Opinion ID: 1057972
Heading Depth: 2
Heading Rank: 4

Heading: Credit Clause

Text: The County's alternative constitutional challenge to Code § 33.1-221.1:1.1's application in this case is the contention that DRPT's grant of funds to Norfolk Southern for the development of the Montgomery County intermodal facility violated the credit clause under Article X, Section 10 of the Constitution of Virginia. The credit clause provides that [n]either the credit of the Commonwealth nor of any county, city, town, or regional government shall be directly or indirectly, under any device or pretense whatsoever, granted to or in aid of any person, association, or corporation. Va. Const. art. X, § 10. Given, again, our governing standard of review, we conclude that this alternative challenge must also fail. Simply put, DRPT's grant to Norfolk Southern for the development of the intermodal facility was only that, a grant, and not an extension of the Commonwealth's credit to Norfolk Southern. Indeed, it was effectively a purchase by the Commonwealth of additional traffic capacity for Interstate 81. Analyzing the credit clause in Article X, Section 10, this Court in Almond I quoted with approval the following definition to be applied to the credit clause, which the Idaho Supreme Court used for its construction of a similar phrase 'lend or pledge the credit' under the Idaho Constitution: In the popular sense, lending or loaning money or credit is at once understood to mean a transaction creating the customary relation of borrower and lender, in which the money is borrowed for a fixed time, and the borrower promises to repay the amount borrowed at a stated time in the future, with interest at a fixed rate. And that is the sense, then, in which the language employed in those sections must be understood, and so understood, no county, for example, shall lend or pledge its credit or faith directly or indirectly, or in any manner which would create the customary relation of borrower and lender. Almond I, 197 Va. at 790-91, 91 S.E.2d at 667 (quoting Bannock County v. Citizens' Bank and Trust Co., 53 Idaho 159, 22 P.2d 674, 680 (1933)). Thus, in the absence of an extension of actual credit by the Commonwealth, the credit clause does not apply. See Reasor v. City of Norfolk, 606 F.Supp. 788, 795-97 (E.D.Va.1984) (in deciding whether the challenged activities violated the credit clause, federal district court, relying on Almond I, explained that term credit under Article X, Section 10 refers to the relation of borrower and lender, in which money is borrowed to be repaid at a later date). Button v. Day, 208 Va. 494, 495-505, 158 S.E.2d 735, 736-42 (1968) is the only decision of this Court holding that a challenged funding scheme was in violation of the credit clause. As the funding scheme at issue here under Code § 33.1-221.1:1.1 does not extend any credit to Norfolk Southern, nor guarantee any default on the part of the railroad, it does not resemble the funding scheme in Button. [9] Finally, we do not view the Commonwealth's remedial interests in the Montgomery County intermodal facility under the terms of the Agreement as in any way transforming the grant or purchase into an extension of credit.