Opinion ID: 2060173
Heading Depth: 1
Heading Rank: 2

Heading: Nature of the Authority and art. VIII, sec. 7 (2) (d), Wisconsin Constitution.

Text: Sec. 234.02, Stats., provides that the Authority is a public body corporate and politic. This court must, however, look beyond this legislative denomination to the powers and structure conferred upon the entity in order to determine its nature. [15] Sec. 234.02 (1), Stats., provides that the members of the Authority shall include the secretary of local affairs and six public members appointed by the governor by and with the advice and consent of the senate for staggered four-year terms. The Authority, pursuant to sec. 234.03, is granted all the powers necessary or convenient to implement its public purpose, including but not limited to the power to sue and be sued; to have perpetual existence; to make and execute contracts; to incur debt; to acquire and dispose of mortgages or security interests; to acquire leaseholds, real or personal property or any interest therein; and, under certain conditions, to own, hold, clear, improve and rehabilitate and to sell, assign, exchange, transfer, convey, lease, mortgage or otherwise dispose of or encumber the same. The Authority has the power to hold and disburse its own funds independent of state warrants. It has the power to borrow money and issue and sell bonds and other evidences of indebtedness to accomplish its purposes. Its debts thus created are satisfied out of rents and interest the Authority receives from the property the Authority acquires and the investments it makes. The powers conferred upon the Authority support the legislative declaration that the Authority is an independent entity, denominated a public body corporate and politic. To the extent the words denote interdependence and a common identity, the Authority is neither an arm nor agent of the state. [16] The legislature has the power to create separate entities designed to carry on a public purpose. Townsend v. Wisconsin Desert Horse Asso. (1969), 42 Wis. 2d 414, 423, 167 N. W. 2d 425. [17] The obvious purpose behind the creation of many such entities has been the indirect achievement of some purpose that the state cannot achieve directly because of various constitutional limitations placed upon the power of the state. While it has been intimated that such plans are a subterfuge to evade the constitutional provisions, such attacks have been rejected on the theory that it is never an illegal evasion to accomplish a desired result, lawful in itself, by discovering a legal way to do it. [18] Under this theory many so-called dummy corporations were created by the legislature and approved by this court, whose purpose was to construct or finance a facility for use or occupancy by the state. The typical dummy corporation would lease land from the state at a certain rent, borrow money to finance construction of buildings or improvements, and sublease the property back to the state at a rent greater than that provided in the lease. Although the state would obligate itself to the payment of said rentals and would eventually own the only property interest in the completed project, the state would disclaim any liability for the obligations of the dummy corporations. The state's obligation to make rental payments sufficient to cover the cost of construction was not considered debt within the meaning of various constitutional provisions. [19] Although without the constitutional proscriptions, the state, in effect, obligated itself to pay the construction costs of the facilities. In 1969, the constitution was amended to provide that the state may contract public debt directly. [20] Art. VIII, sec. 7 (2) (a), Wisconsin Constitution, now provides: (2) Any other provision of this constitution to the contrary notwithstanding: (a) The state may contract public debt and pledges to the payment thereof its full faith, credit and taxing power to acquire, construct, develop, extend, enlarge or improve land, waters, property, highways, buildings, equipment or facilities for public purposes. However, in addition to expanding the state's power to incur debt directly, within prescribed limits, the amendment sought to eliminate certain indirect financing as carried on between dummy corporations and the state. Art. VIII, sec. 7 (2) (d), provides: (d) No money shall be paid out of the treasury, with respect to any lease, sublease or other agreement entered into after January 1, 1971, to the Wisconsin State Agencies Building Corporation, Wisconsin State Colleges Building Corporation, Wisconsin State Public Building Corporation, Wisconsin University Building Corporation or any similar entity existing or operating for similar purposes pursuant to which such nonprofit corporation or such other entity undertakes to finance or provide a facility for use or occupancy by the state or an agency, department or instrumentality thereof. Respondents argue that the Authority and its activities are within the proscription of art. VIII, sec. 7 (2) (d), Wisconsin Constitution. Ch. 234, Stats., is not repugnant to art. VIII, sec. 7 (2) (d), Wisconsin Constitution. The purpose of this section was to prevent the utilization of state money to liquidate the construction debts of nonprofit corporations established to provide facilities for the use or occupancy of the state. Ch. 234 does not contemplate nor authorize the expenditure of state moneys pursuant to a lease, sublease or other agreement between the Authority and the state. The Authority is not authorized to undertake the financing or construction of a facility for the use or occupancy by the state or an agency, department or instrumentality thereof. Art. VIII, sec. 7 (2) (d), Wisconsin Constitution, does not prevent all nonprofit organizations or corporations, established for a public purpose, from carrying on that purpose. It prohibits the type of indirect financing for the purposes enunciated therein, as evidenced by the type of agreements that traditionally existed between the corporations specifically enumerated in sec. 7 (2) (d) and similar entities and the state. Where no state money is appropriated out of the state treasury for the purpose of meeting the state's obligations under such an agreement, art. VIII, sec. 7 (2) (d) is not violated.