City of Pittsburgh v. Alco Parking Corporation – Oral Argument – April 15, 1974

Media for City of Pittsburgh v. Alco Parking Corporation

Audio Transcription for Opinion Announcement – June 10, 1974 in City of Pittsburgh v. Alco Parking Corporation

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Warren E. Burger:

We’ll hear arguments next in 73-582, City of Pittsburgh against Alco Parking.

Mr. Lynch.

Ralph Lynch, Jr.:

Mr. Chief Justice and may it please the Court.

I represent the petitioners, the City of Pittsburgh.

The respondents are private persons operating offstreet parking facilities in the City of Pittsburgh.

On February 20, 1970, the respondent’s filed a suit to enjoin enforcement of the City of Pittsburgh parking tax ordnance and that ordinance imposed a tax on the privilege of engaging in offstreet parking transactions for a consideration and established the rate at 20% of the gross receipts derived.

That ordinance replaced a 1969 ordinance, taxing the same privileges at the rate of 15% and that ordinance had in turn replaced a 1963 ordinance, taxing the same transactions at the rate of 10%.

The respondents are 12 in number and they operate 17,000 offstreet parking spaces in the downtown area of the city.

There are another 1,000 spaces operated by private persons not party to this suit and there are an additional 6,100 spaces operated by the Public Parking Authority of the City of Pittsburgh, a public municipal corporation.

The respondents’ allege basically that the competition of the public parking authority when combined with the 20% gross receipts tax of the City of Pittsburgh serves to confiscate their profits without due process of law.

The issues raised then are two.

Number one, whether or not the Due Process Clause of the Fourteenth Amendment places any limit on the right of a legislative body to set the rate of a revenue tax.

Harry A. Blackmun:

In that connection Mr. Lynch, could the city have prohibited private operation of parking lots anywhere in the city?

Ralph Lynch, Jr.:

The City of Pittsburgh does not have health powers, so from the standpoint of health in terms of fumes or things in that nature, no.

From the standpoint of regulating traffic under its general police powers, the City of Pittsburgh does control parking operations in the City of Pittsburgh.

William J. Brennan, Jr.:

That is location and the site?

Ralph Lynch, Jr.:

That is correct.

William J. Brennan, Jr.:

And ingress and digress and that sort of thing?

Ralph Lynch, Jr.:

That is correct.

William J. Brennan, Jr.:

But that is all, but they do not prohibit?

Ralph Lynch, Jr.:

The City of Pittsburgh; I do not think in the exercise of its police powers.

Well, it could in turns of an emergency I suppose declare that for example that if there were excessive pollution in the city on a particular day, it might have to cooperate with the county because it does not have directly the health power, that’s a county function.

William J. Brennan, Jr.:

How about zoning coordinates Mr. Lynch, are there any which prohibit —

Ralph Lynch, Jr.:

The City of Pittsburgh can control parking by proper exercise of the —

William J. Brennan, Jr.:

That is prohibit commercial parking in section –

Ralph Lynch, Jr.:

Yes, sections, certain sections, yes sir.

Harry A. Blackmun:

Getting back to my question, could the city in view of the fact that it is in the business and the authority is in the business, could the city have remove from private enterprise, the operation of any parking facility in the City of Pittsburgh?

Ralph Lynch, Jr.:

No, I do not think that the City of Pittsburgh has on its face any specific power to totally prohibit parking in the Pittsburgh, in the city unless it would —

Byron R. White:

Are we talking about State Law?

Ralph Lynch, Jr.:

No, the City of Pittsburgh —

Byron R. White:

What about the question, is the federal constitution in that city from forbidding private parking lots within the city limits?

Ralph Lynch, Jr.:

No, I do not think the federal constitution would.

Byron R. White:

And so assisted say, if Pennsylvania constitution or statutes prohibit themselves permitted Pittsburgh to do this, to prevent entire private parking lots, you would think the federal constitution was committed?

Ralph Lynch, Jr.:

No, I do not think it would.

Lewis F. Powell, Jr.:

Mr. Lynch, the city itself operates parking lots, does it not?

Ralph Lynch, Jr.:

The City of Pittsburgh operates a small number of lots, yes sir.

Lewis F. Powell, Jr.:

Suppose it to have been proved that the principal purpose or a purpose of the city was to put the private lots out of business so that the public city owned lots would be able to make a higher rate of profit, would that give you any trouble constitutionally?

Ralph Lynch, Jr.:

I think, there might be a problem there Your Honor, but that is not the issue here.

The issue is whether or not there was any intent of the City of Pittsburgh to put the private operators out of business or whether or not the City of Pittsburgh was merely exercising its power to raise revenue by imposing the tax.

Now, there has never been any question in this case as to the power of the City of Pittsburgh to impose a tax on parking transactions for the purposes of raising revenue, and the City of Pittsburgh ordinance states on its face that it was to raise revenue.

The record shows very clearly that revenue was raised.

It shows very clearly that each time the tax was increased, additional revenue was raised.

So, the issue here is not whether or not the City of Pittsburgh had power to force the private operators out of business while the public operation remained.

The issue is whether or not under the Due Process Clause that the revenue measure on its face designed to raise revenue could be inquired into by the Court simply because it was unreasonable, simply because it might believe to be — you might believe it to be excessive or even destructive of a particular business.

This Court has held on numerous occasions that if the power to tax exists, the extent of the burden is strictly a concern of the legislature no matter what the indirect effect of that tax.

Warren E. Burger:

Mr. Lynch, I have feeling that your answers in that last dialog at least confused me.

Let me see if I can straighten up my own mind.

Is there anything in the federal constitution that would bar the City of Pittsburgh from declaring that it was by law?

That it was going to have a monopoly on all public parking just as it does over water and electricity and number of others?

Ralph Lynch, Jr.:

No.

Warren E. Burger:

I think you gave an ambiguous answer perhaps that you did not intend earlier on that.

Ralph Lynch, Jr.:

No.

A second issue in this case —

Harry A. Blackmun:

Mr. Lynch, one more question there.

Does the record disclose whether there was any of resistance, complaint when the rate was 10% and then later one it was 15% or did the resistance come only when it went to 20%?

Ralph Lynch, Jr.:

When the rate was set for the first time at 10% in 1962 effective for the year of 1963, the revenue measure was challenged.

That is the 10% rate and in 1964 in a per curiam decision, the Pennsylvania Supreme Court validated the 10% tax.

At that time, the opinion shows that there were 5,100 parking authority spaces, the public spaces in existence at the time of that suit as compared to the 6,100 in existence now.

Byron R. White:

Is there any evidence in the record at all as to whether this tax could be passed on or was being passed on?

Ralph Lynch, Jr.:

That raises one of the second basic issue in the case —

Byron R. White:

Alright, we will get to that.

Ralph Lynch, Jr.:

— Your Honor and that is the issue assuming that judicial inquiry is proper, do the facts show that property was taken without due process of law.

Now, the chance preceding inequity, he validated the ordinance and the tax and he found among other things that demand for parking exceeded supply.

And to that when the tax have been increased in 1969 that gross receipts had increased during the same year after payment of the tax and that there had no effort to pass the tax on.

The Supreme Court when it reversed the commonwealth court and as well as the transfer in equity determined as a matter of law that the respondents did not have to attempt to pass tax — the tax on and in fact at the time of trial, there had been no attempt to pass the tax on.

William J. Brennan, Jr.:

Is there a spread, a very large one between what the private lots charge and what the municipal operated —

Ralph Lynch, Jr.:

There is on the average in many cases, the rates being charged in the publicly own garages are lower than the rates being charged in the private garages.

William J. Brennan, Jr.:

Much lower or?

Ralph Lynch, Jr.:

Well, there is a whole range of rates from whether it is for a half hour to an hour to all day, so that we can say in generally they are lower.

William J. Brennan, Jr.:

Yes, and this has always been so?

Ralph Lynch, Jr.:

Yes.

William J. Brennan, Jr.:

And have the rates for the private lots gone up in larger percentage than the rates for the publicly operated lots?

Ralph Lynch, Jr.:

There is nothing in the record to show that.

However, I think that if there is a disparity and rates are changed percentage wise, then the disparity might increase.

However, one of the fundamental errors that we believe that the majority below made was to conclude that under the circumstances here, the tax could not be passed on.

This is one of the fundamental issues in this case because the record shows, the undisputed facts are that demand exceeds supply by 4,000 spaces.

William H. Rehnquist:

Mr. Lynch, that is a factual question, isn’t it on which the Commonwealth Court found a particular way and certainly, the Supreme Court of Pennsylvania did not upset that finding.

How free are we to make our own factual inquiry into something like that?

Ralph Lynch, Jr.:

But we have an issue here Your Honor which deals with the Fourteenth Amendment of the constitution and you are free to examine the facts yourselves to determine whether or not there has been a constitutional violation.

William H. Rehnquist:

Even strictly historical fact?

Ralph Lynch, Jr.:

Yes, because the — I do not think it is fact.

The finding that you did not have to make, that the respondents did not have to make an attempt to pass the tax on in the form of price increases is really not a finding of fact, it is a conclusion which goes against the facts of records.

William H. Rehnquist:

No, I agree with you on that, but then the very next, in a parenthetical expression right after they say that in the Supreme Court of Pennsylvania.

They say although it is previously noted, the Commonwealth Court found this was not possible.

So at least, you have an opinion by the Pennsylvania Appellate Court that the tax could not be passed on and are we free to upset that?

Ralph Lynch, Jr.:

Yes, I think you are Your Honor because that goes to the constitutionality of the ordinance, which is being tested as a violation of the Fourteenth Amendment and this Court has permitted that in prior cases.

Byron R. White:

Even if it work can passed on and they’re appointing (voice overlap) finding in any company without business or was forced out of business?

Ralph Lynch, Jr.:

The record does not indicate that one company has gone out of business.

The record indicates that the time of trial, all the respondents had paid their tax.

There was a statistical compilation of income versus expenses and that compilation shows that nine of 14 of the operators — or the projected expenses for the year 1970 where in compared to projected income that nine of 14 operations studied would show a loss, but that does not in anyway show confiscation.

Ralph Lynch, Jr.:

That just is taking one standard.

There is not study as to the amount of salaries that were involved in the operating expenses as to whether or not they could be consider return on investment.

But I want to return Your Honor to the question, the conclusion that you could not pass the tax on. The factual situation shows that 25% of the supply is controlled by the public body; charging lower prices.

The record also shows that the public, the so called public competitors charging lower prices is full at all times.

It is completely full at all times.

With the demand exceeding supply by 4,000 spaces, that is another fact of record and as Justice Pomeroy points out on his dissent, I do not know how you can say it better.

An entrepreneur who controls 71% of the supply in a market of unsatisfied demand need not concern himself with the low cost competitor.

The parking authority who controls 29% of the supply has no excess capacity and cannot serve his demand which the 71% competitor might drive away through price increases.

Now, with all due respect to Justice Roberts and the majority opinion, I think that when demand exceeds supply and the low cost competitor is at capacity to conclude that you do not have to attempt to pass on the tax in a form of a price increase is just sheer economic nonsense.

I think at the very least and as Justice Pomeroy also pointed out in his dissent.

At the time, he wrote his dissent, the respondents had indeed raised their prices and he stated at the very least you could go back and look at the effect of that.

You are talking about confiscation of property and to establish confiscation, the fact should show, there should be no doubt in anybody’s mind that confiscation took place.

No doubt in anybody’s mind and I had submit that it is impossible not to have a doubt in these facts.

I think another question in this case is the extent to which the Pennsylvania Supreme Court in the majority opinion attempts to set forth competition, the direct competitions of a governmental body as something unique in this area of the law.

The question of competition by governmental body and taxation at high rates was before this Court over a century ago in the VC Bank Note case.

And in that case, this Court held that a 10% tax on bank notes admittedly excessive for the purpose of driving out a state bank notes which were in competition with the federal notes being issued by the federal government was profit.

That the Fourteenth Amendment does not permit judicial inquiry into the rate of the tax designed to raise revenue.

That was a matter for the legislature.

Again, more recently in Puget Sound case cited in our brief, there, the issue was a 3% gross receipts tax imposed by the City of Seattle.

The tax was imposed upon a like company within — with which the city was in direct competition.

This Court held that the Fourteenth Amendment does not immunize a private person from competition by the government even though the government is also levying a tax on the competitor.

Now, if the power to compete exists and the power to tax at a rate exists, I do not see how two rights can make the wrong.

We eventually get right back to a question of what rate of tax is reasonable or burdensome and that issue is for the legislative body.

The majority opinion also places some weight on a descent in the Magnano versus Hamilton case.

And that dissent states that it would be conceivable that a revenue measure on its face was only a mere disguise that it was so arbitrary that it was obvious that the intent was not to raise revenue, but that the attempt was to exert another power, perhaps a forbidden power such as confiscation.

Well obviously, you couldn’t determine that question on rate because in the Magnano case it was admitted that the rate of tax 15 cents a pound on olio was going to drive the olio companies out of business.

So, you can not look to rate to determine whether that is the unusual circumstance involved.

And this revenue measure — it is impossible to conclude that the measure is a disguise the attempt of the City of Pittsburgh to confiscate the property of the respondents.

The measure on its face says it is raising revenue.

It did raise revenue.

Ralph Lynch, Jr.:

So, if the court is going to engage in speculation as to what the intent was, if it does not accept the measure on its face, there is no reason to conclude that confiscation was the intent.

I think it would be more reasonable to include that the City of Pittsburgh had successfully raised revenue before by imposing a parking tax.

That it was reasonable for the city to assume that when it increased the tax, revenue would increase.

It would also be reasonable to assume that since it is a parking tax and I think that we can all agree that parking in the downtown Metropolitan area is somewhat of a luxury, that it would not a be unreasonable to believe that if the price was raised in some of the areas involving these entire 24,000 spaces in downtown Pittsburgh, that some of this people coming in from the suburbs might continue to come in and pay an additional tax.

I think that would be the fair conclusion from an examination of this record and the unfair conclusion would be to conclude that the City of Pittsburgh didn’t intend to raise revenue at all.

It intended to confiscate the respondents’ business.

William H. Rehnquist:

Does the City of Pittsburgh have any income tax levied down the people who work there?

Ralph Lynch, Jr.:

1% — it has a 10% occupation tax on non-residents and a 1% tax on residents.

William H. Rehnquist:

What is the 10% occupation tax on?

Ralph Lynch, Jr.:

Excuse me, $10.00.

William H. Rehnquist:

Oh, $10.00.

Ralph Lynch, Jr.:

$10.00 occupation tax.

That is for the privilege of working there.

Harry A. Blackmun:

Do you have any comment about the curious provision as to making the authority taxable in the ordinance?

And as I understand that the authority has challenged this and —

Ralph Lynch, Jr.:

Yes Your Honor.

Harry A. Blackmun:

What is the status of that litigation?

Ralph Lynch, Jr.:

Yes, Your Honor.

The respondents in this case, the very people who claim that the City of Pittsburgh is out to confiscate their property and to favor the authority — and to favor competition by the authority have instituted litigation successfully to eliminate the 20% tax which is being imposed by the city or was being imposed by the city on the authority since the inception of the tax in 1963.

Harry A. Blackmun:

Is not that just another pocket of the city?

Ralph Lynch, Jr.:

No, Your Honor, it is not just another pocket of the city.

And even if it were, I submit that the way to attack that problem, if the City of Pittsburgh is using the authority to compete unfairly or if the authority is competing unfairly, then appropriate proceedings could be brought in the State Court.

There would no be — there need be no reason to attack the tax, which is being placed directly on the authority and would tend to equalize the burden rather than to further discriminate.

William J. Brennan, Jr.:

So I guess Mr. Lynch, the private parking group brought the litigation, which invalidated the tax against the authority?

Ralph Lynch, Jr.:

Right.

William J. Brennan, Jr.:

When was this?

Ralph Lynch, Jr.:

That litigation was commenced about a year-and-a-half ago and the Commonwealth —

William J. Brennan, Jr.:

What was the rate at that time?

Ralph Lynch, Jr.:

20%

William J. Brennan, Jr.:

And the authority was paying 20%?

Ralph Lynch, Jr.:

The authority was paying 20% and operators operating on behalf on the authority were paying 20%.

Those operators claimed the statutory exemption from taxes set forth in the Authority’s Act against the will of the authority.

They overcame preliminary objections filed by the authority, so you using that exemption, these very respondents have been successful and having the 20% tax eliminated from the operations of the public —

William J. Brennan, Jr.:

Well, but you still have to pay it or would have to pay it, if you prevail?

If the private operators will have to pay it if you prevail?

Ralph Lynch, Jr.:

The 20% tax in this case if we prevail?

William J. Brennan, Jr.:

Yes.

Ralph Lynch, Jr.:

Yes Your Honor.

Harry A. Blackmun:

Is that other litigation final now that’s —

Ralph Lynch, Jr.:

There is a petition for certiorari pending in Pennsylvania Supreme Court.

Warren E. Burger:

Mr. Boreman.

Leonard Boreman:

Mr. Chief Justice and may it please the Court.

I think it is necessary at the outset to pose the issue in this case, which the Supreme Court of Pennsylvania posed.

In the opening paragraph of the opinion and that is where a city imposes a 20% excise tax or parking tax and that is combined with the governmental operation of the exact identical business, does that constitute a taking under the Fourteenth Amendment or rather I should say under the Fifth Amendment made unlawful by the states under the Fourteenth Amendment.

Now, that is the issue.

The issue was not whether a tax standing by itself is unconstitutional and the issue is not whether the city has the power to impose an excise tax on these parking operators and the issue is not whether the city has the power to compete with the parking operators in conducting a parking business.

Of course, there is no question about any of those issues, but the issue is, can the city impose a 20% tax which the Commonwealth Court has declared by an unanimous vote of the excessive and unreasonable and which the Supreme Court has said is excessive and unreasonable and when combined —

William J. Brennan, Jr.:

Mr. Boreman, is that in the context where those holdings in the context of the parking authority itself being subject to the tax or was this after the invalidation of the taxes —

Leonard Boreman:

Let me explain that Your Honor.

The Supreme Court, Justice Robert said and adverted to invalidation of the tax against the parking authority, but he said that did influence his decision.

He said by reason of the fact that the parking authority outside of the parking tax has total exemption from all property taxes, exemption from all income taxes, low cost financing, long-term financing, the power of eminent domain under its statute, that these are such great advantages that they alone enable the parking authority to charge lower rates and that adding the exemption of the parking tax makes it even worse.

Now, may I explain this part?

Warren E. Burger:

Do you think the 15% tax was unconstitutional too?

Leonard Boreman:

I beg pardon?

Warren E. Burger:

When it was 15%, do you think that was unconstitutional?

Leonard Boreman:

I think it would be, Your Honor, yes, if the fact show, but we think this record shows and what I propose to discuss —

Warren E. Burger:

How about 10%?

Leonard Boreman:

There, I think there might be a proper —

Byron R. White:

What about — was the parking authority subject to the same tax or wasn’t it?

Leonard Boreman:

Yes, let me explain that, Your Honor because I am counsel in the case which invalidated the parking for these, some of these same plaintiffs, but there are others.

Leonard Boreman:

There are some very large interests who are not placed in this case.

This is the way the parking authority works.

The parking authority was created by the legislature of Pennsylvania by the Act of 1947.

It authorized municipalities to setup parking authorities.

The City of Pittsburgh setup a parking authority.

The parking authority went out and with the low cost financing and long-term financing and with tax exemption, issued bonds to build these structures.

They then proceeded to the lease these garages to private operators.

Now, under the terms of the lease, these private operators pay a flat rate.

William J. Brennan, Jr.:

Every one of them lease to a private operator?

Leonard Boreman:

Yes Your Honor.

William J. Brennan, Jr.:

Everyone?

Leonard Boreman:

Yes, Your Honor.

The parking authority operates a few small lots where they have parking meters I think by themselves, but most of them are.

Now, these operators pay a rent which is enough to cover the amortization of the bonds, and then they share the profit with the parking authority 50/50.

Now, these private operators, when I say share their profit 50/50, that is after all expenses, so that the burden of the expenses are on these private operators even though they are operating the parking authority garages.

If there is a profit, the parking authority shares 50% of the profit.

Consequently, if this tax remains valid against the parking authority, these private operators must add to their expenses the amount of the parking tax.

So, they went into court and I acted as their counsel and the Commonwealth Court has so held, that I might say it is completely under Pennsylvania precedent.

It is cited in Justice Roberts’ opinion.

That they went into court to have it declared — to have the exemption in favor of the parking authority declared and the Commonwealth so declared.

The case is now on petition for a (voice overlap)

Thurgood Marshall:

Why can’t you pass it on?

Leonard Boreman:

I beg pardon sir.

Thurgood Marshall:

Pass the tax on?

Leonard Boreman:

The tax cannot be passed on for a several reasons, Your Honor.

Number one, there is testimony in this record by a number of these plaintiffs who by the way are probably the most experienced parking operators in the United States.

One operator, the operator of Alco Parking and the others, may I just go on with this, Your Honor and I will explain why, is the largest parking operator in Pittsburgh, has been an operator for over 50 years.

William J. Brennan, Jr.:

Now, might he be operating some of parking authority unto a lease as well as independently?

Leonard Boreman:

Yes, Your Honor, yes Your Honor.

The other one operating Stanwicks Auto Park is a member of the Board of Directors of the National Parking Association.

Leonard Boreman:

These are experts.

They have testified that in their experience as parking operators, if they are charging and getting as much as they can get, they say and they testify, they charge the highest rate.

They’d be a fools not to get lower if they could.

Now, with the competition of the parking authority garages sitting —

Thurgood Marshall:

How many more spaces could you use right now?

Leonard Boreman:

Well, the —

Thurgood Marshall:

Is that 4,000 figure correct?

Leonard Boreman:

It is a misleading figure Your Honor.

Thurgood Marshall:

But is it correct?

Leonard Boreman:

Well, I am not being an expert on this subject, I cannot say —

Thurgood Marshall:

Well, is there anything there to contradict it in the record?

Leonard Boreman:

There is no actual testimony.

No, it is a figure given by Wilbur Smith who did a study for the parking authority.

Thurgood Marshall:

It is in the record?

Leonard Boreman:

It is in the record.

He came —

Thurgood Marshall:

And there is nothing in the record to the contrary?

Leonard Boreman:

No Your Honor because there is no expert testimony that contradicts and I would not want to contradict that, but I would want to explain it Your Honor.

I say that it is a misleading figure.

If you read that record in which that 4,000 figure is given, it just says, it is an overall average for the whole city based on the examination of traffic, congestion, on needs and so forth.

Now —

Thurgood Marshall:

What it is the best figure we have so far?

Leonard Boreman:

Yes, Your Honor but it is the —

Thurgood Marshall:

What else do we have to go on except the best we now have?

Leonard Boreman:

Well, I think it needs — it requires and deserves explaining Your Honor.

That is 4,000 deficiently is that –

Thurgood Marshall:

Would you explain the way of the facts, I will listen.

Leonard Boreman:

Good.

At 2 o’clock, as the studies will show and it is in the record, at 2 o’clock, there is this capacity.

And by the way, it is not capacity because the record shows that at least it set it fourth in the brief, the record shows that capacity goes up to a 120% and not the 99% or a 102% that the parking authority garages have.

Leonard Boreman:

Now, at 4 o’clock and at 6 o’clock and in the evening and on weekends, there is no such deficiency Your Honor.

That 4,100 spaces is only at the peak hour of 2 o’clock in the afternoon and possibly 12 o’clock on some occasions.

If you will look on page 640, you will see that at other times, there is not that peak demand on that deficiency of 41 spaces.

That is an estimate by Wilbur Smith Associates in making the study that the City of Pittsburgh overall that use 4,100 spaces, that does not say that the parking authority garages are filled 24 hours a day in no sense and they are not.

Thurgood Marshall:

I do not know of any parking authority or any place in the plain world is filed 24 hours a day.

Leonard Boreman:

That is right.

Thurgood Marshall:

So, that is not in this case?

Leonard Boreman:

That is right Your Honor.

Thurgood Marshall:

But only thing we have in this case about passed it on is that your people would say, “we cannot do it.”

Leonard Boreman:

And the Supreme Court found that they did not have to do it in the Commonwealth Court would find that they cannot do it.

And that’s because at other times of the day other than peak hours, the parking authority garage is not filled and they charge lower rates and if the private garages raise their rates at these other times of the day, that lessens their competitive ability.

For example, there are parking authority garage in the City of Pittsburgh standing on one corner and there is the private operator’s garage right next door.

Now, anybody conversant with the parking business will tell you that the bread and butter and the success of a parking garage depends on short-term parking, one two, three, and four hours.

If you look at our record in exhibit 3, you will see that for those short periods of parking, the parking authority rates are 50% of the private operators.

Now, if we are expected to pass it on and charge more, we increase that disparity.

So, it is not a simple question of some statistical 4,100 space.

It is a question of the actual facts in the operation of parking garages in the city.

Now Your Honor, I think it is important in discussing the nature of this tax.

That this tax that is imposed on these private operators is 20%, a tax that is greater than to my knowledge than any tax in the City of Pittsburgh or in the nation.

I know of no other 20% excise tax anywhere and certainly, no 20% parking tax.

It is a selective tax.

It is not imposed generally on the City of Pittsburgh.

It is imposed on this small group.

Now, in addition in the City of Pittsburgh, there is what is known as a business privilege tax and it is tax that the right of six mills.

These parking operators pay that tax also so that the tax for the privilege of conducting business in the City of Pittsburgh to the parking operators is 206 mills whereas every other business in the city pays six mills.

Also in the City of Pittsburgh, there is a mercantile tax imposed on wholesale and retail vendors of merchandise at the right of 1 mill.

Now, the disparity between the tax imposed on this selective group of parking operators as compared to all other businessmen is tremendous.

The amount imposed on this people is 34 and a third times more than any other business.

On exhibit 3, you will note that the mercantile tax in 1969 obtained for the city is $2 million.

That is overall all the merchants in the city, 7,200 merchants.

Leonard Boreman:

The parking operators of this small group paid equally 2 million.

The business privilege tax all over the city brought in four-and-a-half million, these parking operators paid 2 million.

Now, I might say at the same time that there are no extra benefits conferred on these parking operators for this money.

There are no extra police.

The record is replete with testimony that there are no extra police.

There are no extra services and there is no particular benefit advanced to them.

Byron R. White:

Is it your position that the city violates the constitution when it simply imposes the gross receipts tax that has the result of reducing the number of customers for parking lot spaces?

Leonard Boreman:

Not, if they are were public competition Your Honor.

If the factor of public competition by the parking authority weren’t here, I think we would have a different picture.

I think we would have another question, but I would not take that position at this point.

The position —

Byron R. White:

How many public parking spaces were there that’s run by the authority?

Leonard Boreman:

6,000.

Byron R. White:

And how many total in the city?

Leonard Boreman:

In the downtown section of the city which is where the concentration is 24,000 all together.

The private operator operate 17,600 spaces or 400 spaces.

The parking authority operates 6,100 spaces and there are scattered individual lots for about —

Byron R. White:

Well, I suppose it means that the tax would probably might guarantee as the price got higher and higher that the spaces in the authority and lots would always be full?

Leonard Boreman:

If the private operators were compelled to increase their rates, which they cannot do because if they do, they make the competition with the parking authority that much worse.

Byron R. White:

Well it cannot get any worst in 5 or 6,000 places, full places

Leonard Boreman:

Yes, it can.

Byron R. White:

But it can reduce the number of cars that come into park?

Leonard Boreman:

Yes, it can Your Honor.

There is nothing to stop the parking authorities from building new garages.

You exercise the power beyond the domain.

Byron R. White:

But it has not happened though?

Leonard Boreman:

Yes, it has happened Your Honor.

Byron R. White:

Yeah, but that isn’t what — I would suppose that it is the reduction of the number of people who want parking spaces that would get to you pretty fast.

Do you have any statistics in the record as to how many parkers there were over the years as this tax got higher and higher?

Leonard Boreman:

No, but we do not have that statistic, Your Honor, but we do have one statistic in the record.

Leonard Boreman:

Myers Brothers, one of the national parking chain, one of the largest parking operations in the City of Pittsburgh, I believe their capacity about over 2,000.

When this tax became 15%, they tried to raise the rate.

They found that their business decreased by about 25%, it is in the record.

Then they tried again to raise the rate at the end of 1969 and they had to close a whole floor because there are people who just weren’t coming in because —

Byron R. White:

Are there any statistics in the record as to what the average vacancy was in the authority’s parking lots?

Leonard Boreman:

Yes, Your Honor.

There is no average vacancy, but there is a —

Byron R. White:

Were they always full?

Leonard Boreman:

— on page 640.

No Your Honor.

No, they are not always full.

They are full — they are mostly full at peak hours of 12 and 2, but not at 4 and 6 in the evenings and weekends, no.

Byron R. White:

So, their spaces were going begging too to some extent?

Leonard Boreman:

Yes Your Honor.

Yes, except for the peak hours.

William J. Brennan, Jr.:

When Myer’s tried to raise its rates at the time, as I understand you when the tax were 15%.

Leonard Boreman:

Yes.

William J. Brennan, Jr.:

Were the public authority lots are also paying the 15% tax?

Leonard Boreman:

Yes Your Honor.

William J. Brennan, Jr.:

At that time?

Leonard Boreman:

They were.

William J. Brennan, Jr.:

Did they try to raise it?

Did they try to raise their rates, the public authority?

Leonard Boreman:

No Your Honor, they did not.

As a matter of fact, one of the difficulties that exist today is that the public authority itself directs and fixes the rates for these lessees and they have not permitted a raise in rates since 1952.

They have just won’t permit a raise in rates and the loss is then absorbed by these lessees because it isn’t the lost of the parking authority.

Warren E. Burger:

Do you agree with your friend that there is nothing in the federal constitution to prevent Pittsburgh from taking over all of the parking?

Leonard Boreman:

I agree.

Warren E. Burger:

You see, public utility —

Leonard Boreman:

I agree on one basis that that is an actual condemnation and I would say that constitutionally they would have to pay damages.

Leonard Boreman:

By eminent domain, they could certainly take them over.

Warren E. Burger:

Well, I do not mean taking them over.

I mean simply decide that there would be nothing except public parking facilities and —

Leonard Boreman:

I would say that that is itself is a taking.

Warren E. Burger:

But do you think it was at the taking when the Eighteenth Amendment was passed and saloons went out of business?

Leonard Boreman:

That Your Honor comes under the category of cases I think Your Honor is quite familiar, the obnoxious substance cases.

I think the government could ban marijuana, could ban alcohol, could ban other drugs.

I think they came under the obnoxious substance doctrine.

United States against Sanchez for example is an example.

I do not think they are on the same category as these cases.

This is a legitimate Biz.

As a matter of fact, it is a quasi public business.

Warren E. Burger:

Well, isn’t the liquor business a legitimate business now?

Leonard Boreman:

It is now because of the Eighteenth Amendment I think but possibly before.

I think, as I recall it, I think there is a case cited in Sax’s article in the Yale Law Journal in which Broery was put out of business by a zoning ordinance that was upheld by this Court.

I think before the Eighteenth Amendment, I think there might be basis for prohibiting businesses that might be called obnoxious substance.

But this is a legitimate business and my position Your Honor is that what we have here is a taking.

Now, this Court has —

Warren E. Burger:

Was it the taking when it was 15%?

Leonard Boreman:

I think it was Your Honor.

I think anything in excess of 10% (Voice Overlap).

Warren E. Burger:

There was no complaint then?

Leonard Boreman:

Well, the tax only lasted a year.

The parking operators wanted to see if they could live with it.

You ask why they hadn’t gone out of business today.

They have been tying to see if they could live with it all through this.

It started out at 10% in 1962 and they attacked it.

By the way, when it was attacked in 1962, no — there was no attack on the basis of confiscation or on the basis of a public authority competing.

If you look at the opinion which declare the 1962 Ordinance invalid, you will see that the court said, “We cannot say there is confiscation in here because there is nothing in the record to substantiate it.

The plaintiffs did not put any record in.”

Leonard Boreman:

Now, they lived with the 10% tax until 1969.

It was raised to 15%.

They objected vigorously before council and so forth, but they decided to live with it.

It lasted one year, and then the city again came along and raised it to 20%, that was what broke the camel’s back and they come in and decided to fight it.

Thurgood Marshall:

What is there in the record that show to use your language that broke the camel’s back?

Are there any financial reports in here from any of your clients?

Leonard Boreman:

Yes Your Honor.

Exhibit 1 is a (Voice Overlap).

Thurgood Marshall:

Which one shows that the camel’s back is broken?

Leonard Boreman:

Page 48 of our brief Your Honor, summarizes the whole experience or the whole record of Exhibit 1.

It shows —

Thurgood Marshall:

Where is that now?

Leonard Boreman:

Page 48 of our brief.

We have summarized what Exhibit 1 shows.

Now, Exhibit 1 is a compilation which we made from the books and records of this plaintiff’s in which we showed the actual record of 1968 and 1969 and the record for the first 6 months of 1970 projected on the same basis of 1969 for the whole year of 1970.

Thurgood Marshall:

And that shows for all of your clients?

Leonard Boreman:

Yes, Your Honor.

It shows.

If you will note that on 46 locations, it shows —

Thurgood Marshall:

I thought you had several thousands of this, where is your 46?

Leonard Boreman:

Several thousand parking spaces Your Honor, 46 locations, 17,000 spaces.

Thurgood Marshall:

How many spaces — how many locations do you have?

Leonard Boreman:

These 46 are the total of the total locations in the downtown area of Pittsburgh.

Thurgood Marshall:

And you’re just about bankrupt?

Leonard Boreman:

Yes, it shows a gross of $8 Million and on the basis of that $8 Million with the parking tax at 20%, there is a loss of $270,000.

Thurgood Marshall:

Yes.

Leonard Boreman:

And the figures in 1969 show that on the basis of $7 million —

Thurgood Marshall:

(Voice Overlap) when asked you about the other point you know, about passing on to keep that line?

Leonard Boreman:

Yes.

What is it again Your Honor?

Thurgood Marshall:

Passing the tax on.

Leonard Boreman:

Yes Your Honor.

Well, our position is that because the parking authority is in direct competition standing right next door to many of these garages and lots and charging 50% already less than what we have, for us to raise the rates as the Supreme Court of Pennsylvania wants.

Thurgood Marshall:

Why don’t you make them raise their rates?

It has just much right as what you are asking here?

Leonard Boreman:

Well Your Honor, I wish that that was easy as you —

Thurgood Marshall:

You are not arguing equal protection at all.

This is straight confiscation, is that all you have?

Leonard Boreman:

I want to say that under this —

Thurgood Marshall:

Is that right?

Leonard Boreman:

I beg your pardon?

Thurgood Marshall:

You are just arguing confiscation here?

Leonard Boreman:

No Your Honor.

I am arguing that this is a taking and I am arguing that this is a condemnation taking under the Fifth Amendment prohibited by the Fourteenth Amendment to the States and the cities.

Thurgood Marshall:

That is not confiscation.

Leonard Boreman:

Well, —

Thurgood Marshall:

Listen again —

Leonard Boreman:

Part of the —

Thurgood Marshall:

All I am saying is that is your only point, you are not arguing equal protection?

Leonard Boreman:

Oh and that is right Your Honor.

No, Your Honor.

No, I abandoned that argument Your Honor because I am afraid that it is a hopeless attempt.

Lewis F. Powell, Jr.:

Mr. Boreman, the figure that has been mentioned here and I think it is in the opinions of the Court is that 71% of the parking spaces available are privately owned and operated, the city having 29%.

Leonard Boreman:

25%.

Lewis F. Powell, Jr.:

25%?

Leonard Boreman:

And there is 4% scattered around the small operates.

Lewis F. Powell, Jr.:

Right.

Has that 25% remained fairly constant over say the last 5 to 10 years or has it?

Leonard Boreman:

No, not the last 10 years.

Your Honor, let me say this.

Leonard Boreman:

When the parking authority was organized, there were three garages originally.

It increased to 8.

There are now 15 and in the last 5 years, I think there have been about 3 or 4 parking garages organized.

Now, they all were in the downtown area by the way.

Some of them were in what is known as a subsidiary business area what we call East Liberty for example or —

Lewis F. Powell, Jr.:

Is there an exhibit that shows the dates of the introduction of the government owned parking facilities?

What I am trying to get at is —

Leonard Boreman:

Exhibit —

Lewis F. Powell, Jr.:

The rate of increase of the publicly owned garage and parking facilities in the downtown Pittsburgh area.

Leonard Boreman:

Yes, Exhibit 11, which I think is the study by Wilbur Smith, yes.

Yes, there are statistics Your Honor.

Lewis F. Powell, Jr.:

That is (Voice Overlap)

Leonard Boreman:

That commences on page 616 of the record.

Lewis F. Powell, Jr.:

616?

Leonard Boreman:

It is quite a lengthy study and I cannot put my figure on the exact spot where it gives the number of parking authority garages but Your Honor, I do not think we have placed in the record all of them because since this case was tried, there are several new ones.

I am referring to the Wilbur Smith study which is quite lengthy and which was prepared for the parking authority in 1969.

I might add this, Your Honors too.

We have in Pittsburgh another public authority called the Auditorium Authority and there the authority that built the Three Rivers Stadium and also our civic arena and they have in turn, the Auditorium Authority for example has leased the parking space to the public parking authority itself and the authority in turn has leased it to one of this plaintiffs, Alco Parking to operate for them.

So, in addition to the normal parking authority spaces in the downtown central location of Pittsburgh, the Three Rivers Stadium Authority which I think is over 2000 to 3000 spaces is also run by a public authority leasing to the parking authority and there are other public bodies doing the same thing.

We have in Pittsburgh this authority operation of public parking facilities all in competition with private operators.

I do not think that the question of whether the rate could be passed on is open to a factual examination by this Court especially when the Supreme Court has so found it and although the Court of course is free to make it, I submit that it is a factual finding found by the Supreme Court of Pennsylvania in this file.

I would like to say Your Honor that this Court on many occasions has not hesitated to declare a taking where the police power has been exercised, and I am thinking of cases like Pennsylvania against Maine and United States against — cases like Pennsylvania against Maine and other cases which we have cited in our brief dealing with the regulations of the police power, also cases like US versus Causby, the airline cases, Griggs versus Allegheny County and the case of Armstrong against the United States where this Court determined that the immunity of suit privilege given to the United States does not protect it against a claim of a mechanics lien holder.

Now, I say there is no reason in my mind why the same principle cannot be applied to a taxing statute.

And I think the comment or rather the study made by Professor Sax in the Yale Law Journal is a very cogent treatment.

The Supreme Court adverted to it and I submit that it is a rationale theory as to the fact that the excessive imposition of attacks cannot be equally at taking as the excessive and the wrongful imposition of a police power statute.

Byron R. White:

So you think, I suppose you would think it would a taking also of City of Pittsburgh if it didn’t operate any parking lots of is own, simply imposed a minimum schedule of parking fees in order to limit the entry of cars into the downtown area and they put the minimum price that are high enough so that people wouldn’t pay it?

Leonard Boreman:

I do not know, Your Honor.

I do not know whether that would be a taking or not because it seems to me that unless —

William J. Brennan, Jr.:

Well, suppose that they just bar it all downtown parking?

Leonard Boreman:

As a police power regulation?

Leonard Boreman:

That then Your Honor it seems to me tire in with the Sax thesis.

There you do not have a government enterprise.

You do not have a government resource enterprise operating.

It has not itself going into an enterprise activity in competition.

It has made a police power regulation in which it says that for the benefit of all, health wise let us say we will bar parking.

That is a different story that might be under Sax’s rationale that that is a legitimate activity.

William J. Brennan, Jr.:

But as far as they are exposed, they do it to — see to it that people come in the center of town on a publicly owned bus system or subway system or some such reasons as that?

Leonard Boreman:

I think there they would have to pay compensation because that is a resource activity.

I think to place of the burden of the cost of that on a smaller selective group is exactly the idea and the thing that ought to be prohibited.

There, they take on a resource activity, but now I say that —

Byron R. White:

As long as the tax in this case at first at least was on, until you managed to get it invalidated, was on the city activity and on the private activity also?

Leonard Boreman:

On the parking authority?

Byron R. White:

Yes.

Leonard Boreman:

Yes, Your Honor.

Byron R. White:

But wait a minute, wait a minute and I am sure before the tax went on, the rates were disparate also because you say that the parking authority has an advantage?

Leonard Boreman:

Yes.

Byron R. White:

Now, if they put a level tax on, the two remain disparate but they are both are suffering the burden to that extent.

They are both paying the tax.

Leonard Boreman:

But the parking authority does not, there are other advantages which enables it to charge lower rates.

Byron R. White:

But that was too before the tax went on?

Leonard Boreman:

Yes and would still be the truth if they did what you say.

Byron R. White:

But why would you say that the government resource is enhanced if they tax both the city and the private?

Leonard Boreman:

Because by reason — because number one this tax is so excessive and number 2 by reason of the other advantages, we still cannot compete.

It is the excessive tax in addition and you say as they put it on both the parking authority still has the advantages of no real estate tax, no income tax.

William J. Brennan, Jr.:

But they always had that and they never put this special tax on it.

They always have those advantages, isn’t it?

Leonard Boreman:

Yes but now — but they always didn’t have a 20% tax, now what —

Thurgood Marshall:

Were they always full?

Leonard Boreman:

Beg your pardon?

Thurgood Marshall:

Were the public parking lots always full?

Leonard Boreman:

No Your Honor.

No, they are full at certain peak hours with another —

Thurgood Marshall:

They are always full in certain peak hours just as yours are full in certain peak hours?

Leonard Boreman:

Generally, yes.

Thurgood Marshall:

So, how is the fact that they do not pay you they are not going to their (Inaudible), there is no room in there from 12 to 2, am I right?

Leonard Boreman:

That maybe right so that —

Thurgood Marshall:

So, I am going to lose from 12 to 2 if you raise your rates from 12?

Leonard Boreman:

Your business does not just go on for 2 hours a day Your Honor, it goes along for 24 hours.

Thurgood Marshall:

Well, that is 2 hours I am talking about.

So you could raise on those 2 house because you have no place to go?

Leonard Boreman:

Well, how much could you raise if the record shows that —

Thurgood Marshall:

I do not know, that’s your problem.

Leonard Boreman:

Well, the problem has been solved Your Honor.

Thurgood Marshall:

You do not want to say —

Leonard Boreman:

The problem has been solved in a month.

Thurgood Marshall:

Let me solve your legal problem.

You take care your economic problem.

Leonard Boreman:

Well, let me point this out as the record shows by the testimony of the City Treasure that in order to overcome this 20% tax, you got to raise your rates 25%.

Now, how much can your raise it even in that peak hour?

Thurgood Marshall:

25%.

Leonard Boreman:

That is for the 2 hours.

Thurgood Marshall:

Yes.

Leonard Boreman:

That is not for the rest of the day.

Thurgood Marshall:

Well, that will get you further away from the problem.

Leonard Boreman:

Yes, it would help Your Honor.

Thurgood Marshall:

(Voice overlap)

Leonard Boreman:

May point out another factor.

It is not only the parking authority —

(Inaudible)

Leonard Boreman:

No, Your Honor we want businesses fair.

Leonard Boreman:

It isn’t only the parking authority being 50% of the raise.

Do not forget hundreds of thousands of shoppers if the rates get too high and it becomes too expensive to come in time, aren’t going to come in time.

They are going to stay away and go out to the shopping centers.

This is a business decision that we got to consider too in raising rates.

In other words, you just do not say, “well, it is the tax at 20% raise to 25 and everything will be hunky dory.”

It is a serious business decision.

Now, what I would like to say and I think in answer to your question Mr. Chief Justice is that it is not just and Mr. Justice Brennan it is not just the parking authority existing, it is the combination of this very excessive rate plus the competition.

A parking rate of say 5% or 6 mills or 10 mills or 10% plus the competition might not be a taking.

It is the unheard of unequal in anywhere in the country of 20%.

Warren E. Burger:

Thank you Mr. Boreman.

Lynch, do you have anything further?

Ralph Lynch, Jr.:

May it please the Court.

With respect to the question of this Court reviewing the facts, you stated in Fiske versus Kansas City, this Court will review the finding of fact by State Court where a conclusion of law as to a federal right and a finding of fact are so intermingled as to make it necessary in order to pass upon the federal question to analyze the facts.

Furthermore, it is really incorrect to state that the majority of the State Court found that the tax could not be passed on in the form of a price increase because the four three decision, Justice Egan concurred in the result only.

So I don’t think you can infer necessarily that Justice Egan, excuse me justice O’Bryan concurring in the result also concurred in the conclusion that the tax could not be passed on.

I think it is only fair to say that three of the justices of the seven justices of the Pennsylvania Supreme Court concluded that the tax could not be passed on.

References that made to the inability to persuade the authority to raise rates after the tax was increased, there is nothing in this record to show that any approach was made to the parking authority and then a request for rate relief was refused, nothing in this record on that.

With respect to the confiscation and the growth of the authority into the private area at the time of Magellic in 1964, that case was a case stated.

And among the stipulated facts were that there were in existence at at time 5,100 authority spaces.

And now in 1970 in September at the time of trial in this case, there were existent 6,100 spaces, hardly a record of a wildly spawning authority operation at the expense of private industry.

Reference is made to Professor Sax and I think it should be clear from a reading of the majority opinion that great weight is placed upon the opinions of Professor Sax about government acting in an entrepreneurial capacity rather than as an arbitrator.

Instead of showing nothing in a later article, Professor Sax states and I quote, “I am compelled however to disown the view that whenever government can be said to be acquiring resources for its own account compensation must be paid.

I now view the problem as considerably more complex.”

So, we have a decision where Professor Sax wrote originally that his opinions did not square up with the decisions of this Court.

The court below and the majority opinion adopts Professor Sax’s theory even though they do not square up with the decisions of this Court, and now, Professor Sax disowns his theory.

With respect to the question of whether or not supply exceeds demand, Mr. McNeal, a witness for the respondents was asked what is the shortage?

There is a present deficiency of about 4,100 spaces in the survey area, that is in downtown Pittsburgh.

That is the answer.

That is in the Central Business District which will increase to approximately 7,500 spaces based on developments that are currently under way.

Reference is made to the exhibit in the respondent’s brief on page 48A and I think this illustrates the point the petitioner makes with respect to the quality of the evidence presented in the court below.

Ralph Lynch, Jr.:

There, Justice Cramer of the Commonwealth Court in his dissent put in tabular form the findings that the engineer had compiled to show the income versus expenses of the respondents.

And if you look at that exhibit to see how easy it is to manipulate this type of evidence.

The first seven companies the record shows are owned by one man — one man on seven companies.

The first two companies show losses.

Dropping down to the fifth company, it shows a profit of 16,126 and then another company shows a loss of 5,384.

So, if you combine companies one, two and five with company number four — one, two and six with company number five, two of the unprofitable operations in this study would be eliminated.

And the remaining one would still be profitable.

So, evidence like this clearly are subject to manipulation.

Byron R. White:

Mr. Lynch, what was the citation to that Mr. Sax’s more recent article?

Ralph Lynch, Jr.:

That is contained in the respondents brief, the citation is Sax taking private property in Public Rights 81, Yale Law Journal 149.

William J. Brennan, Jr.:

81?

Ralph Lynch, Jr.:

Layout, yes.

William J. Brennan, Jr.:

The other one is in 74?

Ralph Lynch, Jr.:

74, yes.

William J. Brennan, Jr.:

Right.

Warren E. Burger:

Thank you gentlemen.

The case is submitted.