JEFFERSON CITY — The Missouri Supreme Court ruled that portions of a statutory scheme that allowed counties to establish lake area business districts were constitutionally invalid.
The Supreme Court severed the invalid portion of the statute in a unanimous June 25 decision authored by Chief Justice Mary R. Russell.
Gail Griswold, Shawnee Bluff Winery LLC, Laura Salamun and Pointe View Management LLC appealed judgments declaring section 67.1175.1 of Missouri law constitutionally invalid.
The provision, alongside section 67.1177, was found to require political subdivisions to grant public money to private entities, violating Article VI, Section 23 of the Missouri Constitution.
The circuit court attempted to rectify the constitutional issue by modifying section 67.1175.1. However, the challengers argued that despite the modification, the statutes continued to mandate the unconstitutional transfer of public funds to private entities, according to the opinion.
The challengers contended that the entire statutory scheme, including sections 67.1170, 67.1175, 67.1177, and 67.1180, should be invalidated as the provisions were not severable.
The court agreed with the challengers, finding that both the modified section 67.1175.1 and section 67.1177 still required political subdivisions to allocate public funds to a private nonprofit entity, which remains unconstitutional.
The court also determined that the unconstitutional provisions were not severable from the rest of the statutory scheme, necessitating the invalidation of sections 67.1170, 67.1175, 67.1177, and 67.1180 in their entirety.
The statutory scheme, enacted in 1993, was designed to govern the creation, operation, and dissolution of taxing districts known as lake area business districts.
These districts could be established by the governing bodies of counties bordering lakes with at least one hundred miles of shoreline upon petition by fifty or more property owners within five miles of the lake.
Each district would be a political subdivision with an advisory board, a nonprofit entity comprising seven members elected by the county lodging association, responsible for governing the district.
One of the advisory board's powers was proposing a lodging tax to be paid by transient guests of hotels, motels, and resorts within the district.
The collected tax was to be used for advertising and promoting tourism.
This framework led to the creation of lake area business districts and advisory boards in Camden, Miller, and Morgan counties, where lodging taxes were implemented and used by the advisory boards, the opinion states.
In 2020, Griswold and Salamun, owners of businesses within these districts, ran for positions on their respective advisory boards but were unsuccessful after changes to voting rules allowed property management companies multiple votes.
They subsequently filed lawsuits against their respective counties, challenging the constitutionality of sections 67.1175 and 67.1177.
The circuit court initially found section 67.1175.1 unconstitutional but attempted to salvage it by removing the phrase "which shall be a nonprofit entity."
The Supreme Court, however, reversed this decision, ruling the entire statutory scheme invalid.
"Without the lodging tax—to be used to promote tourism in the lake area business districts—there is no purpose for creating the lake area business districts and no need for a method to dissolve them," Russell wrote in the opinion. "Because the remaining sections creating and dissolving the lake area business districts are inseparably connected with the void sections creating a governing body and its ability to impose and use the lodging tax, sections 67.1175 and 67.1177 cannot be severed. The entire statutory scheme must be stricken."
The court enjoined any further actions by the advisory boards and the collection of lodging taxes, remanding the case to the circuit court to appoint trustees to wind up and dissolve the affected business districts.
Salamun and Griswold were represented by Matthew A. Jacober, Brooke M. Parsons and Curtis L. Tideman of Lathrop GPM.
The county business districts were represented by Marc Ellinger and Stephanie Bell of Ellinger Bell; and Steven H. Schwartz, T. Michael Ward and Brian Sableman of Brown & James.
Attorneys declined to comment on the matter.
Missouri Supreme Court case number: SC100076, SC100076