Opinion ID: 2124417
Heading Depth: 1
Heading Rank: 2

Heading: Real Estate for Industrial Development

Text: When we consider the provisions of the statute authorizing the expenditure of funds for the acquisition of real estate for industrial development, we are confronted with a quite different set of circumstances. Before real estate can be effectively used for industrial development, it must first in some way come into the use and possession of the private persons or entities which may engage in industry. A municipal corporation has only those powers which are granted in express words, those which are necessarily or fairly implied in or incidental to powers expressly granted; and those which are essential to the objects and purposes of the corporation. Jacobs v. City of Omaha, 181 Neb. 101, 147 N.W.2d 160. We have been directed by the defendants to no statutes which authorize cities or counties to engage generally in operation of an industry. Our conclusion is that the authority of a municipality or county to use public funds to own, acquire, develop, lease, and sell real and personal property for industrial development purposes is measured by the provisions of Article XIII, section 2, of the Nebraska Constitution, and the enabling statutes lawfully enacted by the Legislature pursuant to the foregoing provision of the Constitution. State ex rel. Meyer v. County of Lancaster, 173 Neb. 195, 113 N.W.2d 63; State ex rel. Beck v. City of York, 164 Neb. 223, 82 N.W.2d 269; §§ 18-1614 to 18-1623, R.R.S.1943 (Industrial Development Act). In State ex rel. Beck v. City of York, supra , we held that the original Industrial Development Act, sections 18-1601 to 18-1613, R.R.S.1943 (Reissue 1954), which authorized the issuance of revenue bonds by certain governmental subdivisions for the purposes of industrial development violated Article XIII, section 3, of the Constitution, because it permitted the loan of the credit of the state to an individual, association, or corporation. Following our opinion in that case, Article XV, section 16, now Article XIII, section 2, was enacted by vote of the people. This provision of the Constitution specifically authorizes the Legislature to give counties and cities authority to acquire real and personal property for industrial development and to issue revenue bonds supported by a mortgage on the property and pledges of rentals from the property for the purpose of paying the principal and interest of the bonds. Section 2 specifically provides that the bonds shall not become general obligations of the city or county. That constitutional amendment further provides: No such governmental subdivision shall have the power to operate any such property as a business or in any manner except as the lessor thereof. Pursuant thereto the Legislature, in 1961, enacted the present Industrial Development Act. This act, with one exception not pertinent here, was held to be constitutional in State ex rel. Meyer v. County of Lancaster, supra . The constitutionality of section 18-1401, R.R.S.1943, either in its original form or as amended in 1972, has not been heretofore challenged. Section 18-1401, R.R.S.1943, clearly purports to authorize the acquisition of real estate for industrial development purposes by the use of tax money and income from proprietary functions. For reasons already noted, it is evident that the use of the property for industrial development purposes cannot be accomplished so long as the use and possession of the property remains in the municipality. It needs very little elaboration to demonstrate that under the procedure of section 18-1401, R.R.S.1943, the credit of the municipality is loaned to some individual, association, or corporation. This results in capital being furnished by the city or county for private use. The real estate so acquired may decrease in value, and the loss is that of the municipality because funds or proprietary income are the sources of the capital. If the property increases in value the benefit of the increase and thus of the capital furnished will pass to the private person. Even if title is held by the city or county, this would still be true. When the Legislature submitted to the people the constitutional amendment which became Article XIII, section 2, of the Constitution, and when the people voted thereon, they were, of course, aware of the scope of the holding of this court in State ex rel. Beck v. City of York, supra . It seems clear, therefore, that Article XIII, section 2, is the full measure of the power of the state through the cities and counties to lend the credit of the state. Article XIII, section 3, remains in the Constitution and under its terms any loan of credit made by the state, by a county, or by a municipality to a private individual, association, or corporation is unconstitutional. State ex rel. Beck v. City of York, supra . The one exception to the above principle is that a loan of credit may be made by a county or municipality if the loan of credit is made under enabling legislation that complies with the requirements of Article XIII, section 2, of the Constitution. State ex rel. Meyer v. County of Lancaster, supra . The purchase by a municipality of property for industrial development under the provisions of section 18-1401, R.R.S.1943, clearly does not comply with the provisions of Article XIII, section 3, of the Constitution, because it authorizes the use of tax money and income of the subdivision from its proprietary functions for the purposes. Defendants argue that the constitutional provision just mentioned expressly provides that the acquisition of real and personal property for industrial development is a public purpose. They say, therefore, that this ratifies the provisions of section 18-1401, R.R.S.1943, here being discussed. They overlook, however, the fact that Article XIII, section 2, does not authorize the use of tax or proprietary funds for the purpose of extending credit and that this section, when construed with section 3, constitutes, in effect, a prohibition against such use.