Opinion ID: 1156159
Heading Depth: 2
Heading Rank: 2

Heading: pledge of state's credit

Text: Under the Act, the Authority is empowered: ... [T]o secure the payment of the obligations or any part by mortgage, lien, pledge, or deed of trust, on all or any of its property ... S.C. Code Ann. § 13-17-70(8) (Supp. 1985). To mortgage, pledge, hypothecate, or otherwise encumber the property, real, personal, or mixed, or notes, bonds, evidences of indebtedness, or other obligations of the authority; provided the authority shall have no authority to pledge the credit and the taxing power of the State or any of its political subdivisions ... [Emphasis supplied]. S.C. Code Ann. § 13-17-70(12) (Supp. 1985). The Authority has stipulated it intends in some instances to pledge its assets through mortgage or other encumbrance of its property to secure the obligations of high technology industries which locate in its research parks. The issue here, stated simply, is whether the Authority may mortgage the 1,500 acres of real property transferred to it by the State Budget and Control Board. The Circuit Court held such a mortgage would violate the above-emphasized proviso of § 13-17-70(12) which proscribes the pledging of the State's credit. We disagree. The Authority concedes it is proscribed from pledging the State's credit, but contends a mortgage of the 1,500 acres would not do so. We agree. Nichols relies upon two decisions of this Court for his contention that the mortgaging of the Authority's 1,500 acres constitutes a pledge of the State's credit. His reliance is misplaced. The first, Casey v. South Carolina Housing Authority , 264 S.C. 303, 215 S.E. (2d) 184 (1975), involved Act 1171 of the 974 General Assembly, which created a $10,000,000 Guaranty Fund to service bonds issued for low cost housing. Section 14 of Act 1171 required (1) that the Authority report to the Budget and Control Board the sum, if any, required to restore the Guaranty Fund to the Guaranty Fund Requirement prescribed in Section 7; (2) that, in turn, the Budget and Control Board report annually to the General Assembly the amount necessary to fund such deficit; (3) that, [a]ll sums appropriated by the General Assembly for such restoration shall be deposited in the Guaranty Fund. [Emphases supplied]. It is patent that § 14, by its provisions which required the raising of revenue to restore funds necessary to eliminate deficits in the Guaranty Fund, did pledge the State's credit. Accordingly, we held in Casey: We are of the opinion that the Act commits the State of South Carolina and, by so doing, pledges its credit to make good any deficit arising because of default under both the Direct Mortgage Loan Program and the Mortgage Purchase Program. The infirmity in Casey which struck down Act 1171 is absent here. We agree with the Authority that the 1,500 acres represent a known, quantifiable asset imposing no potential taxpayer liability, now or in the future. Clearly, the holding in Casey does not apply here. Next, Nichols cites Clarke v. South Carolina Public Service Authority , 177 S.C. 427, 181 S.E. 481 (1935). In Clarke the constitutionality of Act 887 of the 1934 General Assembly was challenged. Under the Act [t]he Authority was likewise authorized, without in any way pledging the faith, credit and taxing power of the State, to finance the construction of said project by borrowing money to be evidenced by bonds secured by a foreclosable mortgage on the project. After holding the Act constitutional the opinion in Clarke contains dicta in which reference is made to decisions of other jurisdictions forbidding the mortgaging of public property under certain circumstances. However, the opinion also cites with approval other such decisions which specifically hold that the mortgaging of public property, when authorized by legislative Act , does not constitute a pledging of the State's credit. See Hughes v. State Board of Health , 260 Ky. 228, 84 S.W. (2d) 52 (1935); Brockenbrough v. Board of Water Com'rs. , 134 N.C. 1, 46 S.E. 28 (1903); Haesloop v. City Council of Charleston , 123 S.C. 272, 115 S.E. 596 (1923), in which an ordinance donating city owned land to a private developer for erection of a tourist hotel was held valid as a public purpose. Accordingly, we hold that the mortgaging of the 1,500 acres by the Authority does not constitute a pledging of the State's credit.