Opinion ID: 2607531
Heading Depth: 1
Heading Rank: 7

Heading: Lending The Credit Of The State

Text: Article XI, section 7, also prohibits the Legislative Assembly from lending the credit of the state exceeding $50,000. [15] DeFazio v. WPPSS, 296 Or. 550, 577, 679 P.2d 1316 (1984), discusses the meaning of lending credit: Past opinions discussing these constitutional provisions include some cases in which the government became a coowner of property or borrowed funds to aid a private enterprise in a desired economic development. See Miles v. City of Eugene, 252 Or 528, 451 P2d 59 (1969) (joint construction of power plant); Carruthers v. Port of Astoria, [249 Or. 329, 438 P.2d 725], supra (municipal financing of aluminum reduction plant for long-term lease to specified private company); Hunter v. Roseburg, 80 Or 588, 156 P 267, 157 P 1065 (1916) (municipal bonds for joint railroad project with railroad company and lumber company). These more properly illustrate `raising money' than `lending credit.' By forbidding the state to `lend' and local governments to `loan' their credit, as well as to hold stock in or raise money for a corporation, Article XI covers transactions in which government does not itself raise and transfer funds but places its credit behind the corporation's ability to borrow money or obtain goods on credit. The obvious example is an outright guarantee made directly to a creditor to pay another's debt. To lend the credit of the state is to invest or otherwise promise public funds for the benefit of private persons or to promote private schemes. Morris v. City of Salem et al., supra, 179 Or. at 671, 174 P.2d 192; McMahan v. Olcott, 65 Or. 537, 542-43, 133 P. 836 (1913). No such situation exists here. Chapter 1032 limits use of the financing agreements to real or personal property which is or will be owned and operated by the state or any of its agencies, or to refinance previously executed financing agreements. (Section 1(4).)