Court Holds Municipal Taxpayers Have Standing to Challenge Town’s Grant to Local Church

In the late 1980s, the Town of Cabot received a two-million-dollar grant from the U.S. Department of Housing and Urban Development (HUD) to fund a loan to the Cabot Farmers’ Cooperative Creamery for the construction of a warehouse. The Cooperative repaid the loan and, pursuant to its agreement with HUD, the Town was permitted to keep the funds for purposes consistent with applicable HUD regulations and the Housing and Community Development Act of 1974. The Town has since maintained the funds in an isolated account from which the Town gives loans and grants to local individuals or groups for projects that, among other things, “protect and enhance the quality of life and character of the town.”

In 2014, the United Church of Cabot (UCC) applied for a ten-thousand-dollar grant from the Town to assist with a portion of the cost of certain structural repairs. While UCC is a place of worship, it also makes its premises available for nonsectarian community events and it is considered “an important and historic building in the town.” The grant request was put to a vote on Town Meeting Day and the voters approved the grant.

The plaintiffs challenged the grant under the Compelled Support Clause of the Vermont Constitution and requested an injunction from the trial court to prevent the Town from making the award to the UCC. The trial court rejected the Town’s arguments that the plaintiffs lacked standing to bring the constitutional challenge and issued a preliminary injunction, finding the grant was analogous to the unrestricted tuition-payment system struck down in Chittenden Town School District v. Department of Education, 169 Vt. 310, 738 A.2d 539 (1999). The trial court also found that, in the absence of a preliminary injunction, the plaintiffs would suffer irreparable harm to their values arising from the UCC’s unconstitutional use of the grant funds during the pendency of the case.

On interlocutory appeal by the Town, the Vermont Supreme Court held that the plaintiffs had municipal taxpayer standing to sue to enjoin the grant award to UCC. Despite the fact that the Town’s use of the funds was restricted by its agreement with HUD, the Court found the Town retained extensive control over the funds with little federal oversight and that the monies could otherwise be available for municipal expenditures. Although the funds were maintained in a separate municipal account, the Court found that the Town’s grant program contemplated the potential award of grant funds to municipal governmental agencies for capital projects and, therefore, the funds could not be “meaningfully divorced from their effects on municipal taxation.” The Court reasoned that the grant to “UCC may displace a grant to a tax-funded entity, with the potential consequences of affecting taxes.”

However, the Court vacated the preliminary injunction, finding that the trial court overstated the plaintiffs’ likelihood of success on the merits of their claims and erred in concluding they would suffer irreparable harm in the absence of the injunction. Regarding plaintiffs’ likelihood of success, the Court expressed skepticism of the argument “that the Compelled Support Clause embodies a categorical prohibition against any public funding for physical repairs to a place of worship” and noted that plaintiffs had not presented evidence sufficient to support a narrower claim. The Court explained that the critical question under the Compelled Support Clause is whether the funds are actually used to support religious worship, and the fact that the recipient of government support is a religious organization is not necessarily determinative. In fact, the refusal to afford a religious organization access to secular benefits made available to similar institutions solely because of its religious character may run afoul of the Free Exercise Clause of the First Amendment, as the U.S. Supreme Court recently held in Trinity Lutheran Church of Columbia, Inc. v. Comer, 137 S.Ct. 2012 (2017).

The Court held public funds will not be considered as supporting worship within the meaning of the Compelled Support Clause if: (1) the funding is available on a neutral, nondiscriminatory basis to a diverse group of potential recipients for the purpose of promoting a secular goal of the community, (2) the funds are not intended to or do advantage religious groups or activities, and (3) the funds are used for structural repairs rather than to replace, repair or erect religious symbols. However, the Court noted that on remand the plaintiffs may be able to establish the Town’s grant program is not as neutral as it appears and that it advantages the UCC on the basis of its religious character, or that the funds will be used to support worship.

Regarding the trial court’s conclusion that plaintiffs would suffer irreparable harm in the absence of the injunction, the Court found that if plaintiffs prevailed on remand, the UCC would be ordered to repay the grant monies and that the alleged constitutional violation would then be remedied. Furthermore, there was no evidence that UCC would be unable to repay the grant if the plaintiffs should prevail. On these bases, the Court found it was error to conclude the alleged harm to plaintiffs was irreparable.

A copy of the decision is available here: Taylor v. Town of Cabot, et al. 2017 VT 92

For additional information about this case, or matters of municipal governance, please contact attorney Eric G. Derry at Stitzel, Page & Fletcher, P.C.

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