## Facts

- The City of Gonzales created Gonzales Economic Development District No. 1, a 233-acre political subdivision, to pursue local economic development projects.
- Voters approved rededication of portions of existing city sales-and-use taxes to permit tax-increment financing (TIF) within the district.
- The Industrial Development Board of the City of Gonzales (IDB), a public issuer, proposed issuing up to $49,875,000 in taxable and/or tax-exempt tax-increment revenue bonds.
- The bond proceeds and related agreements were designed to support construction of a large outdoor retail development anchored by a Cabela’s store, along with a museum, sportsman park center, and public infrastructure.
- The agreements required private developers to acquire property, construct improvements, and convey title to the public entity at bond issuance; the retailer would lease back the property with an option to purchase.
- The private parties undertook enforceable obligations, including investing substantial private capital, paying rent, operating for a minimum term, and maintaining specified public-facing facilities.
- Two local residents and competing retailers intervened, alleging the financing unlawfully used public resources to benefit a private retailer and disadvantaged competitors.
- The trial court validated the bonds and related actions under the Bond Validation Act; the court of appeal affirmed.

## Issues

1. Whether using TIF revenue bonds and related agreements to support a private retail development violates the Louisiana Constitution’s prohibition on the loan, pledge, or donation of public funds or things of value to private entities.
2. Whether the project’s targeted incentives violate federal or state equal-protection guarantees by favoring one retailer over similarly situated competitors.

## Decision

- The Louisiana Supreme Court affirmed the bond-validation judgment.
- The court held the arrangement did not violate the anti-donation clause because it was structured as a constitutionally permitted cooperative endeavor for a public purpose with reciprocal, enforceable obligations and public benefit.
- The court held the equal-protection challenge failed because the incentives were economic regulation subject to rational-basis review and were rationally related to legitimate governmental objectives (economic development, jobs, and increased tax revenues).

## Legal Principles

- Public entities may not transfer public funds, credit, property, or things of value to private parties as a gratuity; an unconstitutional donation occurs when the public gives value without receiving commensurate value or demonstrable public benefit.
- Louisiana’s constitution permits cooperative endeavors for a public purpose when public participation is tied to enforceable reciprocal obligations and non-gratuitous exchange.
- Economic-development financing and incentives generally satisfy equal protection if no fundamental right or suspect classification is implicated and the governmental action is rationally related to a legitimate public objective.
- Under rational-basis review, a government may provide project-specific incentives even if competitors are disadvantaged, so long as a conceivable rational relationship to a legitimate purpose exists.

## Conclusion

The court upheld the use of TIF-backed revenue bonds and associated agreements for a retail-centered development, concluding the package of public ownership/control and private contractual duties constituted a non-gratuitous cooperative endeavor serving a public purpose, and that targeted incentives survived rational-basis equal-protection review.


Bd. of Dirs. of the Indus. Dev. Bd. of the City of Gonzales, La., Inc. v. All Taxpayers, Prop. Owners, Citizens of the City of Gonzales, 938 So. 2d 11 (La. 2006)