Opinion ID: 778880
Heading Depth: 3
Heading Rank: 2

Heading: Nature of the Institution Receiving the Aid

Text: 42 The precise type of aid at issue in this appeal is virtually identical to the bonding mechanisms involved in Hunt v. McNair, 413 U.S. 734, 93 S.Ct. 2868, 37 L.Ed.2d 923 (1973). The Supreme Court described the program as follows: 43 The state aid involved in this case is of a very special sort. We have here no expenditure of public funds, either by grant or loan, no reimbursement by a State for expenditures made by a parochial school or college, and no extending or committing of a State's credit. Rather, the only state aid consists, not of financial assistance directly or indirectly which would implicate public funds or credit, but the creation of an instrumentality (the Authority) through which educational institutions may borrow funds on the basis of their own credit and the security of their own property upon more favorable interest terms than otherwise would be available. The Supreme Court of New Jersey characterized the assistance rendered an educational institution under an act generally similar to the South Carolina Act as merely being a governmental service. The South Carolina Supreme Court, in the opinion below, described the role of the State as that of a mere conduit. 44 Hunt, 413 U.S. at 745 n. 7, 93 S.Ct. 2868. 45 This passage would seem to indicate that a public body could serve as a conduit to allow a pervasively sectarian institution to receive the benefits of tax free bonds so long as public funds were not expended. Rather than reach such conclusion, however, the Supreme Court instead found that the schools at issue were not, in fact, pervasively sectarian and found it unnecessary to address the precise issue before this Court. Since Hunt, the Supreme Court has not addressed the issue. 46 More recently, in Johnson v. Economic Development Corp., 241 F.3d 501 (6th Cir. 2001), this Court considered a case involving facts similar to Hunt, supra. In Johnson, a private Catholic school applied for and was granted an industrial revenue bond from the Michigan Economic Development Corporation, an agency of the State of Michigan. This Court held that the school, although a Roman Catholic institution, was not a pervasively sectarian institution. Id. at 515. 47 Because of this conclusion, the Court did not resolve the question of whether the granting of an industrial revenue bond to a pervasively sectarian institution is an unconstitutional form of aid. The Johnson Court did note, however, that: 48 [I]t is far from settled that the type of aid at issue in this case is direct aid within the meaning of the Establishment Clause jurisdiction. 49 Id. at 510. 50 Moreover, the Court also made the following observation: 51 Plaintiff claims that the tax-exemption under the EDC Act is the equivalent of a tax subsidy for purposes of the Establishment Clause.... The Supreme Court has expressly rejected the argument. There is a constitutionally significant difference between subsidies and tax exemptions. Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 590, & n. 25, 117 S.Ct. 1590, 137 L.Ed.2d 852 (citing Walz, 397 U.S. [664,] 690, 90 S.Ct. 1409, 25 L.Ed.2d 697 [(1970)]). The difference between subsidies and tax exemptions is that in giving tax exemptions the government does not transfer part of its revenue ... but simply abstains from demanding the [entity] support the state. Walz, 397 U.S. at 675, 90 S.Ct. 1409. Therefore, the benefit provided by the tax-exempt status of the bonds does not amount to a cash subsidy. 52 Id. at 511-12 (parallel citations omitted). 53 Judge Nelson, in a concurring opinion, was even more direct and concluded that conduit financing in the form of an industrial revenue bond does not offend the Establishment Clause, even if the benefitting institution is pervasively sectarian. Id. at 518-19. He concluded that the type of aid in question was no different than the indirect aid provided by property tax exemptions available to religious institutions and expressly approved by the Supreme Court in Walz, infra. Id. at 519. 54 In the case at bar, the Board provides pass-through or conduit financing services to a wide variety of nonreligious and religious nonprofit organizations. The Board has arranged tax exempt financing, for example, for a number of colleges and universities with and without a religious affiliation, as well as for low-income housing projects, the Country Music Hall of Fame, the Easter Seal Society, retirement centers, the Jewish Community Center, the Young Mens Christian Association, and Nashville Public Radio. (Cochran Aff. at 3-4; Pressnell Aff. at 2 & Ex. B). Further, similar conduit financing has been provided to a number of privately owned development projects. 5 Significantly, no claim is made that the Board ever favored or disfavored one religion over another.