Opinion ID: 2603873
Heading Depth: 1
Heading Rank: 2

Heading: loan of credit

Text: Next, we turn to appellant's contention that the City's acquisition of property, immediate declaration as surplus, and subsequent sale to Mercy constituted a loan of the City's credit in violation of Const. art. 8, § 7. Appellant argues the City acted as a mere financing conduit for Mercy's purchase of the theater site thus unconstitutionally lending its credit. The City responds that no constitutional violation occurred because the City received money for the property and also expected to reap future public benefits from the sale. Const. art. 8, § 7 provides: Credit Not To Be Loaned. No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm or become directly or indirectly the owner of any stock in or bonds of any association, company or corporation. (Italics ours.) The constitution clearly specifies that the sole purpose for which a municipality may loan its credit is the necessary support of the poor and infirm. See also State ex rel. O'Connell v. Port of Seattle, 65 Wn.2d 801, 399 P.2d 623 (1965). Neither party suggests that necessary support of the poor and infirm was even remotely involved here. Rather, we are presented solely with the City's purchase of real property with the intention of reselling it to a private party. [2] [3] Purchase of property by a municipality with an intent to resell it to a private party is prohibited by Const. art. 8, § 7. Paine v. Port of Seattle, 70 Wash. 294, 126 P. 628, 127 P. 580 (1912). At acquisition a municipality must at very least intend a public purpose to insure that a later sale to a private party does not violate the constitutional prohibition. A municipality is absolutely prohibited from acting as a financing conduit for private enterprise. Since the City acquired the Wade Fruit and Just properties [3] with the declared intention of reselling portions thereof to Mercy, there was clearly an unconstitutional loan of the City's credit. The fact that the City received value on resale does not negative the unconstitutionality of that loan of credit. Receipt of value merely assures that the City did not make an unconstitutional gift of public funds, which is an entirely different matter. An expected future public benefit also does not negative an otherwise unconstitutional loan. We have repeatedly held that a loan of money or credit by a municipality to a private party violates Const. art. 8, § 7 regardless of whether it may serve a laudable public purpose. Japan Line, Ltd. v. McCaffree, 88 Wn.2d 93, 98, 558 P.2d 211 (1977); Port of Longview v. Taxpayers, 85 Wn.2d 216, 231, 533 P.2d 128 (1974); State ex rel. O'Connell v. Port of Seattle, supra at 805-06. As we said in Johns v. Wadsworth, 80 Wash. 352, 354, 141 P. 892 (1914): The section of the constitution last quoted, in most express terms, prohibits a county from giving any money, property or credit to, or in aid of, any corporation, except for the necessary support of the poor and infirm. If the framers of the constitution had intended only to prohibit counties from giving money or loaning credit for other than corporate or public purposes, they would doubtless have said so in direct words. That agricultural fairs serve a good purpose is not questioned, but the constitution makes no distinction between purposes, but directly and unequivocally prohibits all gifts of money, property, or credit to, or in aid of, any corporation, subject to the exception noted. See also Port of Longview v. Taxpayers, supra at 231. Unquestionably, the City's desire for a multipurpose theater adjacent to its contemplated community center is a commendable purpose. But, a salutary purpose does not validate an unconstitutional loan. The City contends we should liberally construe Const. art. 8, § 7 so that an expected future benefit will validate the loan. But, as we said in State ex rel. O'Connell v. Port of Seattle, supra at 806: If Article 8, § 7 is too restrictive in its terms, that is a matter for the citizens of this state to correct through the amendatory process. It is not for this court to engraft an exception where none is expressed in the constitutional provision, no matter how desirable or expedient such an exception might seem. Accordingly, the expected receipt of future public benefits cannot serve to validate an otherwise unconstitutional loan of credit.