related to a future enforcement action was "based on sheer speculation" and constituted a premature effort at challenging the sufficiency of the evidence.²⁹

C. Police Power

County and municipal governments enact ordinances pursuant to their police power,³⁰ and the legitimacy of those ordinances is routinely challenged in court. A "weed" ordinance was the subject of such a challenge in Parker v. City of Glennville?¹ In Parker, an owner of

24. Id. at 327, 710 S.E.2d at 770. The court explained, "A contract to do an immoral or illegal thing is void. If a contract is severable, however, the part of the contract which is legal will not be invalidated by the part of the contract which is illegal." Id. (internal quotation marks omitted); O.C.G.A. § 13-8-1 (2010).

25. 288 Ga. 128, 702 S.E.2d 159 (2010).

26. Id. at 128, 702 S.E.2d at 160.

27. Id. at 130, 702 S.E.2d at 161. The court had little difficulty finding this argument meritless, noting that, "O.C.G.A. § 48-13-6(b) provides that 'each municipal corporation is authorized but not required to provide by local ordinance or resolution . . . and to provide for the punishment of violation of such a local ordinance or resolution.'" Id.; O.C.G.A. § 48-

13-6(b) (2009).

28. Magby, 288 Ga. at 129, 702 S.E.2d at 160. The day care operator argued the ordinance violates her due process and equal protection rights because it unreasonably sanctions her for the lawful act of failing to renew an occupation tax permit, it fails to provide her with sufficient notice that the City could sanction her if she fails to renew her permit, and it places her in a class of persons unreasonably sanctioned for not renewing their permits.

Id.

29. Id. at 130, 702 S.E.2d at 161. The court sardonically observed,

If [the day care operator] continues her pattern of operating a business in the city without paying the occupation tax until after she is cited for violating [the ordinance], she will have the opportunity in any future prosecution, in both the City Court and on appeal, to challenge the sufficiency of the evidence used to convict her.

Id.

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