This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
STATE OF MINNESOTA
IN COURT OF APPEALS
Oak Grove Properties, Inc.,
City of St. Paul,
Filed February 20, 2001
City of St. Paul Council
City Council File No. 00-892
Frank J. Walz, Caryn Scherb Glover, Robert D. Maher, Michelle Bergholz Frazier, Best & Flanagan, L.L.P., 4000 First Bank Place, 601 Second Avenue South, Minneapolis, MN 55402-4331 (for appellant)
Clayton M. Robinson, St. Paul City Attorney, Virginia D. Palmer, Assistant City Attorney, 400 City Hall, 15 West Kellogg Blvd., St. Paul, MN 55102 (for respondent)
Considered and decided by Harten, Presiding Judge, Willis, Judge, and Hanson, Judge.
Respondent St. Paul City Council issued a bingo hall license for a proposed bingo hall to be located less than two miles from an existing bingo hall. Respondent waived the requirement that there be a minimum of two miles between bingo halls, based on a finding that the new bingo hall would provide economic development benefits without significant negative impacts on residential or commercial uses. Relator, owner of the existing bingo hall, challenges the city’s waiver decision. Because we conclude that the decision was supported by substantial evidence, we affirm.
Relator Oak Grove Properties (Oak Grove) has owned and operated a bingo hall at the intersection of University and Lexington Avenues in St. Paul for nine years under licenses issued by the Minnesota Gambling Control Board and respondent City of St. Paul (St. Paul). During that time, the same four charitable organizations have sponsored bingo at Oak Grove’s bingo hall. The bingo hall license is separate and distinct from the license obtained by the charities to operate in the hall.
On August 3, 2000, pursuant to Chapter 403 of the St. Paul, Minn., Code of Ordinances, RK Midway LLC, d/b/a Midway Center Bingo (Midway), applied to St. Paul for a license to operate a bingo hall at the intersection of University and Snelling Avenues, less than two miles from Oak Grove’s Lexington site. The four charities currently conducting charitable bingo at Oak Grove’s bingo hall intend to move to the new bingo hall. St. Paul, Minn., Code of Ordinances § 403.05 provides, in pertinent part:
(a) Minimum distance established. A minimum distance of two (2) miles shall be required between buildings licensed for bingo halls under the provisions of this chapter. * * *
(b) Waiver of distance requirement. The minimum distance requirement herein imposed may, to promote responsible ownership and accountability, be waived by the council upon: a finding by the council that the location of the proposed site would provide economic development benefits without significant negative impacts on residential or commercial uses; provided, however, that (1) the waiver could allow no more than one licensed bingo hall within two miles of another licensed bingo hall, and (2) such a waiver could not be granted to the fee owner of an existing, licensed bingo hall within a two [mile] radius.
Pursuant to the procedures of St. Paul, Minn., Code of Ordinances § 310.04(d)(1), upon receipt of Midway’s application, the Office of License, Inspection, and Environmental Protection sent notice to the neighborhood district council for the area of the new site advising it of the right to object to issuance of the license. On September 18, 2000, after a legislative hearing, the legislative hearing officer recommended that the license be issued to Midway and noted that the request for a waiver of the minimum distance requirement would be the subject of a public hearing before the city council.
On September 27, 2000, the St. Paul City Council (the city council) held a public hearing. After testimony from opponents of the waiver, including Oak Grove, and proponents of the waiver, the city council adopted a resolution finding that the waiver requirements of § 403.05 had been met, granted a waiver of the minimum distance requirement, and issued a bingo hall license to Midway. Oak Grove petitioned for writ of certiorari seeking reversal of the city council’s action.
D E C I S I O N
A city council’s decision may be modified or reversed if it is unsupported by substantial evidence in view of the entire record as submitted or arbitrary or capricious. Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion or more than a scintilla of evidence. Routine municipal decisions should be set aside only in those rare instances where the decision lacks any rational basis, and a reviewing court must exercise restraint and defer to the city’s decision.
City of Mankato v. Mahoney, 542 N.W.2d 689, 691-92 (Minn. App. 1996) (quotations and citations omitted). The courts “determine whether the municipality’s action in the particular case was reasonable.” VanLandschoot v. City of Mendota Heights, 336 N.W.2d 503, 508 (Minn. 1983).
The fact that a court reviewing the action of a municipal body may have arrived at a different conclusion, had it been a member of the body, does not invalidate the judgment of the city officials if they acted in good faith and within the broad discretion accorded them by statutes and the relevant ordinances.
Id. at 509 (citation omitted). “In this state, a city has wide discretion in dealing with matters of local importance.” Arcadia Dev. Corp. v. City of Bloomington, 267 Minn. 221, 225, 125 N.W.2d 846, 850 (1964) (citation omitted). To waive the minimum distance requirement, the city council had to make a reasonable finding, supported by the evidence, “that the location of the proposed site would provide economic development benefits without significant negative impacts on residential or commercial uses.” St. Paul, Minn., Code of Ordinances § 403.05.
1. Economic Development Benefits
Oak Grove contends that there is no evidence that the location of the proposed bingo site would provide economic development benefits, and that the grant of a waiver simply transfers existing economic benefits to the new location. However, the testimony given at the public hearing provides substantial evidence that the new location would provide economic development benefits.
Robert Kessler, Director of License, Inspection, and Environmental Protection (“L.I.E.P.”), testified:
[L]icense staff recommends the approval of the application at the Midway Shopping Center because we find that the location is consistent with the intent of the proposed waiver contained in Council File 00314. L.I.E.P. staff, in consultation with David Gontarek of the Department of Planning and Economic Development, finds that the new bingo hall will have no adverse impact on the adjacent neighborhood or the commercial businesses. The location of the proposed bingo hall is ideal in that it will generate economic activity in a heretofore vacant and under-utilized area of the shopping center. * * * We urge your approval of the application of the proposed legislation that allows for the waiver.
Oak Grove’s counsel testified that, if the city council granted this waiver, Oak Grove would no longer be able to operate a bingo facility at the Lexington site, stating that “this area simply can’t support two bingo halls,” and that the waiver would “simply move an existing economic benefit down the block.” Oak Grove’s counsel further testified that Oak Grove’s space at Lexington and University was “admittedly under-utilized” and that Oak Grove had been negotiating with Home Depot for three years to open a new store on this property. If this happened, Oak Grove would have to find a different site for its bingo license.
Don Ludemann, President of the Snelling-Hamline Community Council, testified that he was at the public hearing to “speak against this waiver, or rather for the waiver with certain conditions.” He testified about concerns regarding an “image problem,” safety, lighting, landscaping, and parking. He agreed with Oak Grove that there would be “no net economic benefit,” but testified that “there might be a secondary benefit,” in that “people who go to play bingo will also shop at the Rainbow or the Walgreens or have dinner at the nearby buffet.” Ludemann clarified that the neighborhood was concerned about “people who might prey upon” the bingo hall patrons. He was assured that off-duty police officers would provide security during the bingo sessions.
Counsel for Midway pointed out in her testimony that, contrary to Oak Grove’s assertion that the ordinance calls for “special circumstances,” the ordinance “talks about promoting responsible ownership and accountability.” She testified that the four charities concluded that the location at “Lexington wasn’t meeting their needs or their customers’ needs for a feeling of security, safety, and for the shopping that the customers wanted,” and that these four charities “have now signed leases and are ready to move into the space at Midway Center.” She also testified that the first economic development benefit provided by the new location would be that Midway would invest over $700,000 to remodel and bring up to code the 10,000 square feet of space that had been vacant and untenable for 20 years.
Midway’s counsel further testified that the new location would bring about 15,000 people a month into an area where “there’s Cub Foods, there’s Rainbow, there’s Herberger’s, there’s Kmart,” and that this would bring added economic benefit. Most of the bingo patrons are senior citizens who “make a day of it,” and in the Midway Shopping Center they could spend money having lunch, buying groceries, and buying pharmaceuticals. There is not “a similar economic engine on Lexington.”
Ellen Waters, President of the Midway Chamber of Commerce, testified in support of the waiver because it was in the best interests of the “whole Midway business community.” She stated that “the spin-off development in terms of shoppers and increased economic activity in that area will benefit all of the surrounding stores * * *.”
Finally, Barbara Kale, CEO of Midway Training Services (“MTS”), a charity that serves developmentally disabled adults and is one of the four charities relying on bingo profits, testified:
For about the last three years we were told that we were going to be moved to another location because the shopping center was going to be sold to Home Depot. Sometimes, we were going to be moved in three months, sometimes six months, sometimes not at all. During this time, the other businesses closed or moved and the bingo hall itself was deteriorating rapidly. Presently, the condition is deplorable. Profits for MTS and the other charities declined significantly. In 1999, the MTS profits were 1/3 of what they were in 1998.
The influx of money to improve the premises where the new bingo hall will be located is an economic benefit. See Port Auth. v. Fisher, 275 Minn. 157, 166, 145 N.W.2d 560, 567-68 (1966) (when productive use of property is achieved, economic benefits to the city and the people will ensue). Furthermore, the record indicates that there are opportunities for additional economic benefits at the new location, in the form of increased profits for the charities, more patrons, and a location which permits those patrons to spend money at nearby stores and restaurants. Although St. Paul, Minn., Code of Ordinances § 403.05 contains no definition of “economic development benefits,” in determining whether there is a public purpose in public financing of small business expansion, the Minnesota Supreme Court stated:
In addition to the direct benefits derived from public financing of small business expansion—increased tax base and employment—there are favorable secondary economic effects. Jobs are created in businesses not directly financed because of the increased demand for goods and services by the new employees of the financed business.
Minnesota Energy & Econ. Dev. Auth. v. Printy, 351 N.W.2d 319, 334 (Minn. 1984). The same theory of “favorable secondary economic effects” can be applied to this situation. St. Paul asserts:
In addition to the initial benefit of construction on the new site, which involves money spent on materials, labor, permits, and landscaping, and the rent and taxes which will be paid, there will be a ripple effect seen in spending at the neighboring businesses by patrons of the new bingo hall.
Based on all of the evidence, we conclude that the city council reasonably found that the location of the proposed bingo site would provide economic development benefits.
2. No Significant Negative Impacts on Residential or Commercial Uses
Oak Grove contends that, even if the city council reasonably found that the location of the proposed bingo site would provide economic development benefits, any benefit “comes at the expense of Oak Grove’s established business,” and thus fails to meet the second half of the waiver requirement addressing significant negative impacts on residential or commercial uses. Oak Grove’s assertion that granting a waiver will cause it to close its bingo hall is based on the fact that the charities now renting from Oak Grove have signed leases with Midway. But testimony establishes that the charities are unwilling to remain at Oak Grove’s bingo hall because the property is deteriorating, there are no nearby shops and restaurants, profits have sharply declined, and any lease is uncertain due to Oak Grove’s ongoing negotiations with Home Depot. The fact that Oak Grove’s own actions make it unattractive for charities to rent space at its bingo hall does not establish that charities are unwilling to remain there merely because of the proximity of another bingo hall.
Oak Grove cites North Mem’l Med. Ctr. v. Minnesota Dept. of Health, 423 N.W.2d 737 (Minn. App. 1988), to support its claim that the city council’s decision was arbitrary and capricious because the waiver did not satisfy the requirements of § 403.05. However, North Mem’l Med. Ctr. is distinguishable; it held that a license to extend the service area for relator’s ambulance services was properly denied where the Commissioner of Health found that the license would risk duplication of services and deleterious competition. Id. at 739-40. The court cited Twin Ports Convalescent, Inc. v. Minnesota State Bd. of Health, 257 N.W.2d 343, 348 (Minn. 1977), in finding that the legislative intent of Minn. Stat. § 144.802 was “to protect the public welfare against deleterious competition in the ambulance services field.” North Mem’l Med. Ctr., 423 N.W.2d at 739.
The provision embodies a legislative determination that the ambulance service business is one in which the public welfare is not promoted by free enterprise. Ambulance service is essential to a community.
Id.; see also Troje v. City Council, 310 Minn. 183, 245 N.W.2d 596 (1976) (city’s denial of garbage hauler’s license not arbitrary where city’s interest in granting only one license was proper because additional license would increase risks to public safety and cause increase in rates or decline in public service).
No such interests exist here to protect a business from legitimate competition; bingo halls are not essential services. The city ordinance does not provide that the city council may waive the distance requirement only if the existing, licensed bingo hall’s profits are protected. Rather, the ordinance provides that “[t]he minimum distance requirement herein imposed may, to promote responsible ownership and accountability, be waived by the council * * *.” St. Paul, Minn., Code of Ordinances § 403.05(b) (emphasis added).
Oak Grove also relies on Zylka v. City of Crystal, 283 Minn. 192, 199, 167 N.W.2d 45, 51 (1969) (city’s decision to deny application for a special use permit arbitrary because unaccompanied by written findings specifying reason for denial, no city official made contemporaneous oral statement of reason, and insufficient evidence to support court finding that permit would adversely affect the public health or safety or general welfare). But here, the record contains substantial testimony supporting the city council’s grant of a waiver.
Contrary to Oak Grove’s assertions, we conclude that the city council complied with St. Paul, Minn., Code of Ordinances § 403.05, finding that the two requirements necessary to grant a waiver were satisfied. The decision to grant a waiver to Midway was supported by substantial evidence, was not an error of law, and was not arbitrary or capricious. Accordingly, we affirm respondent’s decision.