Court Opinion

ID: 9854494
Source: CourtListenerOpinion
Date Created: 2023-09-24 06:08:23.797719+00
Date Added: 2024-06-11T09:23:06.945631
License: Public Domain

HENRIOD, Justice
(dissenting) :
I dissent, with some reluctance, since it appears from certain estimates appearing in the record, that there may be some substantial benefits arising from this particular proposed project inuring to the inhabitants of Tooele County in the way of jobs, housing, income and the like which presently are not extant. Significantly, however, there is little or no evidence, estimatewise or otherwise, as to the damage such a project could do taxwise to all the taxpayers of Utah, — not only those in Tooele County. All of the above has to do only with the *389economics of the project, — not the constitutionality of the act nor the question of governmental authority or purpose.
Let it be said at the outset, that S.B. 187, subject of this litigation, sped through three readings of the House and Senate, with hardly a murmur, and was passed by both houses on the last legislative day in the last legislative gasp one or two hours before sine die, — without any visible, risible or other signs of legislative debate,— all of which is evidenced by the journals of both houses. The bill became effective on May 9, 1967. Thereafter, Tooele County Commissioners met with no one other than those having to do with the project which they proposed and outlined to the Commission, and there is nothing in the record to indicate that the Commission sought out or consulted with anyone except respondents who were promoting the project. Hence, no one with private risk capital who might have been interested in promoting the project without the benefit of a municipal bond issue or private tax advantage, seemed to have an opportunity to do so. Had such private risk capital been obtained without the tax exemption on the proposed bonds, it takes little imagination to conclude that Tooele County could have benefited to the same extent, and income tax revenue would have been available to the State of Utah. It is no answer to say that the State would have gained nothing anyway, because no venture likely would have been proposed without S.B. 187, — which is conjectural. Other multimillion dollar ventures have made the grade in this State without S.B. 187, and without the county’s putting its name on negotiable bonds in large type, only to belie such representation by way of fine print, involving a 72-page “Mortgage and Indenture of Trust,” and a 46-page “Lease and Agreement,” neither of which is in the bonds to be issued except by reference and generalization. The form bond incorporated therein is entitled as follows:
“UNITED STATES OF AMERICA STATE OF UTAH COUNTY OF TOOELE,”
and promises to pay the bearer of the bonds, issued to acquire lands and construct facilities, etc., to lease to one of the respondents, Energy Leasing Services, Inc., a private enterprise. The large print makes it appear that Tooele will pay off the bonds. The small print seems to say it will pay off if the County acquires the property. The question immediately is raised: What if Tooele cannot acquire the necessary property or does not see fit to do so, — perhaps because of change of politics or personnel? Who then pays the bondholders, with interest? If this is not at least a potential lending of the credit of the County for private enterprise and the project fails because of inability of the County to purchase the property, inertia of the perhaps newly-elected county commis*390sioners, or perhaps the refusal of a lessee to accept the land and facilities because of inadequacy or non-feasibility for the contemplated operation, who, pray tell, is to pay off the bonds that in the last analysis, are bottomed on conjectural factors? You and I know who will have to pay — the taxpayers of Tooele County.
This has been a “rush” situation from beginning to end. After a special calendar privilege was granted, it took hut 14 days to read and digest lengthy briefs, a hundred or more cases cited therein, an inordinately protracted contract and lease, and a transcript that hardly could be dubbed a brochure, for the author of the main opinion to pen his decision. Thereafter, counsel for both parties asked for special hearings, and obtained them, in which they pressed for a quick decision. The reason: That the bonds, they said, would have to be printed post haste if we validated the statute, and sold before the end of the year, else the promoters would suffer a loss of many hundreds of thousands of interest dollars, since federal action recently passed would prohibit a project of this type for anything over $5,000,000 and S.B. 187 would he ineffective for anything over that amount after the first of the year. The above is simply background for the economic urgency to approve the project. These facts, being of an economic nature, have no pertinence to the constitutionality of S.B. 187, — the only real issue we have before us.
Now: As to the main opinion: It says:
1) That S.B. 187’s purpose is to promote more industrial development, which is true; that to accomplish this purpose, Tooele and the Magnesium people have entered into a contract, for Tooele County to raise the necessary funds, which is true; it then says that “the money to construct the plant is to be raised” by revenue bonds issued by the County as “allowed by Sec. 11-17-3 of the Act, which bonds are to be paid off by rentals from leasing the plant.” This is the worst kind of non sequitur and ipse dixit since it assumes success of the project and superiority of the “Act” over the constitutional interdiction against pledging the credit of the County. This is followed by the statement that “The County could be deemed to ‘lend its credit’ * * * only if the County might in some eventuality be required to pay the obligation.” The obvious answer to that is that if the County does not wish to lend its credit, why should it he willing to lend its good name to give a private enterprise a tax advantage on an assumption that in some way or another such a discriminatory loan of its name just might result in a public benefit; but which in its failure might destroy not only private but public confidence in its good name. Pose this quare: Suppose the project went broke before it began, or its conception resulted in a still birth,' or that the county commissioners all dropped dead by nerve *391gas, as did the sheep, before any property could be or was purchased?
The main opinion goes on accurately to quote Art. VI, Sec. 31, of the Constitution, volunteering that the framers evidently were putting the skids under any attempt to use tax money in aid of private enterprise. The section does not exactly say what the Chief Justice says it means, although it is conceded that there are they that agree with him, — certainly the respondents in this case. Others have said lending of credit is something else than giving or lending tax money in aid of private enterprise. If the framers had in mind tax money only, it would have been a simple matter to have said, instead of lending credit, that the legislature “shall not authorize the State, or its subdivisions to lend or donate any tax money” in aid of private enterprise.
The main opinion then says that the provisions of the contract are very carefully drawn to prevent constitutional pitfalls, “all of which is in accord with the * * * Act.” The question is not whether the contract complies with the Act, but whether the Act complies with the Constitution' — • questions as far apart as the poles. The opinion footnote-wise, picks out of context selected statements by a couple of members of the Convention.
The optimism of the main opinion to the effect that the establishment of a working plant should result in increasing county taxes is somewhat illusionary, since, although this particular project might support such a conclusion, others may not, and it is strictly a matter of economics and speculation, based on assumption, and having nothing to do with the validity of the legislation.
The opinion relies heavily for its support on an unwarranted conclusion that the lessees here will pay as much to the County as they would if they were the owners of the property, since the Act provides that it is subject to the provisions of 59-13-73. This conclusion is somewhat of a delusion and a snare, since the Chief Justice has not called attention to 59-13-75 which says that any tax unpaid by the lessee is subject to the same collection treatment as those owning the property “except that such taxes shall not become a lien against the property, and no such tax-exempt property may be attached, encumbered, sold or otherwise affected for the collection of the tax imposed hereunder.” This simply means that anyone promoting a deal with county or city commissioners to operate a supermarket under S.B. 187, may use not only money from bondholders but can use a county’s good name to accomplish the result by having procured against him only a personal money judgment. His bankruptcy may render the judgment worthless, and there is no risk capital property that the county can look to in order to collect the *392accrued taxes. In other words, the backbone and theory of tax collection are emasculated, and the county may have on its hands and books a worthless shell of a building, and possibly a shell of its former self. This seems to me to be a lending of credit, with the ultimate result that tax money could or potentially could be employed to pull the county out of a fiscal hole. This seems to be the more ominous, since S.B. 187 does not restrict the counties from entering into literally hundreds of ventures, ranging from egg-beater plants, securities selling schemes, land improvement housing projects on underwater lands of Great Salt Lake, ad infinitum to an attempted restoration of Saltair. In the meantime the county may have taken off the tax rolls valuable property, which, in a given case, under S.B. 187, could be tied up for many years under the guise of industrial development, which may have as good a chance for undevelopment as it does for development. There is no question in my mind that permitting a private enterprise to use the name of a county for the purpose of issuing bonds for a private venture is not out a lending of credit in the constitutional sense. To hold otherwise would be to lend incredibility to a scheme in the common sense as well as the constitutional sense.
Respondents’ brief largely talks about the public benefits to be derived from this venture under S.B. 187, quoting copiously from the testimony of professors, analysts and even self-serving employees of the company promoting this venture. Little or nothing is said about economic disadvantages to the taxpayers. Either way, such testimony seems to be inadmissible, since it is no concern of this Court what might or might not eventuate economically. Our only concern is to look at the Act to see if its terms satisfy constitutional requirements. This is the only issue in this case sans the hearts and flowers and the violin.
Repondents assert that there is no evidence that they could finance the project without S.B. 187. By the same token there is no evidence that a half billion dollar corporation could not do so. Either way, this again is economics, and has nothing to do with this case which has only to do with the interpretation of a statute.
Respondents point to six Utah cases in support of their contention that the instant case is governed by the so-called “special fund” principle. All of these cases have to do with obtaining funds to provide services to the inhabitants, which the municipal government is dtity-bound to supply, such as electric and water facilities, which the city operates for the good of its citizenry. The special fund theory seems to be inapropos here, since the city is not bond-funding to furnish necessary services it is required to provide in its governmental role. In the instant case, the municipal government is not operating the magnesium plant and *393could not do so if it wanted to, since it is a private, commercial venture for profit. The main thrust of respondents and the main opinion is that if any private enterprise proposes a project, which may provide jobs, etc., a county should he able to fund the project under a “special fund” theory, or lend its good name as primary obligor to take a calculated risk on estimates of success, without taking into account any of the incalculables such as removing property from tax rolls, denying the state and/or county of property and income revenue, simply because a project sounds good to a few county commissioners, whose discretion under S.B. 187 may be exercised without restraint of any kind.
A pretty good argument rebutting respondents’ contention is stated in appellant’s brief when it is urged that in the constitutional debates:
The section in question was proposed by Mr. Varían whose comments included the following:
“The purpose of my section is to prohibit the lending of credit in any way for the furtherance of such enterprises as are indicated (Page 952) * * * It is a solemn duty, sir, that we have, to guard the public revenue and the public property from spoilation. We may not farm it out through future generations to be disposed of for other than the necessary purposes' of government. * * * ”
Another of the proponents, Mr. Richards, at Page 913 of the proceedings quoted Cooley, the renowned constitutional lawyer, as follows:
“It has been well and forcibly said that individuals and corporations embark in manufactories for the purpose of personal and corporate gain. Their purposes and objects are precisely the same as those of the farmer, the mechanic, or the day laborer. They engage in the selected branch of manufactories for the purpose and with the hope and expectation not of loss, but of profits. The general benefit of the community resulting from every description of well regulated labor is of the same character, whatever may be the branch of industry upon which it may be expended. All useful labors, no matter what the field of labor, serve the state by increasing the aggregate of its profits, its wealth. There is nothing of a public nature.”
The arguments for some form of public aid to private industry are the same today as when the constitution was being considered and adopted. * * *
In State v. Town of North Miami, 59 So. 2d 779 (Fla.) 1952, it was said in' a similar case that:
Every new business, manufacturing plant, or industrial' plant which 'may be established in a municipality will be of some benefit to the municipality.’ A ’neiir *394super market, a new department store, a new meat market, a steel mill, a crate manufacturing plant, a pulp mill, or other establishments which could be named without end, may be of material benefit to the growth, progress, development and prosperity of a municipality. But these considerations do not make the acquisition of land and the erection of buildings, for such purposes, a municipal purpose. [Emphasis added.]
and in Wadsworth v. Santaquin City, 83 Utah 321, 28 P.2d 161 (1933), it was said that:
Nevertheless, the bonds must be paid when due, or city credit will be impaired. With noiseless foot and steady tread the day of reckoning inevitably comes to demand its toll. To a city, no less than to a state or individual, untarnished credit and an honored name are of inestimable worth. No wealth or power which may come to a community is of more lasting importance than the good name it maintains by keeping its faith unbroken in meeting all of its engagements and obligations. In spite of the fact that full faith and credit of a city is not pledged to payment of the revenue bonds, no prudent city will permit its promise to pay to go unfulfilled where it has received and enjoyed the fruits of the obligation.
Again, in State ex rel. Saxbe v. Brand, 176 Ohio St. 44, 197 N.E.2d 328, a similar case involving revenue bonds, it was stated:
The sale of revenue bonds of the state to raise money necessarily involves a borrowing of money even though no indebtedness of the state results. If the bonds are not paid, the borrowing power of the state will as a result be adversely affected, even though the bonds do not represent a debt of the state. The borrowing power of the state is related to the taxing power because, to the extent that the state’s borrowing power is lessened, a greater burden will be placed upon its taxing power.
In State ex rel. Beck v. City of York, 164 Neb. 223, 82 N.W.2d 269 (1957), it was said that:
It is true that the revenue bonds are not a general liability of the city and they are not subject to payment through the exercise of the taxing power. But they do cast btirdens upon a city with reference to their issuance and payment. The city and its officers are charged with the duty of fixing and collecting the rentals from which the revenue bonds are to be paid. This necessitates the execution of leases, the fixing of rentals, the taking of chattel mortgages on equipment to secure payment of rent, the providing of insurance coverage, and the determination of payments to be made in lieu of taxes. It imposes duties and responsibilities upon the city and its officers on matters which are private rather than public in character. The is*395suance of the bonds in the name of the city for the payment of the cost of the project evidences the fact that the credit of the city has been extended. The city is the payer of the bonds and it is primarily liable for their payment. The bonds become the obligations of the city. The fact that the means of payment is limited does not make it any less so. A failure of payment is a default by the city. The constitutional prohibition does not infer that the credit of the State or its political subdivisions may be given or loaned except zvhen a general liability exists. The prohibition clearly provides that the credit of a State may not be given or loaned to an individual, association, or corporation under any circumstances. * * * It seems clear to us that the revenue bonds are issued by the city in its own name to give them a marketability and value which they would otherwise not possess. If their issuance by a city is an inducement to industry, some benefits must be conferred, or it would be no inducement at all. Such benefits, whatever form they may take, necessarily must be based on the credit of the city. The loan of its name by a city to bring about a benefit to a private object, even though general liability does not exist, is nothing short of a loan of its credit. [Emphasis added.]
In 1959 Idaho enacted an industrial development act very like Utah’s. The act was held unconstitutional in Village of Moyie Springs, Idaho et al. v. Aurora Manufacturing Co., 82 Idaho 337, 353 P.2d 767 (1967), in a lengthy opinion in which the court considered all of the customary arguments. With respect to “lending of credit” it said:
It is obvious that one of the prime purposes of having the necessary bonds issued by it in the name of the municipality is to make them mor^ readily salable on the market. Thus, the credit of the municipality is extended in aid of the project, regardless of the limitations placed upon the remedy of the purchaser. * * *
I would like to point out that the Act, which presents a myriad of complex and constitutionally questionable problems, is offensive on the ground of vagueness and almost ridiculosity, e. g.:
The county can buy property in other counties, under this Act, and thus take such property off the latter’s tax rolls, thus denying sister counties from Pickleville to Mexican Hat from taxing erstwhile taxable property. In this way, for example, under S.D. 187, Salt Lake County could issue bonds having the effect of stripping outlying counties, — 28 of them, if you please, *396and without their consent, of a substantial source of tax revenue vitally necessary to support their own economy, governmental functions and their own inhabitants. All this for the alleged purpose of providing for questionable . industrial benefits for one county, — but what is more important, — to aid a private industry to save interest and avoid taxes, where agreed rentals may never pay off the bonds, where property is taken off the tax rolls, possibly in perpetuity, — all accomplished by a possibly uninformed small group of men on a commission, sensitive and gullible, possibly, to salesmanship, sweet talk, and without seeking bids and without any right in the taxpayers by referendum or other protest of any kind to prevent the project, — albeit its development may be quite hazardous and ruinous. This is why you and I have to pay more taxes, so that rich corporations, etc., buying the bonds are tax exempt and need not sweat too hard to fill out tax returns showing no taxable income, come April 15 of each year. The County Commissioners obviously are blind to the fact that this project can rob the County of revenue security and at the same time increase their own income tax burden by relieving others of that same obligation. After December 31, this year, the very thing this court now approves, cannot be done. What now, Brown Cow?