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Wednesday, September 29, 2010

ROBERT HALE: LEGALITY OF ECONOMIC DEVELOPMENT SPENDING - THE CONTITUTION MEANS WHAT IT SAYS

I found the recent Minot Daily News opinion asserting the state and city would prevail in my attack on their economic development program interesting. I wonder if the editors have taken the time to actually read Article X Section 18 of the State Constitution. It states in full:
“The state, any county or city may make internal improvements and may engage in any industry, enterprise or business, not prohibited by article XX of the constitution, but neither the state nor any political subdivision thereof shall otherwise loan or give its credit or make donations to or in aid of any individual, association or corporation except for reasonable support of the poor, nor subscribe to or become the owner of capital stock in any association or corporation.” (Article XX was repealed).

We believe this provision means what it says. Despite the plain constitutional language, the state and the city argue there is no prohibition against giving our tax money to anyone they wish, without restriction. According to defendants, Article X Section 18 means nothing.
If we prevail and the state constitution is followed, proponents of spending our tax dollars for impermissible “economic development” programs will have the option of amending the state constitution to allow such spending. They face one problem with this. Such a campaign would bring into full public scrutiny the gross abuses of the “economic development” schemes being perpetrated on taxpayers.

Minot’s Magic Fund is the oldest of these schemes. Established in 1990 the Magic Fund has been given more than $35 million dollars in taxpayer money. The track record is clear 85 percent of the money the fund has invested in “economic development” has resulted in a complete and total loss of taxpayer funds. The touted “economic development” the Magic Fund has promised over the last 20 years has failed. Of course, the argument is “if we didn’t have the Magic Fund we would be much worse off.” Yes, and the taxpayers would be $35 million better off.

We do know that tens of millions of taxpayer dollars went to entity after entity that folded and left nothing but unemployment and unpaid employees in its wake.

In 2000 the State entered the “economic development” games and has spent tens of millions on its version of “economic development.” Lee Peterson the man who helped establish the Minot Magic Fund set up the State “economic development” effort and patterned it after what was done in Minot. State results have been similar.

The constitutionality of these “economic development” schemes has never been addressed by the courts. The state legislature enacted NDCC 40.05 and 40.57. Both are in direct conflict with the state constitution’s prohibition against giving taxpayer money to private entities for any reason, except the support of the poor. Neither has been challenged.

JIM’S TRUCKS

 

 

Taking our tax dollars and giving them to others in the name of “economic development” is folly. The state Commerce Department tells us (see their Web page) it gives our money to entities unable to qualify for normal commercial loans. In other words, the state specializes in giving money to businesses the private sector won’t. So much for protecting and responsibly using our precious tax dollars.

If the state really believed this was economic development it would use the Bank of North Dakota to make these loans or give money away money (grants) or lend credit. The problem is the Bank of North Dakota would be shut down by bank examiners if it dispensed money as the Commerce Department or the Magic Fund does.

As for getting a final decision as soon as possible; there is nothing we’d like more. Unfortunately, the City of Minot moved the original filing from state to federal court creating more than a three month delay before the federal court sent it back saying it belonged where it was originally filed by the plaintiff.

While in federal court requested “specificity,” claiming they did not understand our suit. We provided 75 pages of specific statutes, specific programs, specific gifts, grants, loans, loan guarantees, and stock acquisitions. Instead of allowing us to amend the complaint to meet their request sought dismissal. So we are complying with their request for “specificity.”

The state and the city know exactly what we are challenging and their procedural game playing has merely cost taxpayers more money and prevented the issue from being addressed as quickly as possible.

We will file a specific complaint listing we had already provided in discovery, so the court will have the opportunity to say, quite simply, that the state constitution either means what it says or it doesn’t.




Robert L. Hale is an attorney licensed to practice law in Washington State and North Dakota. He is the founder and president of the Northwest Legal Foundation a 501C3 public interest law fi rm. He is also the CEO of Spectrum Care, LLC. Spectrum Care builds and operates retirement/assisted living  communities in the upper Midwest. He lives with his wife of 35 years in Minot, ND.

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