Court Opinion

ID: 9590325
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:53:47.920061+00
Date Added: 2024-06-11T09:13:41.565523
License: Public Domain

Finney, Justice:
I dissent. It is my judgment that the lease agreements between the School District and the Corporation incur a general obligation debt and violate Article X, Section 15, of the South Carolina Constitution.
This case presents the problem of reconciling constitutional debt limitations on local governments with the constitutional mandate for local governments to provide educational facilities which meet certain minimum standards. Appellants assert that because of the structure of this “lease/purchase arrangement,” there is no violation of the constitutional prohibition contained in Article X, Section 15. On the other hand, respondent contends that providing these new facilities by the method proposed would result in exceeding the District’s constitutional eight percent debt limitation'.
In order not to contravene the state’s constitutional debt limitation provision and yet acquire the necessary capital to *403provide new school facilities, the District proposes to lease land and existing school facilities (Base Leases) to a private Corporation for a maximum period of thirty years for one dollar per year. In turn, the Corporation will construct new facilities or renovate existing facilities on the leased property and lease these facilities (Project Leases) to the District. The Project Leases are annual leases containing a non-appropriation clause under which the District may decline, without monetary penalty, to renew the leases. Upon a failure to renew the Project Leases, the District would lose the beneficial use of property acquired through the exercise of its taxing power and be entitled to compensation of only one dollar per year for the period remaining under the Base Leases.
Because of the agreement’s non-appropriation clause, the majority concludes that the lease agreements do not constitute debt as set forth in Article X, Section 15. To follow the majority’s reasoning, the inclusion of a non-appropriation provision in a lease agreement would be determinative of whether the agreement constituted an annual operational obligation or a general debt. In my view, the test should be whether the indebtedness of the school district is “secured in whole or in part by a pledge of its full faith, credit and taxing power.” City of Beaufort v. Griffin, 275 S. C. 603, 605, 274 S. E. (2d) 301, 303 (1981). Applying this test and examining the monetary realities of these lease arrangements conclusively show that the indebtedness is secured in part by the school district’s property, which was acquired by its taxing powers.
Therefore, the leases are a general obligation debt for the period of the Project Leases. Should the district invoke the non-appropriation clause and decline to renew the annual Project Leases, the District may be guilty of misappropriating governmental property.1 Thus, I believe the leases violate the letter and the spirit of Article X, Section 15.
To the extent that the majority relies on Nichols v. South Carolina Research Authority, 290 S. C. 415, 351 S. E. (2d) 155 (1986), to support its conclusion, I believe they misinterpret *404its holding. By narrowly focusing on the potential imposition of taxes to finance a project as the sole indicator of a general obligation debt, the majority misinterprets Nichols, as well as Article X, Section 15. The majority rationalizes its decision, not to address the pledge of credit issue on the basis of no potential tax liability. I disagree with so much of the majority’s opinion as indicates that there must be an invocation of the taxing powers in order for a debt to be classified as a general obligation. See Nichols v. South Carolina Research Authority, 351, S. E. (2d) at 157-8.
Article X, Section 15, states that a debt secured in whole or in part by pledge of a political entity’s full faith, credit and taxing power is a general obligation debt. In my opinion, the words “in whole or in part” signify that the full faith, credit and taxing powers may be proven either individually or collectively in order for a debt to be characterized as a general obligation debt.
Furthermore, my assessment of the cases cited by the majority in support of their conclusion indicates that those cases are distinguishable from this case in that there was (1) an actual purchase then a leaseback; (2) a public corporation rather than a private corporation became the leaser of the governmental property; or (3) there was a lease with an option to purchase.
Nothing in this dissent should be construed as intimating that lease-purchase agreements2 may not be used as a method to acquire needed public resources and avoid exceeding constitutional debt restrictions or limitations. Rather, my contention is that the subject lease agreements are prohibited because they use taxpayers’ property as security and involve a pledge of credit. Further, the non-appropriation provision is an attempt to protect the arrangement from constitutional challenges. State ex rel. Nevada Bldg. Auth. v. Hancock, 86 Nev. 310, 468 P. (2d) 333 (1970.) But cf., Gude v. City of Lakewood, 636 P. (2d) 691 (Colo. S. Ct. 1981); Dean v. Kuchel, 35 Cal. (2d) 444, 218 P. (2d) 521 (1950). The District’s property is, in essence, being used as credit or collateral by the private corporation in order to fund building and renovation projects and attract investors. I believe this is clearly *405a constitutionally impermissible use of governmental property. See South Carolina Constitution, Article X, § 11. See also City of Beaufort v. Griffin, supra.
The lease agreements are a subterfuge to enable the District and the Corporation to evade the District’s constitutional debt limitations, which were provided generally to protect the public. E.g., State ex rel. West Virginia Resource Recovery — Solid Waste Disposal Authority v. Gill, 323 S. E. (2d) 590 (W. Va. S. Ct. of Appeals 1984). Certainly the need to provide facilities determined necessary to educate our youth cannot be overstated. However, no matter how worthy the endeavor, contravening the constitution cannot be justified. The cold economic realities of the rising cost of education and revenue shortfalls are not sufficient reasons to overlook this obvious debt limitation violation. In my opinion, the crisis in this educational system should be remedied by a constitutional amendment or a vote of the people. Thus, I would affirm the decision of the trial court.

 The sole benefit of one dollar annual rental which the District would receive from the corporation during the term of the Base Lease would be grossly inadequate consideration for the value of the property leased.

 The agreement with which we are concerned would be more appropriately designated as a lease-leaseback agreement.