Opinion ID: 1723670
Heading Depth: 2
Heading Rank: 4

Heading: Application of the Proper Interpretation

Text: Under this interpretation, the trial court properly concluded that the project was not financed or sponsored by the State of Michigan. In April 1992, the university began construction on the project. In December 1992, the university issued $59,495,000 in tax-exempt bonds to pay for the project. Between the start of the project and the sale of the bonds, the university internally borrowed with interest from its general fund to cover the cost of the project's progress. The university did not receive capital appropriations from the state for the project. During the time the university drew from its general fund, the cash reserves in the general fund ranged from approximately $22,000,000 to $38,000,000, and the amount the university drew from the general fund as a temporary cash flow on a monthly basis ranged from $95,000 to $7,100,000. After the bonds were sold, the general fund was reimbursed with interest from the bond proceeds. The university intends to repay the revenue bonds with money raised through student activity fees and from its nonstate general fund that includes tuition, other fees, grants, and gifts. The Legislature approved the project with the understanding that it would not involve state funds. [4] The state was not a party to any of the contracts for the project, is not obligated to pay on the revenue bonds, and is not acting as surety on the bonds. According to the undisputed facts, the State of Michigan did not specifically appropriate funds for the project. Where the university drew from its general fund for the project, it reimbursed the funds it obtained, and this fund, at all times, contained sufficient cash reserves from nonstate sources to cover the costs of the project. The trial court persuasively addressed the point regarding whether the university actually used state or nonstate funds for the project when it drew from its general fund: [I]t would be unrealistic to require WMU to chase dollars through its general account to determine whether they were state or non-state funds, for this would be an impossible task. Thus, the court finds that so long as there were sufficient non-state funds in the general account to cover the dollars paid out for the Project, there was no state financing or sponsorship. Moreover, the State of Michigan did not become a surety on the project and was not financially responsible for the debt the university incurred. Because the Court of Appeals properly affirmed the trial court's decision to grant summary disposition in favor of Western Michigan University, I would affirm.