Title: Steup v. Indiana Housing Finance Authority
Citation: 402 N.E.2d 1215
Docket Number: 1179S309
State: Indiana
Issuer: Indiana Supreme Court
Date: April 2, 1980

402 N.E.2d 1215 (1980)
Roger A. STEUP; American Federal Savings and Loan Association of Fort Wayne, Appellants (Plaintiffs below),
v.
INDIANA HOUSING FINANCE AUTHORITY; Robert D. Orr, John C. Hart, Jack New, James E. Faris, Carl Raymond Carlson, Louis H. Boink, and Frank P. Flynn As Members of the Indiana Housing Finance Authority; and Theodore L. Sendak, As Attorney General of Indiana, Appellees (Defendants below).
No. 1179S309.

Supreme Court of Indiana.
April 2, 1980.
*1217 Lewis C. Bose and Kendall C. Crook, Bose &amp; Evans, Indianapolis, for appellants.
Phillip E. Gutman and Richard H. Blaich, Rothberg, Gallmeyer, Fruechtenicht &amp; Logan, Ft. Wayne, Harry T. Ice and James A. Shanahan, Ice, Miller, Donadio &amp; Ryan, Indianapolis, for Indiana Housing et al.
Theodore L. Sendak, Atty. Gen., Jane M. Gootee, Deputy Atty. Gen., Indianapolis, amicus curiae.
HUNTER, Justice.
Appellants Steup and the American Federal Savings and Loan Association of Fort Wayne brought suit against the Indiana Housing Finance Authority (hereinafter referred to as "the Authority"), its individual members and the Attorney General of Indiana for a declaratory judgment and injunction holding unconstitutional the Indiana Housing Finance Authority Act, Ind. Code § 5-20-1-1, et seq., (Burns Supp. 1979), (hereinafter referred to as "the Act"). The Hancock Circuit Court held that the Act was a valid and constitutional enactment of the Indiana General Assembly. This Court granted a joint petition to transfer this cause from the Court of Appeals, pursuant to Ind.R.App.P. 4(A)(10).
Appellants' constitutional challenge raises the following issues for review:
(1) Whether the Act violates Ind.Const. Art. 10 § 5 by creating a state debt;
(2) Whether the Act (a) authorizes a pledge of the state's credit and (b) makes the state a stockholder in a corporation in violation of Ind.Const. Art. 11, § 12;
(3) Whether the Act authorizes the Authority to expend public funds for private benefit without a valid public purpose in violation of U.S.Const. amend. XIV and Ind.Const. Art. 1, §§ 1 and 21;
(4) Whether the Act grants some citizens privileges not granted others similarly situated in violation of U.S.Const. amend. XIV and Ind.Const. Art. 1, § 23;
(5) Whether the Act is arbitrary and in violation of equal protection guarantees, U.S.Const. amend. XIV and Ind.Const. Art. 1, § 23, by creating local employment and contracting privileges;
(6) Whether the Act creates tax exemptions contravening U.S.Const. amend. XIV and Ind.Const. Art. 1, § 23 and Art. 10, § 1;
(7) Whether the Act constitutes an improper delegation of legislative authority to a state agency in violation of U.S.Const. amend. XIV and Ind.Const. Art. 4, § 1 and Art. 1, § 23;
(8) Whether the Act denies due process to certain creditors of the Authority in violation of U.S.Const. amend. XIV and Ind. Const. Art. 1, §§ 1 and 21; and
(9) Whether the trial court's conclusions of law are contrary to law in that they are not supported by sufficient evidence and are contrary to the evidence.
A statute is clothed with a presumption of constitutionality. Every doubt raised must be resolved in favor of the statute's validity. Furthermore, a heavy burden is borne by the challenger. Sidle v. Majors, (1976) 264 Ind. 206, 341 N.E.2d 763.
Appellants first claim that the statute should fail because it authorizes the creation of state debt for purposes other than those permitted by Art. 10, § 5 of the Indiana Constitution which is as follows:
The Authority is similar in nature to the commissions created for the construction of the Indiana Toll Road, Ennis v. State Highway Commission, (1952) 231 Ind. 311, 108 N.E.2d 687; the Indiana Toll Bridge, Indiana State Toll Bridge Commission v. Minor, (1957) 236 Ind. 193, 139 N.E.2d 445; the State Office Building, Book v. State Office Bldg. Commission et al., (1957) 238 Ind. 120, 149 N.E.2d 273; and an Indiana port, Orbison v. Welsh, Governor et al., (1961) 242 Ind. 385, 179 N.E.2d 727. The Authority is neither a state agency nor a private corporation.
Ind. Code § 5-20-1-16(a) (Burns Supp. 1979) provides that the Authority may create and establish one or more capital reserve funds to secure notes or bonds referred to and defined by Ind. Code § 5-20-1-2(10) (Burns Supp. 1979) as "obligations." Ind. Code § 5-20-1-16(a) (Burns Supp. 1979) states:
Ind. Code § 5-20-1-16(b) (Burns Supp. 1979) limits the usage of the funds, as follows:
Appellants argue that appropriations made by the legislature and paid into the capital reserve fund would create a state indebtedness because those moneys could be applied directly and unconditionally to the satisfaction of the Authority's obligations. They further argue that the result would be identical if the state agreed directly to assume all or a portion of the obligations under the bonds or notes as they become due, which would be a violation of Art. 10, § 5 of the Indiana Constitution. Although the result may be identical:
We have previously held that appropriations advanced to commissions for public purposes and projects did not create an indebtedness of the state. In prior cases, bonds authorized to be issued by the statute were not issued in the name of the state and, we held, were not its obligation. Ennis v. State Highway Commission, supra; Indiana State Toll Bridge Commission v. Minor, supra; Orbison v. Welsh, Governor, supra; Book v. State Office Bldg. Commission, supra. The Acts in Ennis and Book provided specifically that the bonds were payable solely from the revenues derived from the commissions. Both Acts contained a section stating that the obligations of the commissions were not the obligations of the state.
Similarly, Ind. Code § 5-20-1-8(a) (Burns Supp. 1979) states in relevant part:
Ind. Code § 5-20-1-7(a) (Burns Supp. 1979) expressly states that the Authority's obligations do not constitute a debt, liability or obligation of the state:
The above provision leaves no recourse against the state and the general fund cannot be reached to pay the Authority's obligations.
Furthermore, the legislature may appropriate funds to the capital reserve fund. However, no funds can flow into the reserve fund unless and until there is an appropriation by the legislature. The Act allows but does not require such appropriations. In Utah Housing Finance Agency v. Smart, (1977) Utah, 561 P.2d 1052, 1056, the Utah Supreme Court stated:
We hold that the Act does not create a state indebtedness and, therefore, does not contravene Ind.Const. Art. 10, § 5.
Ind.Const. Art. 11, § 12 provides in relevant part:
Appellants claim that the net effect of Sections 12, 16 and 23 of the Act, Ind. Code §§ 5-20-1-12, 16 and 23 (Burns Supp. 1979), *1220 is to loan the credit of the state to a corporation. We have held that this provision of the Constitution is applicable only to private corporations and not public bodies. Orbison v. Welsh, Governor, supra; Ennis v. State Highway Commission, supra. We have determined above that the Authority is a "hybrid," "a separate corporate entity which is an instrumentality or agency of the state" but "not the state in its sovereign corporate capacity." Orbison v. Welsh, Governor, supra, 242 Ind. at 399, 179 N.E.2d  at 734. Since the Authority is not a private corporation, we find no violation of the provision of Ind.Const. Art. 11, § 12 which prohibits the loaning of credit to private corporations.
Appellants also argue that the Act makes the state a stockholder in a corporation which is prohibited by Art. 11, § 12. Although appellants concede that the Act does not permit the Authority to own shares in any assisted corporation, they argue without citation to authority that the Authority's powers are equal to or exceed the typical powers of shareholders.
Ind. Code § 5-20-1-6 (Burns Supp. 1979) states:
These powers are extensive, but we need not reach a determination of whether Section 6 makes the Authority a shareholder in entities assisted under the Act. The Constitution prohibits the state from becoming a stockholder in a corporation. Again, the Authority is not the state in its sovereign capacity and, therefore, the Authority's relationships with other organizations do not contravene Ind.Const. Art. 11, § 12.
Appellants claim that the Act authorizes expenditures of state funds for private benefit without a valid public purpose.
The Act was created for the express purpose of providing suitable housing for low and middle income Indiana residents. Ind. *1221 Code § 5-20-1-1 (Burns Supp. 1979) defines the public purpose as follows:
Although the Act and the Authority will benefit private individuals, its general purpose is public in nature.
The standard of review to determine if the legislation is a valid exercise of police powers for a public purpose was set forth in Department of Financial Institutions v. Holt, (1952) 231 Ind. 293, 302, 108 N.E.2d 629, 634. The portion relevant to our consideration reads:
In Edwards v. Housing Authority of City of Muncie, (1939) 215 Ind. 330, 335-7, 19 N.E.2d 741, 744, we stated:
Public purposes are matters for legislative determination.
The Nebraska Supreme Court held valid a statute similar to our Act under a constitution substantially identical to our own in this regard.
In addressing a like issue, the Utah Supreme Court stated:
We believe the reasoning in Utah Housing Finance Agency to be sound and in harmony with our standards. Therefore we hold the purpose of the Act to be public in nature and to be a valid exercise of the legislative police power. Furthermore, the benefits received by private individuals are incidental to the execution of the legitimate public purpose.
Appellants assert that many moderate income persons eligible for assistance under the Act can afford housing at prices substantially above the average local housing cost. Families with incomes in excess of 125% of the median family income for a geographical area are not provided assistance under the Act. Appellants claim that, therefore, the Act violates U.S.Const. amend. XIV and Ind.Const. Art. 1, § 23 by granting privileges and immunities to certain Indiana citizens while denying the same privileges and immunities to other citizens similarly situated.
When classifications are drawn according to some fundamentally suspect classification, such as race, the Fourteenth Amendment places a heavy burden of justification upon the state. However, classifications drawn according to income are not suspect.
Under Article 1, § 23 of the Indiana Constitution,
In the interest of most effectively accomplishing a public purpose, legislation may necessarily confer benefits on some persons which are not available to others. But the equal protection clause of our United States Constitution has never prevented the Indiana General Assembly from indulging in reasonable classifications. Indiana &amp; Michigan Elec. Co. v. City of Anderson, (1978) Ind. App., 376 N.E.2d 114.
Applying these standards, we find that the 125% of median income demarcation line is neither arbitrary nor unreasonable in light of the purpose of the Act. The Act does not grant privileges and immunities to certain citizens to the exclusion of others similarly situated.
Appellants raise an equal protection challenge to Section 5 of the Act. Ind. Code § 5-20-1-5 (Burns Supp. 1979) reads in relevant part:
Appellants claim that the legislature has created employment and contracting preferences which are classifications that cannot stand up to equal protection scrutiny.
We will apply here the same level of scrutiny which we applied in Issue IV above. Again, no suspect classification is involved. Our statute does not establish racial quotas and is, therefore, wholly dissimilar to the Local Public Works Capital Development and Investment Act of 1976, as amended by the Public Works Employment Act of 1977[1] which currently troubles *1224 the federal courts.[2] In fact, Section 5 of our Act does not involve a mandatory quota at all. The Act includes an important modifying phrase, "to the extent feasible." This statutory language requires every positive approach that can properly be taken to award contracts to local firms and employ low income individuals in planning projects and in the construction, maintenance and renovations, where necessary, of housing units. The federal housing statute[3] which requires employment of low income persons and local business "to the greatest extent feasible" has been interpreted in this manner. 40 A.L.R.Fed. 842. The Department of Housing and Urban Development has couched its regulations under 12 U.S.C.A. 1701u (Supp. 1980) in terms of "good faith effort." 24 C.F.R. §§ 135.55-.60. A discretionary good faith requirement is certainly within the purview of the public purpose to be served in our Act. The statute remains directory. The Housing Finance Authority and contractors are not free to ignore the statute and their discretion is limited by it. In construing the language of the federal statute, the Ninth Circuit Court of Appeals has held:
The requirement is not impracticable or overly burdensome. We do not have a legislative history in regard to Ind. Code § 5-20-1-5 (Burns Supp. 1979). However, since our statute follows the federal statute virtually verbatim, we deem it proper to look to the history of the federal statute. The legislative history of the federal act reveals that thought was given to practicality.
For a judicial concurrence in this regard, see Drake v. Crouch, (M.D.Tenn. 1971) 377 F. Supp. 722. In that case three subcontractors were involved and between them only one additional individual was hired. But the court found:
Quotas and racial classifications aside, we must now turn to equal protection analysis under the "fair and substantial relation" test. Appellants cite some Indiana cases in which statutes did not pass this constitutional scrutiny, Davis Construction Company v. Board of Commissioners, supra, (wartime statute relieving highway contractors who contracted with boards of commissioners under certain provisions of one designated statute out of many acts which provide for highway and other public construction); Crawford v. Calumet Paving Company, (1954) 233 Ind. 127, 117 N.E.2d 368 (statute granting immunity to contractors constructing highways under contract with the state highway commission to the exclusion of contractors repairing or resurfacing highways or building or repairing bridges under contract with the commission or contractors constructing or repairing local roads); and State ex rel. Miller v. McDonald, (1973) 260 Ind. 565, 297 N.E.2d 826 (city ordinance declaring apartment houses of four or fewer units eligible for city refuse pickup but not apartment houses of five or more units). In these cases, this Court did not question the purposes of the acts in question, only the rationality of the relation between those purposes and the distinctions or classifications drawn.
The purpose of the Indiana State Housing Finance Authority Act is to provide affordable housing to low and moderate income persons and families. Ind. Code § 5-20-1-1 (Burns Supp. 1979). Appellants argue that the provisions of Ind. Code § 5-20-1-5 (Burns Supp. 1979), which create employment and contracting preferences in favor of low income individuals and businesses owned by low income individuals located in the area of the housing being constructed or rehabilitated under the Act, are not rationally related to the purpose of the Act. We do not agree.
Rentals and prices which low and moderate income persons and families can afford can be achieved in three ways: lowering rents and prices, supplementing income, or doing both until the desired medium is reached. This Act attempts the third alternative with respect to low income individuals by creating the above employment and contracting preferences. Appellants argue that Section 5 improperly distinguishes between low income persons and families and moderate income persons and families in light of the statutory purpose to aid both. It stands to reason that moderate income families come closer to being able to afford adequate housing than do those in the low income category. To the extent that this statute might aid low income persons in moving into or closer to the moderate income group it is consistent with the general public purpose served by this act within our body politic.
It is self-evident that the stability of low and moderate income housing is served by the promotion of economic conditions in the neighborhood, particularly the employment of residents and stimulation of local businesses. Furthermore, resident participation in a program is more apt to foster such intangibles as responsibility and pride than are distant bureaucratic or corporate control and execution of the program. See Ind. Code § 5-20-1-5(b) (Burns Supp. 1979). This is analogous to the federal hiring preference afforded Indians in the Indian service. *1226 Refusing to characterize the preferences as racial, the Supreme Court stated:
In providing that preferences should be given to individuals of low income and local businesses operated by individuals of low income, the legislature evidently considered that the interest of such persons and businesses in a project in their own locality would positively affect the quality of the development. Certainly those located within the area of the Authority's operation would be more concerned with enhancement of the value of the development to the community than those located outside the area. Therefore, the preferences expressed are reasonable in that they may work to maximize the quality of the assisted housing under this Act. The preferences stated do not operate to deprive certain individuals and businesses within the classifications drawn of the opportunity to participate in the Authority's programs. Quite to the contrary. The Authority's operations are statewide and these preferences will be employed in each of many areas in which the Authority will operate. Thus, Section 5 of the Act operates to allow maximum participation rather than repeated use of a few individuals or businesses statewide. There is nothing arbitrary or unreasonable in the preferences indicated for low income persons and businesses. Objections to this section of the Act indicate dissatisfaction with the policy of the Act rather than its constitutional validity.
The provisions of Ind. Code § 5-20-1-5 (Burns Supp. 1979) do bear a fair and substantial relation to the object of Article 20, Chapter 1. Appellants claim that Section 5 of the Act is not related to the goals of the Act which are "restricted solely to the accelerated production of adequate housing." Even accepting this overly simplistic statement of the object of the legislation, we cannot agree with appellants' position which assumes that the purpose of Section 5 is to provide employment. See the United States District Court's construction of the federal statute, 12 U.S.C.A. § 1701u (Supp. 1980), in Feliciano v. Romney, (S.D.N.Y. 1973) 363 F. Supp. 656. We have found that the general purpose of the statute, providing adequate, affordable housing for low and moderate income individuals and families, is constitutional. Therefore, it is simply not logical to strike down a provision which is devised to enhance the economic conditions of the same group of low income persons. We hold that Ind. Code § 5-20-1-5 (Burns Supp. 1979) comports with the equal protection guarantees of U.S.Const. amend. XIV and Ind.Const. Art. 1, § 23.
Appellants also argue that the Act provides for tax exemptions, in violation of Ind.Const. Art. 10, § 1, U.S.Const. amend. XIV and Ind.Const. Art. 1, § 23.
Article 10, § 1 of the Indiana Constitution reads in part:
*1227 Ind. Code § 5-20-1-21 (Burns Supp. 1979) states:
The appellants, citing Chadwick v. City of Crawfordsville, (1940) 216 Ind. 399, 24 N.E.2d 937, argue that the exemption for property used for "municipal purposes" relates solely to the purpose for which the property is used and that the purpose must be "public." However, in Orbison v. Welsh, Governor, supra, we stated:
We have similarly held tax exemptions valid in Edwards v. Housing Authority of City of Muncie, supra, and Ennis v. State Highway Commission, supra. In Ennis we stated:
Having determined that the Authority is not a private corporation, but a state instrumentality operating for a legitimate public purpose, we hold that the tax exemption is not a violation of Art. 10, § 1 of the Indiana Constitution.
The appellants' argument that the Act confers a privilege of tax exemption to bondholders while denying the privilege to holders of bonds issued by private for-profit or not-for-profit corporations is without merit. The Act does not create a classification of bondholders. Any distinction lies in the character of the bond itself. Given our determination that bonds issued by the Authority in furtherance of the public purpose are properly exempted from taxation, there is no violation of Art. 1, § 23 of the Indiana Constitution or the Fourteenth Amendment to the United States Constitution.
Appellants also claim that the Act constitutes an improper delegation of legislative power by the General Assembly to the Authority in violation of Art. 4, § 1 of the Indiana Constitution which states in part:
This provision has been construed to mean that although the legislature cannot delegate the power to make a law, it can make a law delegating power to an agency "to determine the existence of some fact or situation upon which the law is intended to operate." Edwards v. Housing Authority of City of Muncie, supra, 215 Ind. at 339, 19 N.E.2d  at 746. Reasonable standards are necessarily imposed when the legislature delegates discretionary duties to administrative boards and officers. Ennis v. State Highway Commission, supra. In Matthews *1228 v. State, (1958) 237 Ind. 677, 681-2, 148 N.E.2d 334, 336, we stated:
The appellants argue that the Act does not sufficiently define certain terms, including "low and moderate income families," "adjusted family income," "geographical area" and "area of residence," or outline standards to be used by the Authority in its various capacities. The appellant relies on Schakel v. Review Board of Indiana Employment Security Div., (1968) 142 Ind. App. 475, 235 N.E.2d 497. The Appellate Court of Indiana held unconstitutional part of the Indiana Employment Security Act which authorized the director to waive the statutory periodic registration requirement upon an individual's showing of good cause. The Court declared the provision unconstitutional because there was no clear definition of good cause. The Appellate Court relied on State ex rel. Standard Oil Co. v. Review Bd., (1951) 230 Ind. 1, 10, 101 N.E.2d 60, 64:
This case is distinguishable from Schakel v. Review Board of Indiana Employment Security Div., supra. Section 2(11) of the Act grants the Authority the power to establish the standards to be used in determining those persons of low and moderate income. Furthermore, the provision guides the Authority in the formation of the standards and defines low and moderate income families with adequate specificity as the case necessitates. Ennis v. State Highway Commission, supra. Ind. Code § 5-20-1-2(11) (Burns Supp. 1979) provides:
Other terms about which the appellant complains are broad and general and will gain precision from the Authority. Matthews v. State, supra. They involve methods and details that are well placed in the Authority's discretion.
Ind. Code § 5-20-1-9 (Burns Supp. 1979) provides that the Authority may enter into trust agreements with certain corporate trustees. The Authority has discretion *1229 to include certain provisions in the trust agreements or resolutions. But these provisions must be "for protecting and enforcing the rights and remedies of the holders of any [obligations issued under the provisions of the Act] as may [be] reasonable and proper and not in violation of law" or "as the Authority may deem reasonable and proper for the security of the holders of any obligations." These guidelines are sufficiently specific. Therefore, Section 9 of the Act does not improperly delegate legislative power to the Authority.
The appellants next claim that Section 17 of the Act divests the General Assembly of the power to legislate for the preservation of public health, safety and morals in violation of Art. 1, § 23 and Art. 4, § 1 of the Indiana Constitution. Ind. Code § 5-20-1-17 (Burns Supp. 1979) reads as follows:
The Supreme Court of Pennsylvania upheld a similar statutory provision of the Housing Finance Agency Law in Johnson v. Pa. Housing Finance Agency, (1973) 453 Pa. 329, 309 A.2d 528. That Court found the covenanting provision constitutional, stating:
We agree with the interpretation in Johnson, supra. Ind. Code § 5-20-1-17 (Burns Supp. 1979) does not divest the General Assembly of the power to legislate for the welfare of the citizens of Indiana. The Act allows the State to reconsider and alter the functions, structure and power of the Authority while pledging that the rights of bondholders will remain unscathed if changes are made. The Act, consistent with the constitutional prohibition against the impairment of contracts, solely prohibits the General Assembly from affecting the contractual rights of bondholders.
Appellants argue that even if Section 17 is not an unconstitutional delegation of legislative power, it nevertheless contravenes constitutional equal protection provisions. Section 17 provides that the state shall not "limit or alter the rights vested in the authority to fulfill the terms of any agreements" with its bondholders or "in any way impair" the rights and remedies of the bondholders. Appellants contend that these provisions extend privileges to the Authority's bondholders which are not available to security holders in general. However, in this regard, Section 17 is merely a statutory recitation of Ind.Const. Art. 1, § 24 which provides that the legislature may not pass a law impairing the obligations of contracts, a provision applicable to all security holders.
Appellants claim that the Act denies due process of law to certain classes of creditors and claimants of the Authority by enabling the Authority to pledge any of its assets or revenues to the payment of principal or premium, if any, and interest on obligations of the Authority. This power, it is claimed, will result in preference of bondholders over all other creditors or claimants of the Authority without prior notice to affected parties or any further action by the Authority. Ind. Code § 5-20-1-10 (Burns Supp. 1979) provides:
Since the Act states that such a pledge will be "valid and binding from the time when the pledge is made" it is clear that the pledge only applies to future revenues or existing unpledged assets. The statute does not enable the Authority to give priority liens to bondholders on assets which are already subject to mechanics' liens, judgment liens or any other type of secured claim. Only general creditors, who are on notice of the provisions of the Act authorizing the pledge, may be affected by the Authority's exercise of this power.
Appellants argue that the express elimination of any duty on the part of the Authority to notify all parties who might have a claim against the Authority when the Authority exercises its power under Section 10 of the Act effectively denies certain creditors and claimants due process of law. In support of this proposition, appellants rely on Fuentes v. Shevin, (1972) 407 U.S. 67, 92 S. Ct. 1983, 32 L. Ed. 2d 556. Fuentes narrowly held that the provisions of a statute authorizing prejudgment replevin of a chattel from the possessor by a creditor without notice and a hearing was a deprivation of property without due process of law. Fuentes involved an adhesion contract in a consumer credit transaction, where the parties were of unequal bargaining strength.
Fuentes does not support appellants' argument. General creditors of the Authority are not in the same position as the consumer debtor in Fuentes. Here, those who deal with the Authority are chargeable with knowledge of the statute and are forewarned of the Authority's power to create liens in favor of bondholders. Potential creditors and claimants must conduct their business relations with the Authority accordingly. Therefore, we hold that Ind. Code § 5-20-1-10 (Burns Supp. 1979) does not deny due process of law to creditors and claimants of the Authority.
Appellants also claim that the trial court's conclusions of law are not supported by sufficient evidence and are contrary to uncontroverted evidence. We reiterate that the appellants have a heavy burden to establish invalidating facts in a constitutional attack on a statute. The law is clear that:
Appellants cannot attack a negative decision on the ground that there was a lack of evidence to sustain the judgment. Ott v. Johnson, (1974) 262 Ind. 548, 319 N.E.2d 622. The evidence which appellants claim mandates conclusions of law contrary to the trial court's findings is of no moment given our determination that the benefits derived by private individuals are incidental to the furtherance of a legitimate public purpose.
The Indiana Housing Finance Authority Act serves a most legitimate state purpose: providing general access to safe and sanitary housing. All distinctions and classifications are drawn according to income, the most relevant factor in housing during times of spiraling inflation and high interest rates. The legislature provided investment incentives so that private enterprise can further the purposes of the Act, building and rehabilitating housing for low and moderate income families. This legislative effort comports with both the Indiana and United States Constitutions.
*1231 For the foregoing reasons there was no trial court error and the judgment of the Hancock Circuit Court should be affirmed.
Judgment affirmed.
DeBRULER and PRENTICE, JJ., concur.
GIVAN, C.J., concurs in part, dissents in part, with opinion in which PIVARNIK, J., concurs.
GIVAN, Chief Justice, concurring in part; dissenting in part.
I respectfully dissent to the majority opinion that upholds the constitutionality of IC § 5-20-1-5. The appellant argues that section 5 creates a preferential class, i.e. low income businesses in the area and low income persons who might be employed in either construction or maintenance in connection with the project. Financial status has not joined race, alienage and religious persuasion in the ranks of suspect classes requiring a strict level of scrutiny. Examining the statute with a lower level of scrutiny, I fail to see a rational relationship between the classification and the purpose of the statute.
The express purpose of the statute is to provide suitable housing for low and moderate income families based on the legislatively determined need for such housing. IC § 5-20-1-1. The purpose and needs so stated are not to increase employment opportunities or enhance the financial status of low income businesses nor provide supplemental income to families who may be so employed.
The United States District Court in Vermont in Wright Farms Const., Inc. v. Kreps, (1977) 444 F. Supp. 1023, addressed itself to a situation wherein a plaintiff brought an action to restrain the Secretary of Commerce from enforcing 42 U.S.C. § 6705(f)(2), the Minority Business Enterprise provision of the Local Public Works Capital Development and Investment Act of 1976, as amended by the Public Works Employment Act of 1977. The act in question addressed itself to the potential for racial discrimination in the letting of public contracts. However, in discussing the acts pertinent in that case, the court held that no discrimination was involved or established and that the application of the act to the established facts was unconstitutional. In so holding, the court pointed out that there had been no legislative finding of discrimination in the construction industry in the State of Vermont and for that reason the court had to determine whether or not the imposition of the racial quota was constitutional when applied to the circumstances of the cases. The court therefore held that the plaintiffs were denied equal protection under the Fifth Amendment of the United States Constitution when they were denied contracts because they were a corporation wholly owned by two Caucasians and thus had no representative of a minority as required under the statute. Thus, even though a statute would purport to address itself to a discrimination problem, the operation of that statute must be open to all equally situated in the absence of a showing of discrimination. I would therefore hold that the provisions in IC § 5-20-1-5, requiring preferential treatment to certain individuals and businesses, are unconstitutional.
PIVARNIK, J., concurs.
[1]  "Except to the extent that the Secretary determines otherwise, no grant shall be made under this chapter for any local public works project unless the applicant gives satisfactory assurance to the Secretary that at least 10 per centum of the amount of each grant shall be expended for minority business enterprises. For purposes of this paragraph, the term `minority business enterprise' means a business at least 50 per centum of which is owned by minority group members or, in case of a publicly owned business, at least 51 per centum of the stock of which is owned by minority group members. For the purposes of the preceding sentence, minority group members are citizens of the United States who are Negroes, Spanish-speaking, Orientals, Indians, Eskimos, and Aleuts." 42 U.S.C.A. § 6705(f)(2) (Supp. 1979).
[2]  42 U.S.C.A. § 6705(f)(2) has been held unconstitutional in Montana Contractors' Association v. Secretary of Commerce, (D.Mont. 1978) 460 F. Supp. 1174; Associated General Contractors of California v. Secretary of Commerce, (C.D. Cal. 1978) 459 F. Supp. 766; Wright Farms Construction, Inc. v. Kreps, (D.Vt. 1977) 444 F. Supp. 1023; Associated General Contractors of California v. Secretary of Commerce, (C.D. Cal. 1977) 441 F. Supp. 955. The statute has survived equal protection challenges in other courts. Fullilove v. Kreps, (2d Cir.1978) 584 F.2d 600; Ohio Contractors Association v. Economic Development Administration, (S.D.Ohio 1977) 452 F. Supp. 1013; Rhode Island Chapter, Associated General Contractors v. Kreps, (D.R.I. 1978) 450 F. Supp. 338; Constructors Association of Western Pennsylvania v. Kreps, (W.D. Pa. 1977), 441 F. Supp. 936. The United States Supreme Court has granted certiorari in Fullilove v. Kreps, supra, at 441 U.S. 960, 99 S. Ct. 2403, 60 L. Ed. 2d 1064.
[3]  12 U.S.C.A. § 1701u (Supp. 1980), enacted as part of the Housing and Urban Development Act of 1968, reads substantially the same as our Ind. Code § 5-20-1-5 (Burns Supp. 1979): "In the administration by the Secretary of Housing and Urban Development of programs providing direct financial assistance, including community development block grants under title 1 of the Housing and Community Development Act of 1974, in aid of housing, urban planning, development, redevelopment, or renewal, public or community facilities, and new community development, the Secretary shall 

"(1) require, in consultation with the Secretary of Labor, that to the greatest extent feasible opportunities for training and employment arising in connection with the planning and carrying out of any project assisted under any such program be given to lower income persons residing in the area of such project; and
"(2) require, in consultation with the Administrator of the Small Business Administration, that to the greatest extent feasible contracts for work to be performed in connection with any such project be awarded to business concerns, including but not limited to individuals or firms doing business in the field of planning, consulting, design, architecture, building construction, rehabilitation, maintenance, or repair, which are located in or owned in substantial part by persons residing in the area of such project."
The constitutionality of this statute has not been challenged in the federal courts.