Opinion ID: 2369443
Heading Depth: 1
Heading Rank: 2

Heading: Authority to Issue and Fund Bonds

Text: Whether the Rhode Island Depositors Economic Protection Corporation (the `Corporation') may, without a vote of the people under Article VI, Section 16 of the Rhode Island Constitution and without violating Article VI, Sections 2 and 10 of the Rhode Island Constitution, issue its bonds and notes in excess of $50,000 pursuant to the Rhode Island Depositors Economic Protection Act, R.I. Gen. Laws § 42-116-1 et seq., with the payment of principal and interest being paid and secured by the Special Revenue Fund created by R.I. Gen. Laws § 42-116-31 and funded by a portion of the sales tax established in R.I. Gen. Laws § 44-18-18 provided the Corporation issues its bonds and notes on the basis that deposit of such sales tax revenues in the Special Revenue Fund is subject to an annual appropriation being made by the General Assembly of such sales tax revenues to the Special Revenue Fund? The DEPCO act creates a special revenue fund to which a portion of the sales tax is dedicated to be used by the corporation to secure the payment of bonds and notes in excess of $50,000. Section 42-116-31. The Rhode Island Constitution provides: The general assembly shall have no powers, without the express consent of the people, to incur state debts to an amount exceeding fifty thousand dollars    nor shall it in any case, without such consent, pledge the faith of the state for the payment of the obligations of others. R.I. Const. art. 6, sec. 16. We must determine, therefore, whether the bonds issued by the corporation constitute state debts. Section 42-116-4(a) of the DEPCO act creates a public corporation of the state, having a distinct legal existence from the state and not constituting a department of the state government, with such politic and corporate powers as set forth in this chapter. These powers include the power to borrow money, issue bonds, and pledge, assign, or create security interests in assets, revenues, and funds of the corporation. Section 42-116-5. Furthermore, § 42-116-17 states: Bonds issued by the corporation under the provisions of this chapter shall not be deemed to be a debt, obligation (moral or otherwise) or a pledge of the faith and credit of the state    but shall be payable solely from the revenues, funds, assets and other property or any revenues or loans dedicated to corporate purposes of the corporation from which they are made payable pursuant to this chapter. In Opinion to the Governor, 107 R.I. 651, 652, 270 A.2d 520, 520-21 (1970), we considered whether the Rhode Island Water Resources Board could issue bonds in excess of $50,000 without a vote of the people. The enabling legislation provided that the Water Resources Board shall constitute a body politic and corporate and a public instrumentality of the state having a distinct legal existence from the state and not constituting a department of the state government. General Laws 1956 § 46-15.1-2, as enacted by P.L. 1970, ch. 304, § 1. Persuaded by the stated legal status of the board, we concluded that any debtor obligation resulting from issuance of the bonds was exclusively that of the Water Resources Board and not of the state. 107 R.I. at 655-56, 270 A.2d at 522-23. In our present case the DEPCO act expressly states that the debtor obligation resulting from issuance of the bonds is exclusively that of the corporation and not of the state. Furthermore, the language of § 42-116-4, the corporation's enabling act, is similar to the language of § 46-15.1-2, the Water Resources Board enabling act. We therefore find § 42-116-4 constitutional. We further find that the dedication of 0.5 percent of the sales-tax revenue to the special-revenue fund applies to this year only and is not binding on future General Assemblies. Although § 42-116-31 states that this percentage will be dedicated to the special revenue fund, using apparently mandatory language, this section must be read in pari materia with other sections of the DEPCO act. Opinion to the Governor, 112 R.I. 151, 157, 308 A.2d 809, 812 (1973). For example, § 42-116-21(a) provides: The corporation is authorized to accept such monies as may be appropriated from time to time by the general assembly for effectuating its corporate purposes including    the establishment of reserves or contingency funds to be available for the payment of the principal of and the interest on any bonds, notes, certificates or other obligations of the corporation. (Emphasis added.) It is clear, therefore, that the General Assembly intended that the payment of the proceeds of the sales tax into the special-revenue fund would be subject to annual appropriation and that each succeeding General Assembly may renew this appropriation as it sees fit. We therefore find that § 42-116-31 does not violate R.I. Const. art. 6, secs. 2 and 10.
Whether the purposes for which the General Assembly enacted the Rhode Island Depositors Economic Protection Act, R.I. Gen. Laws § 42-116-1 et seq., constitute public purposes, and not local or private purposes, within the purview of Article VI, Section 11 of the Rhode Island Constitution thereby permitting the General Assembly to approve appropriations of sales tax revenues to the Special Revenue Fund created by R.I. Gen. Laws § 42-116-31 and authorizing the Governor on behalf of the State of Rhode Island to contract with the Corporation for the transfer of moneys from the Special Revenue Fund to the Corporation, such moneys from the Special Revenue Fund to be utilized to pay the debt service on obligations of the Corporation and otherwise effectuate the purposes of the Corporation? We have already provided a lengthy discussion of the public purposes served by the DEPCO act; therefore, we shall respond to this question by reference to our response under question 1.