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Lewis H. Dawley, III
By Hand Delivery
Dear Mr. Dawley:
I represent the Shaw Coalition. Preliminary review of pertinent District of Columbia laws, judicial precedents, and facts available to me indicates a substantial basis for concluding that
(1) sections 301, 302, and 303 of the Washington Convention Center Authority Act of 1994, D.C. Law 10-188 (hereafter, the 1994 Act), expired at the end of February 27, 1997, due to noncompliance with §206(h) of the Act;
(2) sections 301303 of the 1994 Act were not retroactively re-enacted by the Washington Convention Center Authority Financing Amendment Act of 1998, D.C. Act 12- 402, approved by the Mayor June 23, 1998 (hereafter, the 1998 Act);
(3) alternatively, §§301-303 of the 1994 Act expired
(4) sections 301-303 of the 1994 Act were not retroactively re-enacted by the Washington Convention Center Authority Act of 1994 Time Extension Temporary Amendment Act of 1997, D.C. Law 11-262 (hereafter, the Temporary Act);
(5) taxes collected under §§301-303 after September 27, 1996 and before the effective date of the 1998 Act were collected without legal authority and must be returned to the taxpayers who paid them.
I request that you respond in writing by August 26, 1998 to the points stated above, and developed more fully below, and that pending your delivery of your response, and your receipt of my reply thereto, which I will deliver within three working days of receipt of your response, that you refrain from disbursing or obligating any of the funds that stem from taxes collected under the purported authority of §§301-303 from September 28, 1996 until the effective date of the 1998 Act. Please let me have your immediate written communication, by facsimile, as to whether you agree to refrain from disbursing or obligating the funds pending the further communications I propose.
Expiration of §§301-303 of the 1994 Act on February 27, 1997 Due to Failure to Submit Final Financial Requirements and a Feasibility Analysis Required by §206(h)
Section 206(h) of the 1994 Act states, The Board sha1l submit final financial requirements and a feasibility analysis for the construction of the New Convention Center to the Mayor and Council within 24 months of the effective date of this act. The 1994 Act was effective September 28, 1994. Therefore, under that Act the deadline for submission of the final financial requirements and a feasibility analysis was September 27, 1996. The Temporary Act, which became effective April 25, 1997, amended §206(h) by substituting 29 months for 24 months, thus changing the deadline for the §206(h) submission to February 27, 1997.
Section 306(a) of the 1994 Act states, Sections 301, 302 and 303 shall expire 2 years after the effective date of this act if the Board does not submit final financial requirements and a feasibility analysis to the Mayor and the Council as provided by section 206(h). Sections 301303 impose taxes and provide for transfer of tax revenues to the Authority. The Temporary Act amended §306(a) by substituting 2 years and five months for 2 years.
According to your June 1, 1998 letter to Councilmember Jarvis, Councilmember Catania stated on May 29, 1998:
Your response to this statement was:
On August 14, 1998, Elizabeth Solomon submitted a written request to your General Counsel, Claude Bailey, for access to the final financial requirements and a feasibility analysis of the Mt. Vernon convention center. Mr. Bailey responded by letter dated August 18, 1998, stating Enclosed are the final financial requirements and feasibility analysis that you requested. Enclosed with Mr. Baileys letter was a letter dated February 28, 1997 to Blenna Cunningham, Chief Financial Officer of the Authority, from Sophia Green Robinson of Columbia Equity Financial Corp. and Frank C. Starr of Evensen Dodge, Incorporated, on the letterhead of Columbia Equity Financial Corp. There were several documents enclosed with the Robinson and Starr letter. The opening paragraphs of the Robinson and Starr letter state, in pertinent part:
None of the documents enclosed with the Robinson and Starr letter were the Financing Requirements and Feasibility Report (FR&FR) mentioned in the letter. On August 19, 1998, Ms. Solomon informed me that on that day she had asked Mr. Bailey for the Financing Requirements and Feasibility Report (FR&FR) referenced in the Robinson and Starr letter and that Mr. Bailey had told her there is no FR&FR.
The Robinson and Starr letter goes on to say:
* * *
It is apparent from the text of the Robinson and Starr letter that this letter does not purport to be a final Finance Plan. Given the content of the letter, it would be difficult to sustain the argument that this letter and its enclosures constitute a final financial requirements and a feasibility analysis complying with §206(h) of the 1994 Act.1
There is additional evidence suggesting that the February 28, 1997 Robinson and Starr letter did not state the final financial requirements for the proposed project. A Draft GAO Report, District of Columbia, Status of the New Convention Center Project (GAO/T- AIMD/OCE-98-238, July 15, 1998), at 21, refers to a financing plan [that] was developed in May 1997. The Report also states that the current . . . financing plan was prepared in May 1998. The Report, at 23, compares the Authoritys Financing Plan As of 5/97 with the Authority's Financing Plan As of 5/98, noting many differences between the two, including a $191 million increase, from May 1997 to May 1998, in Total Funding Required.
There is a substantial basis for concluding that the Authority did not submit to the Mayor and Council, on or before February 27, 1997, final financial requirements and a feasibility analysis, as required by §206(h) of the 1994 Act. On the evidence reviewed above, a contrary conclusion cannot reasonably be sustained. From this it follows that §§301-303 expired on February 28, 1997, as expressly provided in §306(a).
No Retroactive Re-enactment of the Expired Provisions by the 1998 Act
Section 2(1) of the 1998 Act states that Section 306(a) [of the 1994 Act] is repealed and that This subsection shall apply as of February 27, 1997. If on February 28, 1997 §306(a) caused §§301-303 to expire, as noted above, then the question raised by the 1998 Act is whether §2(1) can be construed not only to have retroactively repealed §306(a), but also to have retroactively re-enacted expired §§301-303.
Two principles of statutory construction appear to preclude this interpretation of §2(1). First, statutes must be construed to avoid raising constitutional questions. Edward J. DeBartolo Corp. v. Florida Gulf Coast Building & Constr. Trades Council, 485 U.S. 568, 575 (1988). Retroactive revival of an expired tax provision, resulting in taxation of transactions that took place at a time when the tax law was not in effect, raises a constitutional question whether the retroactive revival is a deprivation of property without due process of law. Shadburne-Vinton v. Dalkon Shield Claimants Trust, 60 F.3d 1071 (4th Cir. 1995) (involving retroactive revival of a money claim that had been extinguished by previous law). The relevant inquiry is whether or not the legislation serves a legitimate legislative purpose that is furthered by rational means, 60 F.3d at 1076, or whether the legislature has acted in an arbitrary and irrational way. Id. at 1075, quoting Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976). A legislatures determination whether particular means rationally serve a legitimate end is entitled to deference. Shadburne-Vinton, 60 F.3d at 1076. In Shadburne-Vinton, a laws retroactive effect was expressly contemplated and specifically intended by the legislature. After extensive hearings, the legislature explicitly had determined that the retroactive consequences were fair and equitable. Where a legislature specifically and rationally determines that a retroactive deprivation of property is just, the legislatures determination is almost certain to be sustained.
The legislative history of the 1998 Act, however, reveals that the Council did not confront the fact that §§301-303 had expired and that taxes had been collected without legal authority. The Council did not expressly determine that retention of unlawfully collected taxes was a just and proper means of funding the Convention Center. Rather, the Council erroneously and irrationally, given the facts reviewed above asserted that the Authority timely had submitted final financial requirements to the Mayor and Council, as required by §206(h), and that §§301-303 therefore had not expired:
Report of the Committee on Economic Development and the Committee on Finance and Revenue, B12-379, The Washington Convention Center Authority Financing Amendment Act of 1998 (June 1, 1998) at 9. Thus, the Council did not say that the purpose of the repeal of §306(a) was to authorize retention of unlawfully collected taxes. Instead, the Council said the purpose of the repeal was merely to remove any concerns that the continued collection of the taxes is contingent upon factual determinations and conditions precedent. Id. The erroneous and irrational premise on which the Council based its action that final financial requirements timely had been submitted and the Councils failure to recognize that continued retention of unlawfully collected taxes was at issue, raises a serious question whether the Council acted in an arbitrary and irrational way. Shadburne-Vinton, 60 F.3d at 1075, quoting Usery, 428 U.S. at 15. More importantly, these facts also militate against construing §2(1) of the 1998 Act as having retroactively re-enacted expired §§301-303, since the Councils contemporaneous legislative history asserts that no expiration had occurred and, hence, denies that any retroactive re-enactment was necessary.
A second principle of statutory construction also suggests that §2(1) should not be construed to have retroactively re-enacted expired §§301-303. As a general rule, statutes are to be construed as having only prospective operation, unless there is a clear legislative showing that they are to be given a retroactive or retrospective effect. Wolf v. District of Columbia Rental Accommodations Commission, 414 A.2d 878, 880, n. 8 (D.C. 1980) (collecting cases).2 Section 2(1) indicates intent to repeal §306(a) retroactively, but §2(1) does not clearly reveal an intention to revive any previously-expired statute. Again, the legislative history precludes any inference of such an intention, since it denies that any expiration occurred in the first place.
Therefore, a substantial basis exists for concluding that the 1998 Act did not retroactively re-enact expired §§301-303 and that at most it authorizes only continued collection of §§301-303 taxes beginning on the effective date of the Act.
Expiration of §§301-303 in 1996, Due to Invalidity of the Emergency Acts; and No Retroactive Reenactments of the Expired Provisions by the Temporary Act
The Home Rule Act limits the Councils power to enact emergency legislation. United States v. Alston, 580 A. 2d 587 (D.C. 1990); District of Columbia v. Washington Home Ownership Council, 415 A.2d 1349 (D.C. 1980) (WHOC). In WHOC the Court held the Council lacked authority to enact successive 90-day emergency acts addressing the same emergency, since these acts evaded the requirement for 30-day congressional review. In Alston, the Court distinguished WHOC and allowed successive emergency criminal statutes where (1) Congress had extended the review period for criminal statutes to 60 days, making passage of legislation through the normal process impossible within the 90-day limit on emergency measures; and (2) the Council, simultaneously with its adoption of the first emergency act, had passed an identical temporary act and had submitted it to Congress through the normal legislative process.
Under Alston and WHOC, there is a substantial basis for concluding that the convention center Second Emergency Act, which purported to extend until February 27, 1997 the deadline for submission of final financial requirements, is invalid. The two circumstances which caused the Court to approve successive emergency acts in Alston are not present here. The congressional review period applicable to convention center acts is 30 days, not 60 days. Further, the Council did not pass an identical temporary act simultaneously with its adoption of the First Emergency Act. Though the Council could have adopted a temporary act to obtain congressional review within the First Emergency Act's 90-day limit, it did not do so. See Alston, 580 A.2d at 591. Instead, the Council sought to accomplish a five-month extension of the deadline for submission of final financial requirements by means that would be insulated from congressional review two successive 90-day emergency acts. These successive emergency acts raise the same concern that caused the Court to invalidate the successive acts in WHOC. For this reason, there is a substantial basis for concluding that the Second Emergency Act is invalid, and that it did not extend to February 27, 1997 the deadline for submission of final financial requirements by the Authority.
Due to the 90-day limit on emergency acts, the First Emergency Act could not have extended the submission deadline beyond December 24, 1996 (90 days after the September 27, 1996 deadline established by the 1994 Act). Therefore, when the Authority failed to submit final financial requirements by December 24, 1996, §§301-303 expired.
There is also a substantial basis for concluding that even the First Emergency Act was invalid. This act purported to extend the final financial requirements submission deadline by six months. On its face, this law violates the 90-day limit on emergency acts. Indeed, the act is absurd; it purports to create a six-month extension for 90 days. The Council apparently recognized the invalidity of using a 90-day measure to create a six month time extension, since, on the 90th day, it adopted the Second Emergency Act. The Council may have thought that the first act was effective to create a 90-day extension. This law cannot be so interpreted, however, since nothing in its text creates a 90-day extension. The text contains only a facially-invalid six-month extension. The law appears to be invalid in its entirety.
There is a another substantial reason why both of the two emergency acts could be found to be invalid. They do not address a genuine emergency. Alston, 580 A.2d at 597 (Councils determination of what constitutes an emergency is subject to judicial review, though review is deferential); WHOC, 415 A.2d at 1366 (various tax measures appear to be dubious social emergencies) (concurring opinion). There is no basis for finding that the Authoritys inability to submit final financial requirements within two years of enactment of the original 1994 Act was a sudden surprise. It appears to have been an ongoing reality, known well before the deadline approached. The Council and the Authoritys inattention to the issue is a dubious basis for declaration of an emergency, particularly since the only consequence of failure to meet the deadline was expiration of taxes dedicated to a future project that was still in the planning stages and years away from groundbreaking.
For these reasons, there is a substantial basis for concluding that even the First Emergency Act was invalid, and that the financial requirements submission deadline therefore was not extended beyond September 27, 1996, and that §§301-303 expired on September 28, 1996 due to the Authoritys failure to meet the original submission deadline.
It also appears that the Temporary Act, effective April 25, 1997, cannot be interpreted to retroactively re-enact expired §§301-303, for the same reasons that preclude a similar interpretation of the 1998 Act. In addition, no provision of the Temporary Act states that any part is to apply sooner than the Acts effective date. Under accepted principles of statutory construction, the Temporary Act appears to have had only prospective effect, authorizing collection of §§301-303 taxes beginning April 25, 1997, but only if final financial requirements were submitted on or before February 27, 1997 which they were not.
The Authoritys right to retain any of the §§301-303 taxes collected after September 21, 1996 is doubtful. None of these funds should be disbursed or obligated at this time.
cc: Terence Golden, Chairman
Mayor Marion Barry
Linda Cropp, Chairman
Convention Center Class Action Steering Committee
Contacts: Beth Solomon (202) 789-7864
D.C. class action suit to seek $55 million taxpayer refund for unauthorized convention center taxes suit would undermine controversial projects financing
Representatives of civic groups are seeking individuals and businesses registered in the District of Columbia to join them in a class action law suit against the Washington Convention Center Authority and the District of Columbia to recover over $55 million in taxes that they claim were illegally collected to build a new D.C. convention center.
The civic groups are releasing a legal opinion drafted by the law firm Gaffney & Schember, P.C. calling on the Washington Convention Center Authority to immediately suspend disbursement of the funds in question.
The release will take place at 12 noon Friday, August 21, 1998, in the Holman Lounge of the National Press Club, 14th & F Sts. NW, Penthouse.
The opinion states that preliminary review of pertinent District of Columbia laws, judicial precedents, and available fact indicates a substantial basis for concluding that legislation authorizing the collection of several taxes for a new D.C. convention center expired after September 27, 1996, resulting in unauthorized taxation of individuals and businesses of over $55 million.
The opinion also states that there is a substantial basis for concluding that financing legislation passed in June by the D.C. Council did not retroactively reauthorize collection of the taxes.
The unauthorized taxes represent a large portion of funds that the Washington Convention Center Authority needs in order to secure a $616 million bond sale for the project.
All incorporated and unincorporated businesses in the District paid the taxes in question, as did any person who patronized a D.C. restaurant or bought prepared food in the District of Columbia during the 23-month period.
Gaffney & Schember is a firm experienced in class action cases whose attorneys have argued cases successfully before the Supreme Court.
The civic groups announced a Class Action Hotline at (202) 265-6420 to enable businesses and individuals to join a claimants pool seeking a refund of the unauthorized taxes.
CHAVOUS CHALLENGES WILLIAMS TO EXPLAIN BREACH OF TRUST ON CONVENTION CENTER TAXES
Councilmember Kevin P. Chavous (D-Ward 7) said today that he is deeply troubled by evidence suggesting that more than $55 million in taxes may have been illegally collected by the District government to pay for a new convention center. The evidence also suggests that the Chief Financial Officer may have supervised the unauthorized tax collection.
Mr. Chavous said, The stated mission of the Office of Chief Financial Officer Tony Williams was to bring fiscal stability, accountability and integrity to the District to support public services and restore stakeholder confidence in the Government of the District of Columbia.
Taxing businesses and individuals without authorization from the City Council shows not only a serious failure of management, Chavous said, but a basic breach of trust with taxpayers.
Mr. Chavous said, If the unauthorized taxes have been collected by the Chief Financial Officer, they should be returned. Anthony Williams owes the public an explanation of how this happened, and how the city will find replacement funds for a project whose costs are already exorbitant.
Councilmember Chavous added, This failure is even more surprising because the Chief Financial Officer sat on the Board of Directors of the Washington Convention Center Authority during the time the unauthorized taxation took place. He should not have permitted the creation of the $55 million liability.
The convention center taxes have added an unnecessary burden to our citys small businesses and residents, Mr. Chavous said, because the-choice of the Mount Vernon location which I voted against caused the cost of the project to double to more than $1 billion dollars, including interest. Added taxation will continue for at least 30 years if the project goes forward. Even the projects supporters say the facility will be obsolete in 10 years, because it has no room to expand.
The Chief Financial Officer was asked to submit a Fiscal Impact Statement assessing the proposed convention center at Mt. Vernon Square, said the Councilmember. The document he submitted was barely a page in length. It is disturbing that the largest public project ever proposed in the District could receive such little attention from the citys primary financial oversight official.
Paid for and authorized by the Chavous for Mayor Committee.
Victor Reid Treasurer
Taxpayers For Common Sense Calls For Suspension of Convention Center Tax; Endorses Planned Civil Suit
WASHINGTON, D.C. Taxpayers for Common Sense (TCS) today called for an immediate suspension of special convention center taxes in the District of Columbia. The organization has also endorsed local efforts to recover over $55 million in taxes that were illegally collected to build a new D.C. Convention Center, according to legal experts.
Ralph DeGennaro, Executive Director of Taxpayers for Common Sense explained: When legal experts question the authority of these special convention center taxes, the citizens of D.C. should hold their government accountable. The money was taken illegally, so its time to give taxpayers their $55 million back!
The prepared statement by DeGennaro follows:
Taxpayers for Common Sense is a politically independent organization founded in 1995 that works to cut wasteful spending, subsidies, and tax breaks through research and citizen education.
1. An additional question is whether the Robinson and Starr letter, which is dated February 28, 1997, was submitted to the Mayor and Council on or before February 27, 1997. Ms. Solomon has informed me that her inquiries at the Council have yet to produce information showing that the Robinson and Starr letter was ever received by the Council. Her investigation of these points continues.
2. This point is separate from any constitutional concern. Scholtz Partnership v. District of Columbia Rental Accommodations Commission, 427 A. 2d 905, 914 (D.C. 1981).
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