City of Phoenix v. Kolodziejski

PETITIONER:City of Phoenix
RESPONDENT:Kolodziejski
LOCATION:Gwinnett County Courthouse

DOCKET NO.: 1066
DECIDED BY: Burger Court (1970-1971)
LOWER COURT:

CITATION: 399 US 204 (1970)
ARGUED: Mar 31, 1970
DECIDED: Jun 23, 1970

Facts of the case

Question

Audio Transcription for Oral Argument – March 31, 1970 in City of Phoenix v. Kolodziejski

Warren E. Burger:

Number 1066, Phoenix against Kolodziejski.

Rex E. Lee:

Mr. Chief Justice, may it please the Court.

Warren E. Burger:

Lee.

Rex E. Lee:

The question in this case is whether the State of Arizona may constitutionally limit the right to participate in general obligation bond elections to real property taxpayers whose property in such an election, the City of Phoenix, will put up as collateral security for the repayment of the bond obligation.

And whose property is subject to lien of those bonds during the life of the bonds.

The relevant facts in this particular case can be simply stated.

On June 10, 1969, there was submitted to the real property taxpayers in the City of Phoenix the largest aggregate of bond issues ever proposed by that city.

Calling for a total of $170 million to finance very badly needed improvements in the City of Phoenix, urgently needed at that time and even more urgently needed at the present time.

Two of these issues related to general or revenue bond issues and the other eight were general obligation bond issues.

Some six days after the election was held, this Court handed down its decisions in Kramer versus Union Free School District and Cipriano versus City of Houma.

The latter of which held that it was unconstitutional to prohibit non-property owners from voting in a revenue bond election.

According to Cipriano applied its holding prospectively only and held open the question of the applicability of Cipriano to general obligation bonds.

Because of the cloud which Cipriano casts over the bonds of the City of Phoenix, because of the urgent need on the part of the City of Phoenix for the facilities which were to be financed by these bonds, this suit was just brought raising the question which this Court now has before it.

Ms. Kolodziejski, the plaintiff in this case, is an employee of the leading investment banking firm in the City of Phoenix specializing in municipal bonds.

She owns no real property and she rents her living quarters.

It’s been stipulated that the real property taxes which her landlord pays have a material bearing on the amount of tax which or in the amount of rent which she is charged.

A question which arises at the outset of this case concerns the relevant test which is to be applied to determine the right of the state through its Constitution and its statutes, to prescribe qualifications under which resident citizens of the City of Phoenix can participate in general obligation bond elections.

John M. Harlan II:

Could I ask you a preliminary question?

Rex E. Lee:

Yes Mr. —

John M. Harlan II:

Currently, if there is any answer to it.

But under your state law, did she have a tax to this bond issue as a matter of timeliness of an action.

Rex E. Lee:

Mr. Justice Harlan, in my opinion, the answer to that question is yes, but no one really knows the answer to that question.

The State of Arizona unlike the State of Louisiana does not have and so far as I know there’s really only one state that has a statute exactly like the one with Louisiana does not have the kind of statute that provides what they call a preemption period at the end of which there is no further challenge.

Arizona is really at the other end of the spectrum in this sense.

The only election challenge statute that exists is a five-day period which was obviously intended to apply to election of people, election of officers.

There is one governing case which is rather difficult to read and lawyers could differ on exactly what it means.

Suffice it to say there is serious question — serious question under the laws of the State of Arizona whether there ever comes a time that there’s no longer the opportunity to challenge a bond election.

John M. Harlan II:

I bet you’re not raising it?

Rex E. Lee:

No sir, indeed we’re not.

Indeed we’re not.

Byron R. White:

As suppose the state can waive that you can.

Rex E. Lee:

Yes Mr. Justice White, in opinion we can.

Byron R. White:

You conceded the five-day limit here (Inaudible) but it have five days after the canvas, it could’ve been July 28 or June 22.

Rex E. Lee:

All right, it would’ve been June 28, yes Mr. Justice White.

Byron R. White:

It would’ve been —

Rex E. Lee:

Before this action was filed.

Byron R. White:

Yes, well, the Court — whoever was excluded from the election and if they were included those appearances.

Rex E. Lee:

That is correct.

We have —

Byron R. White:

So, they really had some time to file.

Rex E. Lee:

That is correct and if not filed within the five-day period.

But I reiterate.

We have not raised that as a defense and do not wish to at this time because we need this issue decided and we feel that under as the matter of Arizona State law; number one, there is a question whether she did or did not filed it within the proper period of time and number two, in my opinion it’s a matter if this — if this can be waived.

And we are not relying on it.

This Court over a period of a century has laid down the very salutary rule and a rule as reflected at least half-a-dozen separate decisions of this Court that in determining which of it’s citizens will be allowed to vote, the states are allowed a broad discretion setting qualifications and determining the circumstances and the qualifications under which of its resident citizens will be allowed to vote.

There was an exception carved out from that general rule by this Court’s decision last term in Kramer versus Union Free School District and because that exception lies at the heart of the resolution of the issue on this case, it is important to know the precise circumstances under which that exception prevails.

Therefore, it is important; I feel to look at the exact language of the Kramer case.

Kramer spelled out that the circumstances under which the exception to the general rule applies is as follows: that the broad latitude which usually accord to legislative judgments in this area is based on the assumption that the institutions of State Government are fairly constituted and that when the attack is an attack on that very assumption and the assumption itself can no longer serve as the basis for presuming constitutionality.

It follows, in the view of the Kramer Court that the general rule upholding the judgment of legislators were reasonable and I’m quoting now “does not extend to decisions concerning which resident citizens may participate in the election of legislators and other public officials”.

And the Court was very specific on this point and reiterated it a number of times.

Now, it is true as Justice Stewart pointed out in his dissent in Kramer that it was not limited to the election of the New York legislature which necessarily imposed that limitation.

Nevertheless, whether right or wrong in Kramer and I accept it as stare decisis whether right or wrong in Kramer, the rationale of Kramer was that that limitation applied only when you’re electing people.

When you’re electing the general policy making bonds of the state on one of its political subdivisions; the state legislature, the school board in Kramer, the city council in this case and bond elections do not fit within that exception category.

Therefore, we submit that the limitation involved in this case must be upheld —

John M. Harlan II:

What do you do in Cipriano?

Rex E. Lee:

That Cipriano, Mr. Justice Harlan, is an enigma.

John M. Harlan II:

Is it in the books.

Rex E. Lee:

That it’s on the books but it did not overrule.

In fact both it and the Kramer decision itself specifically said we are not overruling Lassiter, Pope versus Williams, Mason versus Missouri, and Carrington versus Rash.

John M. Harlan II:

Those are these are — are these some who joined the dissent in Kramer and found it impossible to the dissent in Cipriano?

Rex E. Lee:

And the reason that you found it impossible in the dissent in Cipriano Mr. Justice Harlan is this.

As I read your dissent in Cipriano.

That under any circumstances —

John M. Harlan II:

No, I was joining Justice Stewart.

Rex E. Lee:

Yes and I realize you filed a separate one for other reasons.

But Mr. Justice Stewart’s and Mr. Justice Black’s dissent in that case pointed out that under any circumstances, there was not a reasonable basis for the exclusion in Cipriano and the reason was that there’s simply was not a reasonable connection between exclusion of property orders in a revenue bonds election or not that hangs upon the difference between revenue bonds, the general obligation bonds and I propose that bear down very heavily on that distinction.

The most that can be said about Cipriano, Mr. Justice Harlan is that it was very bare dictum.

It’s a pre curiam opinion have down the last day of the term and I don’t want to — all I can say is it was simply a kind of a wash over from Kramer and if you read Kramer carefully, it should not be made to extend to any kind of bond election and I do not feel to borrow the — borrow the phrase used by the Solicitor General that a century of this Court’s decisions should be laid to rest with nothing more than the simple statement of compelling state interest in the Cipriano opinion without any attempt to reconcile it with the rather careful reasoning, whether right or wrong that was set forth in Kramer.

I turn then to the discussion of the real —

John M. Harlan II:

(Voice Overlap) a lot of history too when we went to Reynolds and Sims.

Rex E. Lee:

Well, I recognize that Mr. Justice Harlan.

All I’m saying is —

Byron R. White:

Do you intend to reargue that?

Rex E. Lee:

No, I do not intend to reargue Reynolds versus Sims Mr. Justice White but all I’m saying is that accepting Reynolds versus Sims, accepting Kramer for its reasoning, accepting Cipriano versus the City of Houma, this is a different case and for reasons which I have now about to discuss, the Court should go no further than it has gone in Reynolds versus Sims, Kramer and Cipriano and I submit Mr. Justice Harlan because I know of your feelings about stare decisis that this is a different issue, I mean it does not involve the same problem.

The reason that it doesn’t involve the same problem rests upon the difference between a revenue bond election on the one hand and a general obligation bond election on the other hand.

In a general obligation bond election, there are two issues that are submitted to the electorate that that are relevant for present purposes.

The first of this is will a City of Phoenix obligate itself, borrow money and obligate itself to repay that money through the impartation of taxes, real property taxes perhaps supplemented by sales taxes.

That’s one question.

Byron R. White:

Are there — are there anything else that is available?

Rex E. Lee:

It’s available, that is correct Mr. Justice White.

Byron R. White:

Except some tax that is designated.

Rex E. Lee:

Designated that is correct.

In Allison versus the City of Phoenix, the Arizona Supreme Court said that there was an obligation only to impose real property taxes were necessary but if the city had available some taxes from another source, they could use it, so I will agree Mr. Justice White.

Byron R. White:

The only thing that comes to bondholders are property tax.

Rex E. Lee:

The property tax must lien on the property.

Byron R. White:

What point do they —

Rex E. Lee:

They promise me and by statute, the City of Phoenix is obligated to tax that property to a sufficient extent to repay the bonds.

Warren E. Burger:

And if they fail to do it, the mandamus is available, isn’t it?

Rex E. Lee:

That is correct and to the point of taking the property and selling it at a tax lien sale.

And that brings me to the second issue in any general obligation bond election.

Rex E. Lee:

I will concede that there might be — Mrs. Kolodziejski may have about the same interest in the first question because it’s true that maybe she is going to participate to some extent or another in the payment of the taxes on a year-to-year basis if things go well.

But there is a second issue really in any general obligation bond election and that is this.

Will the City of Phoenix impose a lien by way of collateral security for the obligation that — for the money that the City of Phoenix is borrowing on the property of each individual property within the City of Phoenix.

That’s the real difference.

The City of Phoenix is borrowing money.

It is borrowing it on a secured obligation, unlike revenue bonds which are unsecured obligations.

The City of Phoenix is putting up security and this is at the case with any secured loan, it can get a better interest rate if it puts up security than if it doesn’t put up security.

Warren E. Burger:

When you say it puts up security, it puts up some security of someone else’s property.

Rex E. Lee:

Someone else, precisely.

Warren E. Burger:

Not its own property.

Rex E. Lee:

This property doesn’t belong to the City of Phoenix.

The property that it’s putting up a security belongs to the Robert Backsteins and the Fred Rosenfelds who live within the City of Phoenix.

Now, under the normal course of events, if all goes well and we don’t have any pressure and the City of Phoenix prosperous, then the City of Phoenix will probably be able to repay this bonus over the entire 21-year period from normal amount, our property tax revenues and from the sales taxes.

Hugo L. Black:

What’s the rate of interest?

Rex E. Lee:

The maximum rate of interest, Mr. Justice Black, under the present statutory provisions of State of Arizona is 6%.

Probably be able to repay it and it means very possible that the land owners and the Emily Kolodziejski’s within the City of Phoenix won’t notice a materially different impact from these bonds.

But undeniably, there is a difference in the risks that is assumed by the property taxpayers and the non-property taxpayers.

And that the property taxpayers have themselves, have their property subjected to a lien.

Their property is put up as security for what the City of Phoenix has borrowed and I think the purest illustration of this lies in the bonds that are referred to by the amicus brief, it’s been cited and been filed by the City of Salt Lake.

They referred there to effort revenue bonds which are revenue bonds and which the city anticipates will be paid from the revenues generated by the airport.

But the city wants to issue these as general obligation bonds because it can get a better interest rate.

Anyone who has ever had any experience as I’m sure all the members of this Court have with commercial transaction knows that a loan can be made on conditions more favorable to the lender if he puts up some kind of security.

Thurgood Marshall:

Mr. Lee do you have sales tax in Phoenix?

Rex E. Lee:

Yes, sir we do.

Thurgood Marshall:

Personal property tax?

Rex E. Lee:

Well —

Thurgood Marshall:

Well, it may also assume that some of the property there, the taxes are paid by the people who are renting?

Rex E. Lee:

That is correct, Mr. Justice.

Thurgood Marshall:

Is there money involved?

Rex E. Lee:

Their money is involved, Mr. Justice Marshall in the annual repayment or maybe involved.

Rex E. Lee:

The difference between those people in the real property —

Thurgood Marshall:

No.

This will settle my question.

Is the payment of these bonds limited to real property taxes?

Rex E. Lee:

No.

Thurgood Marshall:

That’s all I’m on now.

Rex E. Lee:

Under the decision of the Arizona Supreme Court in Allison versus the City of Phoenix, you can use sales taxes.

You must use property taxes necessary.

My point is there is not a constitutional difference or that we don’t need to look that the difference in source of payment year by year for the constitutional difference.

In my view, the constitutional difference in here is in the fact of the risk that the property owner is taking.

Now, if the City of Phoenix were saying, we’re going to borrow money, we can get a more favorable interest rate on this money if we put up some security and the security that we’re going to put up, the cash surrender value of life insurance of every citizen of the City of Phoenix, the stock and bond investment portfolio of every citizen in the City of Phoenix and the savings accounts, then I think we would have a different case.

Hugo L. Black:

Could they do that, those three (Voice Overlap)

Rex E. Lee:

Being practical Mr. Justice — it’ll be impractical and the reason it would be impractical is because those things are made articles and those things don’t necessarily stay within the City of Phoenix.

The only thing a value that clearly is going to stay within the City of Phoenix over the 21 period is the land.

Now, in my view, it’s the same as though we had two joined obligors on a promissory note.

Only one of them supplying security for the note and there is a material difference between the interest of those two and whether the bonds are to be sold or not.

Particularly, when you bear in mind — particularly, when you bear in mind that the election which is what we’re talking about here is only the second step in a three-step process involved in the issuance of bonds.

No bonds are ever issued by any municipality in any of the states that have this kind of restriction.

Unless, first of all the city council, the school board or someone determines that bonds should be issued.

That determination is made by a body that all of Kramer has been properly apportioned and elected fairly by all the people.

The election is the second step and the third step is the actual issuance in sale which again lies within the discretion of the city council or whatever the particular body maybe.

Potter Stewart:

This in — this is an election by majority votes of voters without reference to (Voice Overlap) — without reference to the amount of their property.

Rex E. Lee:

That is correct.

Potter Stewart:

I mean if I — if a man owned $10.00 with the real estate, his vote counts as much as the man who owns a million dollars with real estate.

Rex E. Lee:

We don’t have a Louisiana problem.

Potter Stewart:

That was different as Louisiana.

Rex E. Lee:

That is correct.

Now, I’d like to devote just a few moments to the prospectivity retroactivity program against — well, we do feel and I reiterate that under any conceivable test, there is a distinction between general obligation bonds and revenue bonds; the distinction which under this Court’s authorities renders the Arizona law constitutional.

However, in the event that this Court should disagree, I do suggest very strenuously that the decision should be prospective only.

And I would like to discuss that briefly with the Court because of the great interest which has been created and because of the importance of this matter also for the City of Phoenix and its need for $170 million worth of financing.

Rex E. Lee:

The Court has noted I’m sure that there have been 12 different briefs filed from a collection of about eight different states across the country whose provisions are similar to those of Arizona.

I would simply submit that as this Court held in Cipriano that the various interest bearing on retroactivity and vis-a-vis prospectivity indicated that the decision should be prospective only are compounded in the case of general obligation bonds and that there is even more reason why general obligations bonds or why the decision in this case, if the decision should affirm the lower court’s decision should be held prospective only from the date of this Court’s decision in this particular case.

Hugo L. Black:

May I ask you what affect that would have in the City of Phoenix.

Rex E. Lee:

Well, we hope Mr. Justice Black that it would hold them that it would validate these bonds and let me say why I hope that this would be the case.

May I point out first of all what in the Allen case two terms ago which also involved in election under the ‘65 Voting Rights Act.

This Court held this decision prospective not only as to other elections but also as to the election involved in the particular case that was at issue.

The City of Phoenix held its election prior to Cipriano, six days prior to Cipriano.

There are three different questions that are raised by this Court’s decision in Cipriano and in the Allen case that we feel are relevant and helpful in the determination as to prospectivity in the instant case.

In Cipriano, this Court mentioned the significant hardships which were the result from a retroactive decision.

May I simply point out but not only in this case of the City of Phoenix but also others, the hardships are much greater in the case of general obligation bonds than they are in the case of revenue bonds.

Lewis F. Powell, Jr.:

Mr. Lee, is Cipriano the one in which we drew the line pending on whether the election was still subject to challenge?

Rex E. Lee:

Yes sir.

Lewis F. Powell, Jr.:

That was Cipriano.

Rex E. Lee:

Yes, sir and I want to discuss that because that fits fine in Louisiana but not in Arizona.

Byron R. White:

I just wonder how it helped you because by your own confession this election is subject to challenge.

Rex E. Lee:

Right and it maybe Mr. Justice White, we just don’t know it.

Well let me — let me address myself to that problem.

In those states that have a Louisiana-type statute and all candor and I think there’s only one.

Then that rule works fine.

In those states which do not have that type of statute and Arizona does not, then we would submit that it should be — that it should be the time of the election.

Byron R. White:

Why should it be within the period of the election is subject to challenge?

Rex E. Lee:

Because we don’t know what that is.

Byron R. White:

I have to understand that if somebody wants to challenge elections in Arizona, I thought it was five days, five days after the canvass.

Rex E. Lee:

But that’s not bond elections or we’re not sure whether that’s bond election.

Let me tell you why that’s not a good —

Byron R. White:

You mean — you mean, there aren’t any states that — you mean it’s more general than not the states have no time limit on when you can challenge a bond election.

Rex E. Lee:

Mr. Justice White, this is set —

Byron R. White:

I wouldn’t think the bond lawyers would ever — ever pass it or given opinion on a bond issue.

Rex E. Lee:

We have a great battery of bond lawyers.

Byron R. White:

I see them here, I just wondered.

Rex E. Lee:

They have informed me and I rely on their opinion that Louisiana stands alone in so far as that degree of protection.

That is a correction period to say that Idaho has one that is the closest.

Byron R. White:

Well how does — how does anyone know in your state then whether any bond is good, you can apparently challenge an election forever.

Rex E. Lee:

Well you always have the argument obliges and there’s always a possibility that there will come a time that it is not an identifiable time such as it was involved in Louisiana.

Byron R. White:

What is that you’re contending for Mr. Lee?

Rex E. Lee:

For the date of the election.

Byron R. White:

You mean — by that, you mean if I were to say that you lose on the other point that we should also say that only as to elections after the date of this opinion?

Rex E. Lee:

Of this court’s decision.

Byron R. White:

Yeah and that this one only for the State of Arizona?

Rex E. Lee:

No, I would hope for all the states.

Byron R. White:

Well, how would this effect to we said in Cipriano, except —

Rex E. Lee:

It would — it would, it would simply say that in those states as if Cipriano was where you have an identifiable time grid and that’s the point.

Where you don’t have it —

Byron R. White:

But we have two rules.

Rex E. Lee:

Have two rules.

Byron R. White:

I see.

Potter Stewart:

And how it is should be the date of the election?

Rex E. Lee:

The election.

Now, here’s the reason that I feel that it should be the date of the election.

It is after all the election that raises the constitutional question.

That’s where people either do both or they don’t.

And here’s another reason Mr. Justice White why I feel that it should be the election and answer to your earlier question.

City of Phoenix held its election on June the 10th.

Cipriano came down on June the 16th.

Now, subsequent to that time, the City of Phoenix, acting in perfectly good faith took steps to have the question determined as to whether it’s bonds are good or not and that’s why we’re here and we’re here first.

Subsequent to that time, there were a number of elections held.

And as you look in the amici briefs that have been filed at Colorado, Louisiana, Utah didn’t have one, Tulsa, Oklahoma, Florida, Idaho and Texas.

All of those have held elections subsequent to Cipriano.

The reason was of course that especially for schools and that’s one reason why it’s even more important to hold the prospective and general obligation bond context and it is in the revenue bond context.

That’s the only way schools can finance and schools simply can’t wait.

Rex E. Lee:

And that’s why you find so many school elections.

They have to be held.

But so under and that case is not here, many of those elections would be approved under any rule, under the Cipriano rule, keep it worthwhile here simply because they went ahead, held their election and the State of Texas actually sold their bonds.

We submit that there is no reason why the City of Phoenix should be in any or lesser position having proceeded in good faith as the City of Phoenix did in orderly way to get the question resolved.

And really and frankly doing a service to other 13 states in this country and Cipriano where he candidly has through him, the municipal financing community in the 13 states into chaos.

Why we should be in any lesser position having performed the service.

John M. Harlan II:

How much of this issue, how much of the total issue has been resolved?

Rex E. Lee:

None, Mr. Justice Harlan.

John M. Harlan II:

None of it?

Rex E. Lee:

None, none.

Potter Stewart:

I supposed not any purchaser would demand a pretty big discount.

Rex E. Lee:

Well, the problem is we can’t get any detail when to give us an approving in opinion.

Potter Stewart:

Exactly.

Warren E. Burger:

That’s why you want one from us.

Rex E. Lee:

That’s right.

Potter Stewart:

You concede the invalidity of the revenue bonds that were (Voice Overlap).

Rex E. Lee:

Well, I keep my (Voice Overlap) on that.

If I’m right that in non-Louisiana-type states the cutoff date should be the election date then this revenue bond election was before the Cipriano decision came back six days before.

Potter Stewart:

Yes, but so I see you save your position with respect to the prospectivity retroactivity.

Rex E. Lee:

Only, only, other than that we agreed that Cipriano give its revenue bond elections.

Potter Stewart:

Makes them valid, that’s the future —

Rex E. Lee:

Right.

Potter Stewart:

Election.

Byron R. White:

Well what about in other states Mr. Lee that have held elections since Cipriano.

Cipriano would at least told them that it wouldn’t have been anymore retroactive than Cipriano said special election revenue obligations were.

So the tendency of this case — the dependency of this case, really doesn’t seem to — it shouldn’t worry anybody, that that wouldn’t be anymore retroactive than Cipriano.

Rex E. Lee:

Well, Mr. Justice White, I hate to use up my time arguing for the other fellows but I do feel, you see in Cipriano, you said, you specifically held open the question of Cipriano’s applicability of general obligations.

Byron R. White:

Well, I understand that.

Rex E. Lee:

Yeah, you also said that Cipriano itself would be prospective only.

I simply submit and I can do nothing more than that these states acted reasonably in light of both of those involved, in light of all those holdings.

Byron R. White:

Well, I would think they would — that recently holding elections, delve on why they worried about with consequences of decision in this case.

Rex E. Lee:

Well, I would like to reserve a few moments.

Warren E. Burger:

Mr. Rosenfeld.

Fred H. Rosenfeld:

Mr. Chief Justice, may it please the Court.

On behalf of Miss.Kolodziejski, we suggest that the Court reject the city’s argument and affirm the decision of the lower court.

In relation to the city’s argument which is in effect to limit both Kramer and Cipriano to the factual contents of each case, we feel this should be specifically rejected.

The Kramer case we will admit stated that the rule would apply and at the first instance, it seem to say the rule would apply to the election of officials.

However, it went on and —

Warren E. Burger:

Number 1066, Phoenix against Kolodziejski.

Rex E. Lee:

Mr. Chief Justice, may it please the Court.

Warren E. Burger:

Lee.

Rex E. Lee:

The question on this case is whether the State of Arizona may constitutionally limit the right to participate in general obligation bond elections to real property taxpayers whose property in such an election, the City of Phoenix will put up as collateral security for the repayment of the bond obligation and whose property is subject to the lien of those bonds during the life of the bonds.

The relevant facts in this particular case can be simply stated.

On June 10, 1969 there was submitted to the real property taxpayers in the City of Phoenix, the largest aggregate of bond issues ever proposed by that city.

Calling for a total of a $170 million to finance very badly needed improvements in the City of Phoenix urgently needed at that time and even more urgently needed at the present time.

Two of these issues related to general or to revenue bond issues and the other eight were general obligation bond issues.

Some six days after the election was held, this Court handed down its decisions in Kramer versus Union Free School District and Cipriano versus City of Houma.

The latter of which held that it was unconstitutional to prohibit non-property owners from voting in a revenue bond election.

Court in Cipriano applied its holding prospectively only and held open the question of the applicability of Cipriano to general obligation bonds.Because of the cloud which Cipriano cast over the bonds of the City of Phoenix, because of urgent need on the part of the City of Phoenix for the facilities which were to be financed by these bonds, this suit was brought raising the question which this Court now has before it.

Ms. Kolodziejski, the plaintiff in this case, is an employee of the leading investment banking firm in the City of Phoenix specializing in municipal bonds.

She owns no real property and she rents her living quarters.

It’s been stipulated that the real property taxes which her landlord pays have a material bearing on the amount of tax which or on the amount of rent which she is charged.

A question which arises at the outset of this case concerns the relevant test which is to be applied to determine the right of the state through its Constitution and its statutes to prescribe qualifications under which —

Fred H. Rosenfeld:

Another thing to know in the Cipriano decision, the Court appeared as I stated to take the more rigid approach to that election the dissent, Mr. Black — Justice Black’s dissent used what I believed to be the rational basis doctrine or the general test for Fourteenth Amendment — of the Fourteenth Amendment against the state statute.

Potter Stewart:

The dissent of what case?

Fred H. Rosenfeld:

In Cipriano.

Potter Stewart:

There was no dissent in Cipriano.

Fred H. Rosenfeld:

Excuse me, concurring opinion.

I’m sorry, I’m sorry.

I apologize.

Fred H. Rosenfeld:

To the effect that it was held and that the restriction was wholly irrational.

Now, if it was wholly irrational, the Court — if this is the opinion of the minority, it could also will have been the opinion of the majority but the majority opted for a more specific test, so we feel that in the reading of Kramer and Cipriano, there was ample reason for us to believe that the Court meant to apply this to all special elections.

Thurgood Marshall:

Well, if it applies to all special elections in Phoenix called an election to decide zoning rules for real property owners and restricted that the real property owners reproduce, what would you say?

Fred H. Rosenfeld:

Well then, then the test would have to apply, the test would be are those who are excluded substantially less interested and thus the exclusion promote a compelling state interest.

It wouldn’t — the neither case held at the —

Thurgood Marshall:

Well, I thought you said any special election that would be open to everyone.

Fred H. Rosenfeld:

Oh no, I — that’s not my statement at all, the test applies — excuse me if I did.

I didn’t mean to say that.

I apologize.

My position is that the test is applicable not that all special elections must be thrown over.

I do not espouse that position and I don’t think this case is vehicle for anyone to espouse that positions.

The test set forth in the Kramer case as I’ve said is that of substantial interest and the exclusion must promote a compelling state interest.

In the Cipriano case, this was re affirmed.

In the Kramer case and also in the footnote in the Cipriano case, it appears to us that the test is so rigid that no tolerances whatsoever are allowed.

In the Kramer case, it is said that the statute must be tailored so that although and I underline all are substantially less interested than those who are allowed to vote.

Now, let us apply this rule to the facts of this case.

Ms.Kolodziejski is a lessee.

She does not pay real property taxes, she owns no real property.

She owns no personal property subject to personal property taxes.

She — however, it is stipulated that the rent that she pays takes the amount of the landlord’s real property taxes into effect.

Therefore, she will be affected by any increase in the real property taxes.

She also pays sales taxes which maybe used to defray the bonds but it’s not an absolute requirement that the city continued to use the sales taxes for the purpose of defraying these bonds.

The facts also showed that she is interested in the city affairs of the City of Phoenix and that she wants to vote in all elections.

The facts further showed that the city has for the recent years use ad valorem taxes to pay only approximately two fifths of the annual debt service on its general obligation bonds.

Now, in applying the substantial interest test, it is our position that appellee is as interested or is substantially interested in the outcome of this election.

There can be no question that she is subjectively interested in the election.

The facts bear that out.

She is also pecuniarily interested in the election in so far as her rent will be affected by any increase in the real property taxes.

She is also pecuniarily affected in so far as the money she pays and excise taxes will go if the city continues its present policy to the payment of the debt service on the general obligation bonds.

All residence of the City of Phoenix are affected by the increase in any tax where sales tax or real property tax because it will increase generally the cost of goods and services within the city.

Fred H. Rosenfeld:

Besides being interested both subjectively and pecuniarily, we also feel that the appellee is interested and has an objective state in the outcome of this election.

We wish to point out that in all bond elections the bond authorization is not the only question before the voters.

There are other questions of political import in every bond election not just the debt.

The location and type of the improvement to be made is an important aspect of each bond election.

Obviously, I maybe induced to vote for the bond issue if they are going a place a school or library near my house.

Conversely, I maybe induced to vote against the bond election if the city intends to place a sewer plant or abattoir in the direct vicinity of my house.

This objective state is one that is shared by all residents of the city, not just by the real property taxpayers.

In fact, this objective state is affected, affects those people who are excluded from this election.

For example, if you have residents of slums or tenements which are almost universally owned by absentee landlords and if this is a dense population of people, the political power of the ballot to induce the city to place the municipal improvements desired by those voting is completely wiped out.

I think one of the, one of the lessons of the election cases and voting rights cases and voting rights legislation that we’ve had over the past decade is the fact that the fruits of the election gravitate toward the political power.

Here, we have a situation which is basically unfair.

A class of people are in a position where they cannot exercise any power to end and I might say and I will speak from past experience in this area.

The general inclination on all bond elections is to have a purpose which will carry.

Hugo L. Black:

Is to what?

Fred H. Rosenfeld:

Is to carry, that the election will carry nine times out of 10 the purpose will be tailored toward those with the voting power.

Now, if we exclude certain citizens from the elective process and if we exclude certain citizens who have a real state in municipal improvements in the area of schools it might be said that the renters in the slum areas have an even greater stake in the improvement or the construction of new schools in their area but when we take away this power to this power over the elective process, this power of the combined vote of the tenant class to carry the election then we have not only affected the tenant class to rents, maybe through excise taxes but we have affected their objective stake in the election.

Warren E. Burger:

But what you’re really arguing now are those the wisdom of the Arizona structure.

Fred H. Rosenfeld:

Well, I’m arguing the interest.

I have to say this, the footnote in the Kramer case seems to say that interest meant the intent to vote.

Mr. Justice Stewart’s dissent said that is what the Court is intending to do that the mere interest is an interest sufficient to take demand of the polls to vote.

But I have tried to show that the interest of the tenant generally goes much further than that.

The interest of the tenant is cumulative.

It is subjective, pecuniarily and objective.

Now, it also is I think of basic tenet of our civilization that the rent is going to be passed on to the tenant.

The appellant in the briefs state that the appellee is unique in this fashion, in this manner.

However, this Court in the very recent case of Turner versus Fouche stated as follows.

“It cannot be seriously urged that the citizen in all other respects qualify to sit in the school board must own property if he has to participate responsively in the educational decisions without regard to whether he is among other things, a lessee who effectively pays property tax as part of his rent.”

I think the Court has noted what to me is a fact, a basic tenet of our capitalistic society that the landlord in order to get a fair return must pass on the real property taxes as a cost of doing business.

If the real property taxes go up, his rents are going to go up accordingly so he can keep his fair return.

Now, another thing in this — another point in this argument turns on the fact that there is not qualifica — there is no quality, qualitative approach on the part of the State of Arizona or the City of Phoenix to determine just how much real property is necessary in order to allow the elector to vote.

Fred H. Rosenfeld:

It is clear in my mind that so long as the man actively pays real property taxes, he may own one square inch of property then will be allowed to vote.

A person leasing thousands of acres of property has no standing to vote in the same election.

However, if we are talking about the mere tokenism of owning property, then we’re in the situation which this Court condemned in Harper versus Virginia Board of Elections where it said that the test of wealth is not germaned to informity voting.

It is easy to draw an example where the owner of real property who would be allowed to vote could have a very small interest in the property that he owns.

If for example we have someone owning in $10.00 worth of taxable property at the assess level and we have B who owns, who leases a $10,000.00 home on the assess evaluation basis.

We have a situation where in one month, B is going to pay a bigger share of this — of the debt incurred for these bonds that A will pay for the entire term.

However, B will not be allowed to vote and A will.

It might also be pointed out that as I said, one of the tenets of our society is that the entrepreneur takes the risk.

The lessee of real property must live on property owned by somebody.

If it’s a corporation, the corporation can’t vote; if it is a private source, the private source could vote if he lived within the city.

However, one of the risks that this entrepreneur takes is the risk that he will have a tenant throughout the life of his building.

In the event that taxes are to increase, this is part of the risk, so it’s no grave imposition on the landed class to place to remove the restriction that only real property taxpayers may vote.

In our brief, we cited some examples and the only one that I wish to point out is the situation where under this particular type of statute, one person could own the entire municipality.

No civic improvement could be made unless that one person agreed to it.

Now, this is not exactly too farfetched.

In my in brief, I pointed out two examples one were two people carry, here the vote carry two to nothing, one where the vote was defeated by score of one to nothing.

We feel that the statute and the constitution of the State merely requires a token ownership of property and that the interest effected is in no way relative to the fact that the man owns property because you can pay more in a lease in a month than the owner of a small piece of property could pay throughout the life of the bonds.

Token as we feel should not be a constitutional distinction and yet that is what we have here.

However, in the event it is shown that the appellee and her class are less interested than those who are allowed to vote, this does not carry the day for the appellant.

The appellant must also show that the interest, the state seeks to protect is compelling.

I am at loss to know the appellants’ position on compelling state interest.

I have yet to learn the appellant’s position on the goal the state articulates.

However, the amici briefs are some help in this area.

The amici briefs boil this down to the protection of the land owner against the piling of indiscriminate debts by those who do not own the land.

We feel that the basic tenant of this type of articulated goal is mere protectionism against the way the population excluded might vote.

This same approach was denounced in Carrington versus Rash where the Court said, first the State says it has a legitimate interest in immunizing its elections from concentrated balloting of military personnel whose collective voice may overwhelm a small community.

Fencing out from the franchise of a sector of the population because of the way they may vote is constitutionally impermissible.

The exercise of right is so vital to the maintenance of democratic institutions cannot constitutionally be obliterated because of the fear of the political refuse of the group of residents.

I might note that the fencing out section was also sided in the Cipriano case.

That concludes my delivery insofar as the test of the Kramer and Cipriano cases are concerned.

Fred H. Rosenfeld:

I feel a few words might necessary in relation to prospective application.

It is the statement of the city that the date of the election should carry the day in this situation.

I feel that; one I feel if there is very little question in my own mind, personally that we do have a cut off date in Arizona; it is either the canvas date or the five day period thereafter.

Different attorneys as Mr. Lee has stated have read the Morgan case in a different way.

It is my feeling that there is a legitimate cut off date.

John M. Harlan II:

That’s why it’s still on books.

Fred H. Rosenfeld:

Well, I think there is a cut off date insofar attacking, no there is a, there is a cut off date insofar as the application of the doctrine, but if the doctrine is a constitutional and a Federal Constitutional Doctrine then there is in my mind no legislative action that the state can take to deprive the Federal Courts of Jurisdiction and that’s what, that’s — we would be doing here.

Excuse me.

John M. Harlan II:

That ever been happened.

Fred H. Rosenfeld:

I don’t know.

Byron R. White:

You mean the State has ever set a time beyond which you couldn’t wait then raising a constitutional challenge.

Fred H. Rosenfeld:

A Federal constitutional challenge.

Byron R. White:

Is that’s your position?

Fred H. Rosenfeld:

That’s my position.

Potter Stewart:

Well a state could certainly have a statute limitation generally.

Fred H. Rosenfeld:

It could have general statute limitations.

Potter Stewart:

And why wouldn’t that apply to any attack, any lawsuit whether it would be based on statutory or common law or constitutional ground.

Fred H. Rosenfeld:

You must also note that the five day election contest period in question is a specific type of contest period.

It goes to the conduct of the election.

We have no quarrel with the conduct of the election per se.

We say what went on afterwards before there was authority to issue the bonds was sufficient to void the entire election.

John M. Harlan II:

Now you seem to be completely at odds with your colleague here, your opponent on whether there is a cut off date or not, but you speak with that assurance on it, could you give us cases on it, state cases?

Fred H. Rosenfeld:

Well, the only case that it can’t be applied is Morgan versus the Board of Supervisor.

Byron R. White:

Yes, but I thought you said after you said that that whatever cut off date there might be for some purposes you are perfectly clear in your mind that there is not in Arizona on a case like this.

Fred H. Rosenfeld:

On a case like this if the authority, if the canvas I will have to add this if the canvas has passed.

When the canvas passes and the authority to issue the bonds or in the alternative when the five day period passes, if that transpired before Cipriano, before the Cipriano decision, then in my mind those elections are valid and they would not be affected by the Cipriano decision.

On the contrary, if as in the City of Phoenix election the authorization was not complete because those are the words used in the last paragraph of Cipriano, the authorization was not complete.

Then Cipriano would apply and if Cipriano did apply notwithstanding whatever cut off date, whether it would be canvas or five days after the canvas would have no application because we are not talking about a question for suit to the election.

Thank you.

Warren E. Burger:

Mr. Lee you have about one minute left.

Rex E. Lee:

I don’t really understand what Mr. Rosenfeld just said about whether there is or is not a cut off period, but I submit that my case is now made that there is a confusion on this point in the State of Arizona.

Now there certainly is at the very least serious question as to whether there is and we do not have the type of situation that exists in the State of Louisiana.

Under those circumstances I simply reiterate my original position and that is, that the election is the thing that raises the constitutional question should be the election that should be the crucial date as of which any prospective decision, any question of prospectivity should be applied.

I simply reiterate that there is no question, that this does involve an extension of Kramer and Cipriano viewed in any way, whether you take the Kramer dictum or not.

I suggest to the Court that whether Kramer was a good decision or not in the first place, when you extend that compelling State interest test to real property owners in a general bond election, it involves the same kind of judicial intrusion into the traditional legislative field that this Court happily rejected in other fields in Nebbia versus New York, it should not be done.

Warren E. Burger:

Thank you Mr. Lee, thank you Mr. Rosenfeld.

The case is submitted.