Court Opinion

ID: 9654967
Source: CourtListenerOpinion
Date Created: 2023-08-23 18:56:35.346231+00
Date Added: 2024-06-11T18:13:15.096438
License: Public Domain

STEPHENSON, Justice,
dissenting.
The dissenting opinion by Justice Leibson is an excellent analysis of the constitutional infirmities of the majority opinion, and I concur in that dissent.
I write only to emphasize what I consider the principal errors in the majority opinion.
In discussing Section 177 of the Constitution of Kentucky, the majority opinion makes this astonishing statement: “However, as long as the expenditure of public money has, as its purpose, the effectuation of a valid public purpose, Section 177 is not offended even in situations where the conveyance occurs without consideration.” The two cases cited in support of this proposition are not in point. Both Industrial Development and Kentucky Livestock Breeders involved a challenge pertaining to Section 171 of the Constitution and not Section 177. Both involved appropriating tax money for a “public purpose.” Section 177 provides that:
The credit of the Commonwealth shall not be given, pledged or loaned to any individual, company, corporation or association, municipality, or political subdivision of the State; nor shall the Commonwealth become an owner or stockholder in, nor make donation to, any company, association or corporation; ....
Section 177 does not, anywhere, mention “public purpose.” In effect, the majority opinion has amended Section 177 by adding “except for a valid public purpose.” Together with leaving the determination of public purpose to the legislature, the major*816ity opinion has in effect repealed Section 177. I feel more comfortable in having the people vote on amendments to the Constitution or repeal of entire sections.
In its rush to assert that the statute does not offend Section 177, the majority has overlooked our holding in McGuffey v. Hall, Ky., 557 S.W.2d 401 (1977), where we said:
With respect to Const. § 177, which prohibits lending the credit of the Commonwealth, Hager v. Kentucky Children’s Home Soc., 119 Ky. 235, 83 S.W. 605, 607, 67 LRA 815 (1904), held that an annual appropriation of $15,000 to a charitable corporation devoted to the care of destitute children did not involve a giving or lending of credit. The opinion then went on to say that because the purpose was public the act did not offend Const. § 171, and there has been some tendency to misconstrue the language of Hager referring to Const. § 171 as applicable to Const. § 177 as well. Clearly, however, whether the objects of an expenditure are “public” or otherwise is irrelevant to Const. § 177:
“The state cannot now loan or give its credit to any person or corporation for any purpose — public or otherwise.” Hager v. Kentucky Children’s Home Soc., supra, 119 Ky. 235, at 83 S.W. 607.
This holding is in direct conflict with the majority opinion.
Further, the majority opinion relies on the reasoning in Almond v. Day. It is indeed curious that now the majority is persuaded by Almond v. Day when McGuffey emphatically rejected the same reasoning.
After holding that a loan of public money does not involve the public credit, the opinion in Industrial Develop. Auth. v. Eastern Ky. Reg. Pl. Com’n, supra, at 332 S.W.2d 274, cites the following excerpt from Almond v. Day, 197 Va. 782, 91 S.E.2d 660, 667 (1956):
“When the underlying and activating purpose of the transaction and the financial obligation incurred are for the state’s benefit, there is no lending of its credit....”
The statement is too broad. As specifically pointed out in Hager (119 Ky. 235, 83 S.W. at p. 607), Const. § 177 does not permit the state’s credit to be given or lent for any purpose, public or otherwise.
I wonder if the majority is ready to overrule McGuffey with a judicial amendment to Section 177.
In my opinion, the .transaction with Toyota is a gift. The state will purchase and deliver a deed to Toyota with no lien or other reservation. The majority approves as consideration the funny theory of incremental taxes. These are the taxes paid by any other business for the benefits of government, including, unfortunately, payment of principal and interest on revenue bonds previously issued. It is a charade to say that incremental taxes are a consideration for the conveyance. Even accepting this theory, that leaves Toyota paying for the land on the easy-payment plan. If this is not giving, pledging, or loaning the credit of the Commonwealth, then nothing is.
To sum it up, this transaction is either a donation or a giving or pledging of credit. Either way, the transaction violates Section 177.
I have one other comment on the majority opinion as it treats Sections 49 and 50.
The majority opinion states that the sums needed to acquire and develop the site for Toyota will be generated by a revenue bond issue and that the funds needed to pay the debt service on the bonds' principal and interest will be provided by appropriations from the General Funds of the Commonwealth on a biennial basis as an expense item of the Commerce Cabinet. This statement truly portrays the situation; there is no revenue, and the bonds are really considered as obligations of the Commonwealth.
A revenue bond is one that is retired by revenue from the project which is being financed. It is noteworthy that the majority opinion recites the reason for the adop*817tion of Sections 49 and 50; that is, the Commonwealth was heavily in debt and fiscal restraint was considered to be in the best interests of the people. This is the situation today with more and more of the General Fund going to pay the principal and interest of so-called revenue bonds. It is unfortunate that this court ever engaged in the fiction that these revenue bonds, which do not produce revenue, are not obligations of the Commonwealth. We know, and the executive and legislative branches know, that each legislature will appropriate funds from the General Fund to pay principal and interest on these bonds and that they dare not decline to do so in order to maintain the credit of the Commonwealth.
At least, up to now, in engaging in this fiction the property to be financed was owned by the Commonwealth. This made the fiction more palatable to the court. Here, the Commonwealth is to deed the property to a private corporation and retain no interest at all in the property. It was conceded at oral argument that this concept is a step further than any of the cases decided by this court.
Adopting this concept by the majority gives the legislature a free hand to increase debt for the Commonwealth without any hindrance from this court. This debases Sections 49 and 50 to no meaning at all.
Accordingly, I dissent.