Advisory Opinion on Constitutionality of 1975 Pa 301

270 270 400 OF 1975 PA 301 ADVISORYOPINION ON CONSTITUTIONALITY (Calendar 15). 8, 1976 No. Docket No. 57918. Submitted June De- cided June 1977. request by Represent- Supreme granted the House of The a Court constitutionality opinion advisory on the atives for an (Enrolled Act, Development Authority PA 1975 301 Senate Job 243). Justice, Fitzgerald Bill Justices Coleman The Chief concurring, wrote: prohibition the constitutional 1. The act does not violate improvements against in internal because it state involvement express exception provides public improvement, internal an Legislature proscription. The has deter- to the constitutional promotion program necessary mined for the that this welfare, improvements public antici- therefore internal improve- pated by internal are deemed to be statute through accruing private interests own- ments. The benefits ership them into unconstitu- or use are not sufficient to convert non-public improvements. tional Municipal 2. not its reference to the Finance The act does statutory prohibition amend- Act violate the constitutional only. contemplated title The bonds ments reference to special payable primarily from taxes or 1975 PA 301 are not assessments, Municipal therefore the Finance Act does not bonds, Development Authority apply except to the that the Job [1, ^{[5] [4] [3] [8] [9]} [6, [10] [11, ^{[15] [20]} 73 Am Jur 2] 73 Am Jur 73 Am Jur 64 Am Jur 7, 13, 14, 16 Am Jur 12] cies 16 Am Jur 16 Am Jur 72 Am Jur Am Jur Am Jur 16 Am Jur §§ 78-85. 16-19] 2d, 2d, 2d, 2d, 2d, 2d, 2d, 2d, 2d, References 2d, States, Statutes Public Securities and Constitutional Law 56.§ Public Funds 60.§ Statutes 137. Statutes 2d, Constitutional Law § Constitutional Law § Public Securities and Constitutional Law § Am Jur §§ § Territories and et 2d, States, Points 39. seq. Obligations in Headnotes 76. 133. Obligations Dependencies Territories 111. §§ 13.§ 1-3. § 1 et Dependen seq. Advisory PA 301 required proposed to submit bonds or notes to the its Munici- pal approval. Finance Commission for require 3. act does is a act therefore two-thirds vote of house and each referendum as a special provision concerning The constitutional local act. only legislative legislation applies local to action which is geographical limited to some area. contemplated appropriation public money 4. The of to the capital guarantee public funds be for reserve and loan would a private require purpose and and not a does not a two-thirds appropriation vote in each house as an of private purposes. funds The "authorization” the statute guarantee capital for future loan reserve funds and of the Job Development only Authority accordingly hortative can Legislature. neither violate the Constitution nor bind the How- ever, public purpose by because these bonds are issued for a a public authority, appropriations repay- to the funds for their appropriations regarded private ment not to as are be a purpose. local public authority 5. The statute establishes to administer a self-liquidating project whose bonds and do not appear tions, developed that record it on by acceрted institutions or obligations financial not be would self-liquidating public and that to the cannot be marketed taxing general of the commitment has been an effective there therefore, that, authority obligations are not in fact power and judicially principle created of the the of the nature and within exception self-liquidating bonds. revenue regarding indulging assumptions the no basis for 4. There is Development Authority bonds and of marketability the Job guaran- accept loan willingness of financial institutions the power independent any of the state’s commitment tees which, understanding because of evolves If a tacit taxation. honor, act, forces, Legislature the cannot fail to the market disclaimers, tanta- despite commitment would be an effective spirit express and within to an commitment mount future on Such constraints constitutional limitations. of the obligation people Legislatures would not create a moral and the only. limita- the constitutional that the act violates 5. A conclusion tions, authority obligations not be not or would or that providing pursuit goal valid, preclude not would governmental through employment opportunities increased equipment; machinery it buildings, and of industrial subvention 1975 PA 301 Advisory Opinion goal would mean if is be financed with borrowed required money approving people an is vote of the or the projects support projections must revenue financed without an taxing power. effective commitment of the Levin, principally Justice Williams concurred with Justice because The interaction two factors. first factor is that Development Authority the Job Act with deals bond risks that are different of traditional from secure risks revenue bonds engineer- where there is either a firm revenue record sound ing projections. very strong revenue The second factor is the emphasis Legislature may act that the future appropriate capital to maintain reserve fund at a level to critical, payments. meet bond The first factor is alone but interacting with the record creates a situation where reliance only revenues, partially is partially thus on the credit of state, bonds, to the extent that the bonds are not revenue constitutionally act invalid. Jr., Moody, participate Justice Blair did not in the decision. Separate Kavanagh, C.J. Fitzgerald,

Coleman JJ. Improvements. 1. Constitutional Law —Public Internal being party any state is not barred from to or interested in improvement public work of internal of a nature authorized (Const 6). law art Development Authority 2. Constitutional Law —Job Act —Public Improvements. Internal Development Authority provides public The Job Act for works of improvement permitted by internal which is the Constitution: Legislature expressed pro- has its determination that this gram necessary promotion welfare, public for the improvements anticipated by therefore internal the act are improvements; deemed internal the beneñts accru- ing private through ownership interests or use in this program private are not sufficient convert them into internal (Const improvements prohibited by the Constitution 301). §6; 1975 PA Development Authority 3. Constitutional Law —Job Act —-Munic- ipal Finance Act —Bonds. Development Authority The Job Act does not violate the constitu- prohibition statutory by tional amendments reference to title only by Municipal Act; its reference to the Finance the bonds Development contemplated by Authority the Job Act not are payable primarily special assessments, from taxes or and there- 400 bonds, apply to Municipal does not Act fore the Finance required Authority Development except that Job proposed Authority Development submit its bonds or Act to Job (Const approval Municipal Finance. Commission notes to the 301; seq.; 1963, 4, §25; MCL 131.1 et MSA art 1975 PA seq.). et 5.3188[1] Phrases. Acts —Words 4. Constitutional Law —Local concerning legislation applies provision local The constitutional geographical only some is limited to action which 29). (Const 1963, 4, area art § Authority Appro- Development Act — 5. Constitutional Law —Job priations. Authority Development Act which The Job authorization in the Legislature appropri- subsequent purports some authorize capital guarantee money reserve funds of the ate loan Authority only Development and can neither Job is hortative Legislature future bind some violate the Constitution nor 301). (Const 1963, 4, §30; art 1975 PA Development Authority Act —Bonds. 6. Cоnstitutional Law —Job Development Authority author- Act establishes Job self-liquidating project ity whose bonds and to administer compliance requiring not a debt of the state notes do evidence Constitution, borrowing provisions nor does with the pledge provide of the state’s credit for an unconstitutional act 301). (Const 15, 1963, 9, §§12, 18; PA art Separate Opinion Levin, J.

Ryan, J. Borrowing 7. Constitutional Law — Limitations —Bonds. debt, grant- The limitations in the Constitution contraction credit, improvements ing participation in internal do not bonds; they apply self-liquidating are not a revenue involve the state and do not involve the state’s credit or debt purchasers únancially any resulting improvement because rely solely anticipated on the on the revenue (Const 12, 15, taxing power art §§ 18). Statutes—Construction—Presumptions. 8. Constitutional Law — constitutional, presumed con- to be and are to be Statutes inñrmity; from a court strued to save them constitutional Advisory Opinion PA 301 presume supportive of the the existence of facts constitutional- ity legislation. Development Authority 9. Constitutional Act —Con- Law —Job Borrowing Limitations. struction — Act, Development Authority pre- The Job construed with the sumption constitutionality, only authorizes issuance of guarantees making of evidence indebtedness and the payable ñnancial are out of institutions that revenue of the Job Development purely Authority discretionary appropri- and such make; Legislature may ations as the choose to since the holders authority guarantees evidences indebtedness and would "general taxing power”, then obliga- no have call on the such debt, represent tions would not the credit of the state granted, would it not have been and would have no ñnancial (Const 1963, projects interest in the aided art 9, 301). §§12, 15, 18; 1975 PA 10. Constitutional Law —Statutes. unconstitutional, Even if an act does not on face to seem its may applied; permissi- unconstitutional existence of a impermissible ble cannot sustain an action that an has effect. Advisory Opinions. 11. Law — Constitutional opinions important ques- advisory The Constitution restricts constitutionality legislation; tions of law as to the therefore advisory opinion Supreme in the context of an Court (Const 8). 3, questions 1963, not examine of fact art § Development Authority 12. Constitutional Law —Job Act —Advis- ory Opinions Bonds—Validity. — advisory opinions Whatever be the of the Justices on the Act, constitutionality Development Authority of the Job no opinion expressed validity Development can be on the of Job obligations Authority except adjudicating an actual contro- versy upon development regarding of the facts issuance (Const 1963, making obligations §8; such PA art 301). Borrowing 13. Constitutional Law — Limitations —State Authori- ties. which, authority, although separate legal entity, A state is a government state, instrumentality subject to the debt, credit, improve- on constitutional limitations internal ments; apply authority they if the limitations do not to a state Mich 270 3, §6, circumvented'(Const 1963, 12, 15, art readily art §§ 18). Tаxing Borrowing Power. 14. Limitations — Constitutional Law — credit, debt, and internal im- constitutional limitations provements legal of a disclaimers commit- cannot be avoided an effective commitment of the there is ment of the state if 3, 6, (Const 12, 15, taxing power art §§ 18). 15. Constitutional Law —Construction. narrow, Words do not receive a contracted in a constitution sense, meaning presumed in a have used broad but are been contingencies; covering hence with all the words are a view of read, subject which are to continuous not as codes events, changing but the course of as the revela- revision with great purposes intended to tion which were be achieved of the government. continuing instrument the Constitution as a Borrowing Limitations —Construction. 16. Constitutional Law — purpose the credit limitations of Constitution of the debt and Legislature, people, of the is to without a vote from bar the general taxing power, incurring, on the credit of the state’s (Const 1963, 9, 12, 15, obligations payable art the future §§ 18). Borrowing Taxing 17. Law — Limitations — Power Constitutional —Self-Liquidating Bonds. Self-liquidating do not violate limitations on revenue bonds Constitution, disclaimers, debt not because of but in the state pledge purchasers and the market understand that no because involved; general is no constraint on the tax revenue is there (Const 1963, up deficiency if state make there is a default 12). 9, art Authority Development 18. Law —Job Act-Bonds Constitutional —Borrowing Provisions. Development appear It on a full factual record that the Job Act, disclaimers, despite Authority be an effective com- would express tantamount to an commitment of the state’s mitment power spirit within the of the constitu- of taxation understanding borrowing if a evolves tional limitations on tacit forces, which, Legislature fail to because of market cannot implications for the under the constraint of honor adverse impairment obligations consequent holders of (Const 1963, borrowing capacity of the state and its subdivisions 301). 15, 18; 9, §§12, art 1975 PA Advisory Opinion 1975 PA 301 Development Authority 19. Constitutional Law —Job Act —Bor- rowing Provisions. Development Authority A conclusion Job Act violates limitations, borrowing Develop- or constitutional that Job Authority obligations valid, ment are not would not preclude pursuit goal providing would increased employment governmental opportunities through subvention of buildings, equipment; machinery industrial would mean goal money that if that is to be financed with borrowed an approving people required projects vote ñnanced support projections must an revenue without effective commit- (Const taxing power ment of the §§ 301). 18; 1975 PA Separate Opinion by Williams, Development Authority 20. Constitutional Law —Job Act— Bonds. Development Authority The Job Act deals with bond risks that are different from the secure risks of traditional revenue bonds buyer rely very strong the bond can on and there is emphasis Legislature may in the act that in the future appropriate capital to maintain the reserve fund of the Job Development Authority payments; aat level to meet bond interaction these two factors creates a situation where only partly partially reliance is on revenues and thus on the state, credit of the to the extent that the bonds are not revenue bonds; (1975 301). constitutionally act the is invalid PA Kelley, Attorney Frank J. General, Robert A. Derengoski, Solicitor General.

Harry Iwasko, Jr., G. Ianni, and Robert Assist- Attorney support General, ants in of constitution- ality. Attorney Pirich, D. General,

John Assistant opposition constitutionality. to

Amicus Curiae: (by Canñeld,

Miller, Paddock & Stone Stratton Brown, S. Robert E. Gilbert and William J. Dan- 400 Kavanagh, C.J. hoi) Chamber of Com- Detroit the for Greater merce. requested to have been J. We C.

Kavanagh, compliance the of opinion render an advisory Author- Derezinski-Geerlings Development the Job the Michigan provisions ity Act with certain legislation The Constitution of 1963. 301) (hereinafter 2 of MCLA stated PA (102): 125.1702, MSA 3.540

"(1) declares: legislature hereby finds and (a) pro- pressing need for there a statewide That prevent unemploy- grams ment; conditions to alleviate and existing jobs new to preserve jobs and create growth; population employment meet the demands development present business enter- promote the competition growing for prises business and meet Michigan enterprises; diversify the and revitalize general goals of economic economy in and achieve growth employment. full and "(b) That, preservation and betterment of for the

health, people of safety, general and welfare devеlop necessary promote it is and new Michigan, pollution and solid adequate water and air control and disposal equipment facilities business waste enterprises located in this state. and utilities "(c) goals employment of full and maximum That provided by promo- growth best economic can rehabilitation, attraction, stimulation, retention, tion, enterprises. and of business revitalization "(d) health, present safety, future and That require Michigan people welfare promotion development of new public purpose the enterprises, and means to facili- expanded business state, national, compliance and local with tate their pollution control. standards "(e) retention, promotion, diversification That require industry addi- development and commerce help existing financing, business tional means of Advisory 1975 PA Kavanagh, C.J. enterprises promote expand rapidly and to more enterprises location of in Michigan. additional business "(f) expansion That and the retention of existing industry try of of extent acquiring and commerce and new indus- Michigan requires and to and commerce availability that, end, energy supplies to this known sources

energy Michigan developed be should the fullest possible protec- consistent with environmental ecological preservation. tion and "(2) It is therefore to be hereby policy declared Michigan promote health, the state of right safety, gainful employment, opportuni- business ties, general and welfare of the residents a body thereof corporate politic known the Michigan job development authority carry shall created to out this operate act and shall alleviating exist and for the preventing unemployment by the reten- tion, promotion, development of industrial build- ings, including machinery the sites therefor and equipment and or for use including pollution and air water control disposal equipment respect solid waste with thereto by enterprises, including business train- ing and/or retraining enterprise employees business expansion affected resulting or reduction of the labor force efficiency improvements.”

from labor In brief we find:

(1) PA 301 1963, 3, does not violate Const art 6§ prohibiting state improve- involvement in internal ments it provides by because for public law inter- improvement, nal express exception an to that proscription. constitutional

(2) PA 301 does not violate art Const 25 which prohibits statutory amendments § reference to title only, because PA 301 does have the amendatory effect asserted.

(3) PA 301 does not violate Const prohibiting enactment acts special or local without a two-thirds vote of house each referendum, and a because is a act. 400 Kavanagh, Opinion by C.J. 1963, 4,

(4) art Const violate PA 301 does not of legislative appropriations proscribes 30 which § a two- purposes without public private funds for because the in house thirds vote each public moneys contemplated appropriation loan funds guarantee and capital reserve private purpose. not a public would be for a and (5) 1963, art PA not violate Const That 301 does 12, 15, a 9, establishes 18 because §§ project self-liquidating a administer a debt of do not evidence whose bonds and notes with the state bor- compliance requiring the state provide act rowing nor does the provisions of § pledge credit. state’s undertaking by this have been in We aided has submitted General which Attorney office the conclusion of constitu- support one brief in support in of the conclusion and one tionality brief Detroit Greater unconstitutionality a brief as which has filed Chamber Commerce of consti- curiae conclusion supporting amicus for this assistance. tutionality. grateful We are Article first of 1835 stated Michigan’s Constitution improvement encouraged should be internal there- legislature duty provide had the large debt incurred the state for. prompted

construction of railroads canals in the of 1850 on the state’s ban Constitution interested in work being party any or subscribing to or improvement, and from internal or any company, interested in association being any loaning its credit in aid of corporation, person, corporation. association or in bans were continued the constitution

These 1975 PA 301 Advisory Kavanagh, C.J. 1908 but repeated adopted amendments were provide specific exceptions. After the final amend- ment Const read: to, party "The state shall be a nor be interested not. in, any improvement, work nor engage of internal ‍​​‌​​‌​‌​​‌​​​‌‌​​‌‌​‌​​‌‌‌​​​​​​‌​‌​‌​​‌​‌​​‌‌​‍work, carrying except: such "1. In improvement the development, and control of aiding in development, improvement and control public roads, refuge, water-ways, airways, harbors of airports, landing facilities; fields and aeronautical "2. In the development, improvement and control of aiding in development, improvement and control rivers, streams, levels, purposes lakes and water for health, of drainage, public control of flood waters and erosion; soil reforestation, "3. In protection improvement in Michigan; lands the state of In expenditure grants "4. to the state of land or other property.”

The debate over continuing this ban occupied much of the time of the delegates to the conven- tion which drafted the Constitution of 1963.

This ban was included as Const 6:§ to, "The party state shall not abe nor be financially in, any improvement, interested engage work of internal nor work, in carrying any except public such improvements provided internal by law.” People” "Address to the up summed intended effect of the section: "This present is revision of art X deleting

constitution language excep- detailed listing improvements tions relative to internal in which may engage. new, wording "The abbreviated makes clear 'may party the state not be a to’ 'financially nor inter- Kavanagh, by C.J. than those of other improvements in internal ested’ law.” 2 Offiсial by authorization public nature and 1961, p 3368. Record, Convention Constitutional the abbreviated from clear equally What is longer no barred from wording the state in work of interested being a to or party nature autho- of a improvement internal rized law. PA 301 ig- whether question answering

In contem- that all works posit nores this ban we of internal im- works act are plated under there is no constitutional for otherwise provement, impediment. they limited whether are must be inquiry

Our internal im- "non-public” "public” works expressly ex- works are provement "public” cepted from ban. in of these words definition

We unaided helpful discus the constitution. most One exposition on Cooley’s Justice sions we found was an act determining whether "public” the word rel People ex Detroit & "public purpose” had a Board, 452, 475-476 Twp R Salem 20 Mich H Co v (1870): to enquire the be propose first whether "I to public purpose, in

accomplished by question the act is imposed to implied when burdens are be of taxation. in the sense legislative power subject the over under the public, when that the word "I do not understand power, to to construed employed in reference this be sense, any in any or illiberal or applied in narrow or taking Legislature preclude the from which would sense interest, necessity policy, or of State broad views public by means of the giving those views effect from the Necessity alone is not the test which revenues. to authority in this be direction limits State defined, statemanshiр beyond must look but wise Advisory Opinion PA Kavanagh, C.J. expenditures absolutely needful which are the con- government, organized and tinued existence of embrace government which tend to make that others serve the present sub- general well-being society, and advance the prospective happiness prosperity and and of the people. public buildings, compensate To erect the debts, public discharge public officers and to are not purposes public sole to which the revenues may be applied, but, contrary, on the considerations natural equity, gratitude pharity are never out of place general good people when the ques- whole is in tion, kept imposition in the view of the public sovereign legislative burdens. The authority considerations, judge must general of the force of such on a just proper view upon of the demands public treasury, provide ability people and of the of the all; and when determines that such payments public good, will subserve the responsibility legislator for the correctness of his judgment people representative must whose is, upon he imposes whom the burdens he must rest.” Legislature expressed has its determination this program necessary for the promotion public welfare. From this we conclude that anticipated internal improvements therein are

deemed public to be internal improvements. We do regard the benefits accruing private inter- ests program through ownership this or use sufficient to convert the internal improvements into "non-public” private improve- internal ments still under ban.

We are satisfied that PA 301 provides works improvement. internal

Article A) 21(5) It is asserted that PA 301 has the amending effect of the Municipal Act and Finance 270 Kavanagh, by Opinion C.J. Const consequently violates follows: which reads as revised, by- or amended altered

"No law shall or sections of the The section only. reference to act altered lished at title its pub- re-enacted or shall be amended length.” 5.3188(1) et seq. MSA seq.;

MCLA 131.1 et Act and pro- Finance Municipal known as the as follows: pertinent vides in section apply shall for the following 2. The definitions "Sec. shall otherwise purposes unless context of this act indicate: * * * "(a) governmental authority 'Municipality’: Any power with to issue agency within the state regulated this under act. obligations authorized "(c) 'Obligation’: A term evidences bonds, notes, bonds, refunding as indebtedness such certificates like instruments

of indebtedness other (except by Act No. 79 of obligations those authorized 1937) by municipality, the on their municipality issued which Public Acts of full and credit of the pledge

face faith payable primarily from taxes and/or special and/or assessments.” contemplated in PA 301 are

Because the bonds special from taxes and/or primarily not "payable Municipal do not consider assessments” we to act-301 any application Act to have Finance provided in PA 301. bonds, except expressly 125.1721(5); §21(5), provides MCLA PA 3.540(121)(5): MSA authority shall be

"Bonds or notes issued an before municipal finance commission approved PA Advisory Kavanagh, Opinion C.J. subject be their issuance but not otherwise Act shall 1943, amended, as being No. 202 of the Acts of Public Michigan Compiled sections 131.1 to 138.2 of the Laws. the bonds approving Before municipal issuance of or notes the the determine shall that finance commission the proposed issue is but not amount sive, sufficient exces- properties pledged for that the and the revenue that payment thereof sufficient and the bonds or authorizing proceedings notes and the the same comply law, applicable nothing with this act but and other in authorizing this section shall construed as the mu- nicipal judgment finance commission to substitute its authority authority’s for that of the in the evaluation of efficacy proposed project relationship the and its job development state.” The use of the indefinite article "an” in the first confusing, sentence of this is somewhat section but we are satisfied it is an and error the reference was "the” authority meant to be to established by the act.

We read this section to require authority to submit its proposed bonds or notes to the Munici- pal approval Finance Commission for its and de- termination the amount of the proposed issue (for is sufficient but not excessive issued) which properties revenue pledged for their payment arе sufficient and that the bonds or notes the proceedings authorizing them comply job with the act development other applicable law. regard

We this section imposing as strictures on to the extent indicated but do not it as having consider intended to have or amending Municipal effect of Act Finance or any other law.

For this we reason find this does not section 4, violate Const art 25.§ B) PA corporation Does 301 create by special a 400 Kavanagh, C.J. which act violation of Const reads as follows: special act in pass no local legislature "The shall applicable, made can be case where act a applicable made shall general act can be and whether a special act shall take judicial local or question. a No by two-thirds of members approved effect until by majority house and serving in each elected to and of the electors in the district affected. voting thereon require special acts shall repealing Any act local serving elected only majority the members require submission to the shall not in each house and

electors of such district.” provision, of this

The and rationale history in the Constitution of appeared which first Attorney Gen in was set forth Justice Brooke 337- Dingeman Lacy eral ex rel v (1914): 338; 146 NW 871 legislation history of under

"Considering the apparent there had it Constitution part grown up pernicious practice on the a practice The was bad legislature passing in local acts. place, partiсulars. In the first very important in two legislation thus enacted constituted much of the purely in local interference direct and unwarranted affairs and an invasion of principles of local self- legislation government. place, In the such affect- second State, in the ing it did certain limited localities representatives from unaffected districts senators and agreed enactment usually complaisant, and to its were intelligence judgment of that without the exercise from all the legislation is entitled to receive which all many legislature. This course led to ‍​​‌​​‌​‌​​‌​​​‌‌​​‌‌​‌​​‌‌‌​​​​​​‌​‌​‌​​‌​‌​​‌‌​‍of the members charters), city (principally in amendments abuses courts, and way found their into the some of which then in there redressed so far as Constitution were permit. force would mind, the Constitution "With these evils Advisory Opinion PA 301 Kavanagh, C.J. people. adopted by was formulated and From a [sic] reading quoted and provisions of the above others of a think, character, is, entirely we clear that it similar purpose of the framers of the was settled new adopted it to people instrument and of the who forever people right insure to the to control their affairs local, legislation all purely and to secure for grave application of the attention and the collective legislators.” wisdom of the

The retention it in the Constitution followed this the committee explanation chair- man: Hoxie,

"Mr. chairman of the committee on powers, following support submits the reasons in Proposal Committee 119:

"The committee recommends the retention of this section first 1908 constitution. found section, along provision, with the home rule is to legislature lift the passing private burden from the legislation. and local only changes up "The recommended are to clear

ambiguous date, language and to remove a now unim- portant. requirement "The of a vote of 2/3 both houses and a

majority protects vote in the area affected localities against arbitrary action. "By allowing majority legislature repeal laws, existing uniformity local will be easier to obtain.” Record, 1961, p 2 Official Constitutional Convention 2415.

From the foregoing reading from a careful of 29 we are properly convinced this section § application has action only which geographical limited to some area.

We do not read PA 301 accord- as so limited and 4, 1963, in it find no violation art ingly of Const §29. 400 Mich Opinion by Kavanagh, C.J.

C) public Does the appropriation funds as authorized in PA 301 require 31 to §§ assent of Legislature two-thirds of the as provided 4, in Const art 30 which reads as follows: § "The assent of two-thirds of the members elected to and serving in legislature each house of the shall be required appropriation public for the money or prop- erty private purposes.” for local or Legislature adopted which PA 301 has pur- ported to Legislature authorize some subsequent appropriate money for the loan guаrantee funds and capital reserve funds of the Development Job Authority. This "authorization” is hortative only and accordingly can neither violate Const art 4, 30 nor bind Legislature. some future §

However, being of the view that these bonds are issued public for a aby authority, we would regard appropriations to the funds for this repayment as appropriations private or local purpose.

Article The Job Development Authority created PAby 301 is authorized to raise through revenue issuance of its bonds or notes. From these reve- nues, the authority is authorized to extend loans to, directly or to guarantee loans made by private lenders enterprises business for financing proj- ects defined in the act.

We are asked:

(1) if the bonds or pursuant notes issued act

(a) are evidence of state proscribed indebtedness by Const 12 which reads: 1975 PA 301 Advisory Opinion by Kavanagh, C.J. "No shall evidence of state indebtedness be issued except pursuant to this debts authorized constitu- tion.”

(b) Const art require compliance with 15 which reads: § specific money purposes

"The state in borrow provided by legislature acts of the amounts as adopted by be a vote of two-thirds members elected house, serving approved by in major- to ity each voting any of the electors thereon at elec- question tion. The submitted to the electors shall state borrowed, specific purpose the amount to be devoted, which the and the funds shall be method of repayment.”

(2) contemplated We are also asked if the loans guarantees of loans is a viola- tion of Const 18 which reads: to, granted "The of the state shall not credit nor person, corporation, public aid of association or private, except as authorized in this constitution.” (l)(a) The act requires the individual bonds language and notes carry this effect: "The state shall not be liable on notes or bonds of the authority nor shall the notes or bonds be considered a debt of the state. The notes and contain on bonds shall the face thereof indicating a statement this fact.” 3.540(127). 125.1727; MCLA MSA

Thus these notes or bonds will not purport of a state They purport evidence debt. will not pledge will, fact, the state’s credit. They purport pledge to be the debt and the Job credit of Development Authority. Kavanagh, C.J. the author- say prepared

Unless we are employed by the subterfuge is a ity sham or and is therefore in this constitutional ban to avoid legal itself, have no reason we effect the state the instruments. at the clear terms of blink authority, the while an We are satisfied that state, legitimate legal is a the instrumentality accordingly state and hold entity apart from the not be evidence that its will notes bonds 9, 12. art contrary state debt to Const § (l)(b) that the bonds or We are also satisfied PA 301 are revenue contemplated PA 3011 creating the Development Job Authority. principal questions

The are whether the act is violative of the constitutional provisions limiting indebtedness,2 issuance of evidence of state granting of the credit of the state3 and the state being in any interested work of improve- internal public ment other than a internal improvement.4 1 125.1701, 3.540(101), seq.; etseq. MCLA et MSA except "No evidence of state indebtedness shall be issued for debts pursuant authorized to this constitution.” Const art 12.§ may money specific purposes "The state borrow in amounts as may provided by legislature adopted by be acts a vote of two- house, serving thirds of the members elected to and approved by majority in each and voting any of the electors thereon at question election. The submitted to the electors shall state the borrowed, specific purpose amount be to which the funds shall devoted, Id, repayment.” be and the method of 15.§ to, granted any "The credit of the state shall not be nor in aid of person, rized in this constitution.” corporation, public private, except association or or as autho Id, 18.§ to, in, party financially "The state shall not be a nor be interested improvement, any such engage carrying any of internal work nor work, except improvements provided by internal law.” Id, 3, 6. 400 Mich

Advisory opinions inherently, are, abstract an- questions swers to abstract without factual devel- opment. response adequate may At times an predicate, made without a but factual in the in- ques- stant matter the ultimate resolution of these depend largely tions will on the factual context.

I Development Authority The Job was сreated public purpose alleviating prevent- "for the ing unemployment5 by promotion retention, development” buildings, and ery of industrial machin- equipment,6 purpose and for that authority may participate loans, make making guarantee loans with and loans finan- cial institutions.7 expected opera-

The to finance its money, tions with borrowed and is authorized to "[i]ssue its or bonds notes for the of mak- ing project loans for costs” and to secure "bonds mortgage, assignment, pledge or all of its moneys, properties”.8 revenues, income, or Before Municipal issued, powers granted by people government. that exceeds the to their 6 3.540(102). 125.1702; MCLA MSA 7 125.1713, 125.1756, 125.1741; 3.540(113), 3.540(156), MCLA MSA 3.540(141). 8 3.540(114). 125.1714; MCLA MSA 9 3.540(121). 125.1721; MSA MCLA Advisory Opinion PA 301 1975

The act provides state shall not be "[t]he liable on of the notes or bonds nor authority shall the notes or bonds be considered a debt of the * * * state,”10 it not and "shall be construed be pledge of the credit of the state for the bonds, payment notes, of the authority’s or loan guarantees”. Where a loan is guaranteed authority, lending required financial institution is to pay guarantee loan "a fee not exceed of the 1% guaranteed portion of the loan outstanding princi- per pal annum”.12 guarantee

Loan deposited fees are in a guarantee loan fund obligations. to secure such An amount equal guaran- of the outstanding 10% bonds and notes issued and loan The state to the holders of the loan funds. sections 31 to behalf of the obligated part lending nоr shall the notes or bonds to for the tedness of the provided it will notes and bonds shall contain on the face thereof a statement loan unpaid MCLA may may and loan rights authority ing this fact.” MCLA terms MCLA "This "The state shall not be notes, bonds, guarantee fund, guarantees, include this make and remedies of the holders thereof until the business However, 127.1761; this state to make installments of payment of the in this act. agreements act limit 125.1743; with the liable appropriate moneys agreements holders, credit of this state to the shall authority, enterprise MSA or alter the together the state pledge and loan this Excepting only MSA connection with this act shall not be construed as 125.1727; holders of not ‍​​‌​​‌​‌​​‌​​​‌‌​​‌‌​‌​​‌‌‌​​​​​​‌​‌​‌​​‌​‌​​‌‌​‍consistent 3.540(161). interest, authority’s act made with the money according bonds with the interest 3.540(143). or to be a fully paid guarantees pledges liable wherein the state is authorized but not agreement rights construed to authorize the be considered MSA and costs and bonds, guarantees herewith, nor to the available for the on notes bonds, notes, vested in the 3.540(127). to their term and tenor and as an action pledge shall remain constituting notes, job development capital policy agrees holders of or in discharged. or thereon, made under this act that of the credit of the state expenses bonds of and loan of this state set out in debt reserve with the holders of any way or loan proceeding hy authority’s authority bonds, notes, a contract on the solely with the state. The obligating agreеments for which the fund notes, bonds, guarantees.” authority guarantees. interest impair the indeb giving authority to fulfill and the indicat reserve this on or or 270 294 400 Levin, J. required fund;13 in that

tees is to be maintained implicit requirement fund, the at in this up proceeds with outset, made at be least will legislative appro- authority borrowings by of priations. capital required authority to create a is also or notes as the bonds reserve fund "to secure authority to be funded "an shall determine”14 princi- equal amount of maximum amount pal to the becoming maturing due in a and interest authority succeeding year bonds calendar capital by then outstand- fund secured ing”.15 reserve contemplated proceeds appears It to be borrowings this fund.16 to establish will be used provides: assure” the main- The act "To further guaran- capital and loan tenance of the tee18 reserve17 annually appropriated19 be funds there required paid authority the amount to the statutorily required any deficiency in the restore funding, certified the chairman au- necessary”20 required thority. The "if chairman (because proves inade- income21 quate) certify annually and the to the Governor Management Department Director of the Budget, shortly annual before the Governor’s message, required budget to restore amount guarantee capital funds, "and reserve and loan 13 3.540(145). 125.1744, 3.540(144), 125.1745; MSA MCLA 14 3.540(131). 125.1731; MCLA MSA 15 3.540(134), 125.1731; 3.540(132), 125.1734, 125.1732, MCLA MSA 3.540(131). 16 3.540(132). 125.1732; MSA MCLA 17 3.540(134). 125.1734; MSA MCLA 18 3.540(146). 125.1746; MCLA MSA "apportioned” provision regarding The word is used 3.540(134). 125.1734; capital reserve fund. MCLA MSA 3.540(146). 125.1734, 125.1746; 3.540(134), MCLA MSA loans, participation guarantees, direct or fees for loan Interest on earnings projects. investments and the sale or lease of from Advisory Opinion 1975 PA 301 the amount appropriated so stated [by Legislature] paid to the authority during next fiscal year”.22 provides: The act

"Excepting only policy of this state set out in sections rized but not capital of this act wherein the state is autho- obligated appropriate moneys to the fund, guarantee reserve fund and the loan this shall obligating act not be construed as this state to the constituting holders of the authority’s nor the bonds a contract on part money this state make available for the (Emphasis supplied.) reserve funds.”23 II debt, It is established that credit and inter- nal improvement limitations do not apply to self- liquidating bonds;24 revenue are they not state debt and do not involve the state’s credit or involve the state financially in any resulting improvement purchasers because may rely solely on the antici- pated revenue and not on the general taxing power: "The idea that some money borrowed is not a debt approving comes from funding cases 'self-liquidat ”

ing public through works’ 'revenue Advisory bonds.’ Opinion re Constitutionality of 1973 1 PA & 390 (1973). 176; Mich 211 NW2d 28 "A continuing line of Young cases since Ann [v Arbor, 267 241; 255 Mich (1934)] NW 579 reaffirm the tions). NW2d 460 (1955) (state Dearborn 73 credit; County, Gaylord 23 24 ^[22] NW2d MCLA MCLA See Bullinger 388 Mich v v 544 Gaylord City (1966) (internal 125.1761; 125.1734, 125.1746; Michigan (1955) (state credit; v MSA Gremore, debt Turnpike Authority, 292-294; Clerk, limitation 3.540(161). improvement; MSA 343 Mich 378 Mich 3.540(134), 3.540(146). evidence NW2d 516, 562-563; local units 273, 289-291, 292-294; 344 Mich credit); state (1972) (debt 37, 58-59, Alan v 72 NW2d 777 indebtedness); government); limita Wayne 66-67; 144 deñnition, 'self-liqui principle dating constitutional that as a obligate the tax do revenue bonds’ subject debt ing power not create and hence do County, 388 Mich Wayne Alan v debt limitations.” Court). (1972) (emphasis by the 293; 200 NW2d that holders Proponents authority contend income obligations only look Legislature as the amounts and such deficiencies, to fund appropriate choose self-liquidating are obligations therefore its and hence exempt sense as revenue bonds same limitations. from the constitutional pre- principle It is a that statutes familiar constitutional, they are to sumed to be from constitutional infir- construed to save them mity may presume and that a court existence constitutionality legis- supportive of facts lation.25 construed, only the issu-

So this act authorizes making ance of evidence of indebtedness and the that guarantees to financial institutions authority of the and such payable out revenue Legisla- as the purely discretionary appropriations make; since the holders of ture choose guaran- authority indebtedness evidences "general no tees would then have call on obligations repre- taxing such would not power,” debt, of the state would not sent state credit no granted and it would have financial have been the projects by authority. aided interest nevertheless, be unconstitutional. may, This act if an act does not seem on its face be Even unconstitutional, it as may be unconstitutional 356, 373; 6 S Hopkins, Yick Wo v US applied. (1886). L "If effect is 1064; Ct 30 Ed the direct 2d, Law, pp 144 and 25 16 Am Jur Constitutional §§ 345 and 343. Advisory Opinion 1975 PA 301 Opinionby however, not we constitutionally offensive must look for any indirect effect. An indirect effect is no legitimate effect, more a than direct and we must assay the effect from the apart purpose. 'The permissible existence of cannot sustain ” action an an impermissible has effect.’ Gallegos Co, v Glaser Crandell 654, 672; 388 Mich (1972) 202 J.). (opinion NW2d 786 T. G. Kavanagh, Although the authority may appear authorized only to obligations issue and enter into that are secured and purely ap- revenue discretionary propriations, it on a developed record appear obligations accepted would by financial institutions or cannot be marketed to and that there self-liquidating has been an effective commitment tax- ing power and, therefore, authority obligations are not in fact nature and within the principle judicially exception self-liquidat- created ing revenue bonds.

Ill The presumption constitutionality "a pre- is fact, sumption of of the existence of factual condi- such, tions supporting legislation. As is presumption. rebuttable It [Citations omitted.] not a presumption, conclusive or a rule of law which makes action invulnerable * * * constitutional increasingly assault. [I]t important that when it necessary becomes relating Court to deal with the particular facts conditions, they commercial or industrial should presented concretely appropriate with determi- evidence, upon nations so that conclusions shall not support.” be reached without factual adequate 400 Mich Levin, Baldwin, Co v 293 US Borden’s Farm Products (1934). 187; 79 L Ed 281 209-210; 55 S Ct of assumptions under- The economic facts obligation moral writing marketing so-called and of financial institu- authority of a bonds state are authority guarantees tion of state acceptance notice. outside of sphere judicial advisory opin restricts Michigan’s Constitution * * * of law to the "important questions ions Const legislation”. of constitutionality in therefore, "It the con appear, 8. would not may of we examine advisory opinion, text an re Constitu Advisory questions of fact.” 441, 483; 294, tionality of 1972 PA J.). (1973) (opinion by NW2d 469 regarding A the constitutional- opinion favorable of and the ity this act read be expression as an this community financial regarding specific Court’s not opinion only also questions asked the Governor but obligations susceptible are to con- authority’s challenge. misapprehension, To avoid stitutional the opin- must whatever be stressed that constitutionality ions the Justices on act, no validity opinion expressed can be obligations, they whether authority bonds, the self-liquidating nature of revenue credit making loan granted has been state financially has guarantee, become im- prohibited in a work of internal interested provement. and the validity obligations

constitutionality only the act as can applied controversy adjudicating determined an actual issu- upon development regarding of the facts making even obligations. ance and of such Indeed constitutionality might appearance an facial hearing. at a yield developed facts testimonial Advisory Opinion 301 1975 PA 299 Levin, Opinion by J. "Although advisory opinion adjudicative not an an binding decision of the Court and is not the same a hearing after a sense decision of the Court on the under precedent merits constitutes a doctrine of decisis, advisory opinions stare our are read by the public, profession, and the the Governor Senate as a expression Any expression definitive our views. such carefully must be so circumscribed as not to a inhibit seemingly in a different determination case where the contending parties opportunity present had an have facts, adjudicative relevant as as well constitutional.

"When a court an act holds constitutional it no particular does than deny more claim unconsti not, tutionality. ought expressions by premature It on generalized claims, appear per abstract to foreclose differently advancing sons from more situated concrete unconstitutionality.” claims of Advisory re 294, Constitutionality supra, (opin of 1972 PA 483-484 J.). ion Levin,

IV legal authority separate entity, While the is a "government instrumentality is declared to be a subject state,”26 this and is to the constitutional improvement debt, credit and internal limitat People Bay City Treasurer, ions.27 ex rel v State 26 3.540(111). 125.1711; MCLA MSA 27 concept apply debt credit limitations to instru state, although entities, organized separate mentalities has recognized Metropolitan been in other cases. Bacon v Kent-Ottawa 159, 174; (1958); Authority, Gaylord Water 354 Mich 92 NW2d 492 v Clerk, 291; Gaylord City supra, p County Oakland Drain Commis Oak, 124, Royal 142; (1943); v 306 sioner Herrick, Mich 10 NW2d 435 Connor v (1957) 201, 216; Cark, (opinion by J.); 349 Mich 84 NW2d 427 Metropolitan Supervisors Authority Huron-Clinton v Boards of (1942). Counties, 1, 23; Five 300 Mich 1 NW2d 430 jurisdictions similarly, enforcing Courts other have state held separate debt limitations where were rel entities involved. State ex Brand, 44; (1964); Reynolds v 197 Saxbe 176 Ohio St NE2d v Waterville, 292; (1898); Ayer 92 Me 42 A 556-557 v Commis- Administration, 586, 598; sioner (1960); 340 Mass 165 NE2d Griffith, Building Authority State ex rel Public Institutional v (1871).28 separate of a creation "The 23 Mich 499 the essence of the not alter body corporate does Building Authority v State ex rel Nevada scheme.” (1970). 333, 336 Hancock, 314; P2d 86 Nev of state debt the creation If the limitations do not to a apply credit of its granting circumvented. It readily they large part of organize possible would be authorities in the through government business e.g., an educational author- departments, various health authority, a mental ity, authority, a welfare in money antici- seek to borrow might all of which appropriations without "discretionary” of pation limitations issuance regard to the constitutional debt. long-term short-term and limitations dis- be avoided Nor can these if there is an legal commitment claimers a taxing general power. effective commitment 2 the state notes there provided 1973 PA obligation of thе involved "shall not be a state, full faith and credit of shall not pledge an indebtedness of the the state and shall not be Nevertheless, the Justices advised that state”. of constitu- authorized state debt violation

act 200, 604; (1939); Hively City v School 135 Ohio St 22 NE2d 206-207 51, (1929); Building 28; Nappanee, 169 NE 53 State Office 202 Ind (1941); 29; 434, Trujillo, State v 46 NM 120 P2d 448-449 Commission ex rel Hall 48, 659; (1970); Taylor, In the v 154 W Va 178 SE2d 58 280, 1975, 135; Oregon Constitutionality Laws 276 Or Matter of of Ch (1976). 126, See, also, Morris, Evading Limita Debt 554 P2d 131-132 Building Costly State Authorities: The Subversion of tions with Public Constitutions, (1958). 234, 68 LJ 249-250 Yale 28 9, 7, precluded The Court held that Const 8 and §§ authorizing townships, villages what it cities and to do the state from companion provisions 1850 do These and could not Constitution have been itself. now carried forward and are the limitations us. before supposed rejected were decisions in other states "which Court circumstances, that, the state the doctrine under such sanction directly might indirectly through it was its subdivisions what do Treasurer, People Bay City 23 Mich to do”. ex rel v State forbidden (1871). 499, 505 Advisory Opinion 1975 PA 301 301 Constitutionality re tional ‍​​‌​​‌​‌​​‌​​​‌‌​​‌‌​‌​​‌‌‌​​​​​​‌​‌​‌​​‌​‌​​‌‌​‍Advisory limitations. supra, PA 1 & 179-180. Words a constitution "do receive a nar row, meaning, presumed contracted but are sense, been have used in a broad with a view of In covering the Matter all contingencies”. Strauss, 324, 330; 197 US Ct 535; 25 S L Ed 774 (1905). "Narrow reasoning and technical is mis placed brought when bear upon an instru themselves, ment people framed for them selves, designed as a upon chart which every man, unlearned, learned and may be able to trace leading principles government.” 1 Cooley, (8th ed), Constitutional Limitations pp 131-132. see Traverse School Similarly, City District v At General, torney 390, 405; 384 Mich NW2d (1971). constitution, "A establishing frame of government, declaring fundamental principles, and creating a national sovereignty, and intended to ages endure for adapted to the various affairs, crises of human is not interpreted with the Legal private strictness contract.” Case, Tender 421, 439; 122; US 4 S L Ct 28 Ed (1884). principles These apply equal with force whether question a provision concerns granting or lim iting legislative power. "The true spirit of constitu tional interpretation both give directions is to full, liberal construction to the language, aiming ever to spirit show to fidelity and purpose.” States, Fairbank v United 181 21 289; US S 648; Ct 45 L Ed 862 (1901).29 29 powers granted broadly granted "If are be as taken carrying reasonably necessary pass with them those acts which carry execution; them into full in other words, grant powers if the in its Constitution of tois be so construed Congress carry powers that granted, shall able into full effect the imperative equally prohibition it is that where or limitation placed upon power Congress prohibition is or limitation 270 400 Mich obligation moral bonds

State authorities unknown when the were makeup provisions with in 1850.30 form took constitutional limitations "[I]n of the Constitu provision determining whether matter, it is of little subject new applies tion to a which the framers one with significance that it is setting up an enduring were not familiar. For carry undertook to they of government framework in all the vicissi future and out the indefinite men, those funda changing аffairs tudes of the instrument itself dis which the purposes mental words, not as we read its closes. Hence we read to continuous subject codes which events, but as changing with the course revision purposes which were great the revelation of the the Constitution as a intended to be achieved continuing government. instrument [Citations 'it is a Constitution If we remember omitted.] rightly prefer, cannot expounding,’ we are we words, that which will meanings of its possible the constitutional defeat rather than effectuate Classic, 299, 316; United States v 313 US purpose.” (1941). "Words, 1031; espe L 61 S Ct Ed constitution, are not to be read those of a cially Id, 320. narrowness.” stultifying with such V of the debt and credit31 limitations spirit entirety. It be a be enforced in its and to its would should language granting powers strange is to be rule of construction that narrowly liberally language restriction to be construed and that States, technically 181 US construed.” Fairbank v United (1901). 289; 648; 45 L Ed 862 21 S Ct 28, supra. See fn pay-as-you-go created a "The framers of the Constitution scheme, Michigan. government In furtherance of that for the State becoming Michigan specifically prohibited from the State of guarantor thing surety anyone. obviously It would be an useless borrowing money prohibit the State from for the Constitution Advisory Opinion PA bar the a vote of Legislature, without the incurring, from credit of the people, on the state’s payable taxing power, obligations in the future.

"Although governments usually are not considered bargainers, weak the constitutional debt limit is based that, upon premise finance, in matters they are imprudent. legislature municipality, often caught A or pressures popular developments between the for new taxes, against may attempt escape additional through borrowing. equity’s excessive unlike Not solici mortgagor, tude for the debt limits reflect a determina tion framers ratifiers state constitutions governments congenital borrowers who often Morris, unwisely.” deal Evading Debt Limitations with Building Public Costly Authorities: The Subversion of (1958). Constitutions, 234, State 68 Yale LJ What done at all not be done by indirection.32 In an early debt limitation case this Court said: "Constitutions do not with change permit by becoming party then incur State to liabilities to the Thus, 9, borrowing 18, provides: of others. article § Constitution " to, granted 'The credit the state shall not be nor in aid of person, corporation, public private, except association or as autho- rized in this constitution.’ provision State, "The of this is make certain that the borrow, except authorized, which itself cannot unauthorized debts others.” does not accumulate by indorsing guaranteeing obligations 1966, Advisory Opinion Constitutionality re of PA No (1968). 563-564; 380 Mich 158 NW2d 416 only change provision in the credit made the 1963 Constitu- phrase "except tion constitution”. was was addition of the as authorized in this explained accompanying commentary It sentence the credit "[t]he first revision art 10 of [of clause] words, present adding 'except constitution these as authorized in exception put having this constitution.’ This is neеded to the section borrowing harmony”. to do school with and this section Address to Record, People, p 2 Official Constitutional Convention 3401. Record, 1961, pp See Official also Constitutional 603- Convention 604. 28, supra. fn See 270 400 Mich 304 Levin, J. desire; the will and opinion

varying public tides of the same inflexi recorded people therein their own deliberative changed law until ble to the courts action; permissible and it cannot circumventions, and in evasions that order to aid instruments, which in the these subject shall they down broad lay to undertake only main construction, and technical to a literal principles, in standing enemies public great if were they every good duty way progress, when provisions their was around get citizen to damaging thrust them a give practicable, ever construe them as must They whenever convenient. if the means of adoption, people did in their within their construction arriving at Treasurer, v State Bay City rel People ex power.” supra, 506. regarding it was observed recently

More limitations: debt and credit exceptions this disposed to extend "We are in- seems to limitation. Each extension constitutional urge ingenuity of those who

vite another. Given limitation, effectively elimi- we could avoidance exceptions to it. extending altogether by it nate pledged its the state has question is not whether "The by the pay the notes to be issued full faith and credit Treasurer, indeb the notes are state but whether State tedness. The framers 'full faith and used the term 'general the term in 14 and of art credit’ obligation §§ they 9. If intended of art bonds’ § general obligation bonds prohibit only the issuance they obligations presumably credit full faith and 9 rather 12 of art those terms would have used ” Advisory Opinion the term 'state indebtedness.’ than 179. supra, PA 1 & Constitutionality of 1973 re note that there were unsuccessful worthy It Advisory Opinion PA at efforts the 1961 Constitutional Convention to except amend the a grant credit limitation up state credit hundred million to one dollars for public corporations the purpose benefit industrial, financing manufacturing and municipal development projects.33 proponents, as do the here, proponents argued was necessary and in the interest create such corporations businesses, to attract to encourage new businesses state, to remain in to increase employ- ment opportunities. proposals Other to narrow the credit clause were also defeated.34

Shortly before the 1961 Constitutional Conven- tion the a people defeated to proposal amend the 1908 Constitution to provide: "The credit of the state, up $5,000,000.00, to may granted, be and at only act, the direction of a or to in aid public of corporations benefit for the purpose of industrial, financing manufacturing and munici- pal development projects this state.”35 Legislature authorized,

The is with the assent of 33 proposed provided: The amendment state, up $100,000,000, "The credit may a of to sum pledged purpose granted public corporations, or to or in aid of benefit for the industrial, financing manufacturing of municipal and devel- opment projects however, in this state: Provided That such require approval extension of credit shall a formal act of the legislature.” Record, 1961, p 1 Official Constitutional Convention 623. proposal by (id, 629), p The was defeated a vote 84 to 39 and later 632). by (id, p vote 93 to 40 provided Another amendment defeated the floor would have granted "except that the credit of the shall not be as authorized Record, by supra, p law”. 1 Official 629. Other amendments were rejected improve committee; proposals except included were loans state, bring industry permit grant or to the and to of credit health, purposes safety, general "for rejecting and welfare.” In proposals interpreted these broadly constitution. There is that it was observed that "those terms are so you might just provision that as well take the out the very very, little that the state would want do you 'health, safety general cannot include under the words Id, p welfare’ ”. 623. Acts, p 1961 Public and Local 760. by members, appropriate public two-thirds of its purpose. private for a money property or Const may Legislature accord- art 30.36 of the au- ingly, activity whether the the private, authority endow thority public is a vote Without out of current revenue.37 effectively pledge the however, not people, general taxing power. do violatе

Self-liquidating revenue bonds disclaimers, limitations, but debt not because the market understand purchasers because is tax revenue involved. pledge that no default, have com- If is a no there bondholders make up deficiency. if the state does not plaint state to do so. no on the There is constraint proponents’ argument Underlying of which assumption, unsupported by any evidence aware, obligations that we have been made and marketed can be underwritten will ac- guarantees its solely on the cepted community the financial of indeterminate strength projections of revenue underlying Also perhaps problematic projects. provision adopted in also first 1850. Const This was §45. 37Appropriations matter. not involved in the instant There are whether projects no authority of to consider be financed need improvement. obligations prohibited If works of internal bonds, authority self-liquidating are of revenue of nature regard projects prohibited of are works then without to whether the financially improvement the state would not be interested internal them the debt and (see they supra) they violate if are not of that nature fn credit limitations. program necessary The that this is determination public promotion resulting the conclusion of welfare does mandate Legisla improvements public. acts of the internal All promote premise presumably does ture not entire tion welfare but judicial constitutionality. The them review for from insulate process judicial concept and of review would be without founda declaration, determinatively could, Legislature if its own Marbury meaning See to be ascribed to the Constitution. conclude the (1 Cranch) (1803). Madison, 137; 2 v 5 US L Ed 60 Advisory Opinion PA 301 1975 307 argument assumption their that a is the failure of to Legislature respond affirmatively a certi- the authority fication from the chairman that a necessary prevent make-up appropriation affect significantly default would not the market and, therefore, Michigan the Legisla- securities truly respond ture has discretion to affirmatively or negatively. assumptions The of those validity not a law question of constitutional law at all, question but fact. matter,

In the instant in contrast with the ear- lier opinions hospital bonds38 and public hous- bonds,39 ing no basis for indulging there is assump- tions regarding marketability of these bonds or the willingness financial institutions accept guarantees loan independent any commitment power state’s taxation. Foote Hospital was long established and projections pre- revenue sumably fully supported contemplated bond Housing obligations issue.40 authority may simi- larly supported by routine revenue projections; the experience has been favorable.41 expected

The Job Development Authority is make loans to enterprises. new untested alleviating and preventing unemploy- ment may involve the financing proj- ects prospects with uncertain and revеnue proj- guaranteed ections. The loans may be those that financial institutions would unwilling make guarantee. but for the

aWhile testimonial hearing may establish that Hospital, Hospital Authority, WA Foote Memorial Inc v Jackson (1973). 193; NW2d 649 Advisory Constitutionality supra. re of PA No Phalon, Investing: Booming Tax-Exempt Hospital See Personal Bonds, Times, May 1977, p York New 11. Housing Michigan Development Authority, State 1976 Annual Report, p 8. Opinion J. authority obligations accept the market would and the provision accompany- make-up without a and "policy assurance” ing "further statements capital in the re- this that deficiencies state” be funded "may” funds guarantee serve and loan full on a factual appropriations, authority’s obliga- record it appear and, therefore, accepted tions could would except on the not be or marketed underwritten of further strength assurance expressions of such and state policy. appear it also

On a full record factual discretion, in Legislature has although in form the present At there are approxi- it does not. actuality outstanding mately dollars of 1-1/2 billion obligations, additional 7-1/2 billions and an obligations municipalities of school districts If it local units of were to government. and other Legislature that a make appear failure appropriations capital deficiencies up with expose funds would guarantee reserve or loan loss, of such to financial would holders securities Michigan have on the market an adverse effect securities, difficult and and would make more outstanding expensive obligations to refinance future, in the is in form market securities what an effective discretionary could substance be establishing commitment. By bonds, guarantees, notes and loan authorizing set Legislature would then have in motion forces Legislatures funds oblige provide which future deficiencies under constraint up to make obliga- implications the holders of state adverse borrowing impairment tions and consequent state and its subdivisions. capacity Legislatures on future Such constraints If obligation only. not create a moral people would Advisory 1975 PA 301 Williams, which, a tacit understanding has evolved because forces, of market cannot Legislature fail honor, disclaimers, act, would despite be an effective to an express commitment tantamount commitment spirit within the constitutional limitations.

A conclusion that act violates constitu- limitations, tional authority obligations or that are valid, not or would not be would preclude pursuit of the goal providing increased employ- ment opportunities through governmental subven- tion of buildings, machinery industrial and equip- ment; goal would mean that if that is to be financed money with borrowed an approving vote of the people required projects or the financed must support projections revenue without an effec- tive taxing commitment of the power.

Ryan, J., concurred with J. Williams, J. I my concur with Brother Levin. I do so because principally of the interaction of two factors. The first factor is that the Job Develop- ment Act Authority deals with bond risks that are different from the secure risks traditional reve- on, nue bonds that buyer rely bond can such Bridge, the Blue Water the Mackinac Bridge, hospitals, public housing, Building, City-County Detroit, etc., in each which there was either a firm revenue record or sound engineering revenue ‍​​‌​​‌​‌​​‌​​​‌‌​​‌‌​‌​​‌‌‌​​​​​​‌​‌​‌​​‌​‌​​‌‌​‍projections. second factor is the very strong emphasis in the act the Legislature may in appropriate the future capital to maintain reserve fund at a level payments. to meet bond 1975 PA 31-48 and 61. In mind the my §§ first factor alone is not but interacting critical with the record it creates reli- a situation where ance is on only partially par- revenues thus Williams, the extent that tially the credit act is bonds not revenue the bonds constitutionally invalid. part Moody, deci- J., no Jr., took

Blair this case. sion notes evidence a requiring compliance borrowing debt of the state with the' Constitution, provisions provide nor act does the for an pledge pledge unconstitutional the state’s credit. The bonds Development Authority, payable the credit the Job and are generated projects by from revenue the intended be financed by legal obligation by them. There is no on the state account of these bonds or notes. Statute declared constitutional. Levin, joined by Ryan, may Justice Justice wrotе the act constitutional, may, be construed so as to be but that never- theless, applied. Advisory opinions be unconstitutional as are inherently questions abstract answers to abstract without fac- development. tual In the instant matter the ultimate resolution questions largely depend of these will on the factual context. purpose 1. The of the debt and credit limitations the Legislature, is to Constitution bar the without a vote of the people, incurring, general from on credit of the state’s taxing power, obligations payable in the future. While the separate legal entity, government is it is a instru- state, mentality subject debt, of this to the constitutional credit, debt, improvement and internal credit limitations. improvement apply and internal limitations do not self- bonds, liquidating revenue which are not a state debt and do any resulting improvement involve state in because 400 anticipated and not solely revenue on purchasers rely power, cannot be avoided general taxing the limitations but an legal if there is effective commitment of a disclaimers taxing power. commitment constitutional, and are to be presumed 2'. are Statutes infirmity. A court from constitutional construed to save them supportive of the constitu- presume facts the existence construed, only this act authorizes tionality legislation. So making indebtedness the issuance of evidence payable out of guarantees institutions to financial discretionary appro- рurely authority and such revenue of make; Legislature since the priations choose as the guarantees authority indebtedness and holders of evidences taxing power”, "general such call on the would then have no debt, represent credit of the obligations would not granted, have no and it would state would not been have authority. projects aided in the financial interest nevertheless, applied. may, unconstitutional 3. This act an action permissible cannot sustain The existence of a Although authority may impermissible effect. that has an obligations that appear only enter into authorized issue discretionary appropria- purely by revenue and are secured

Notes

notes bonds generated the revenues payable or from notes — financed projects thereby. the intended to be v State Com- Highway We held Schureman (1966), mission, 609; 377 Mich 141 NW2d that apply Const 15 does not to revenue it That decision controls here unless be said bonds. 301 for provision permissive appro- that in PA capital guarantee to the reserve and loan priations or notes into something funds converts these bonds than revenue bonds or notes. other provision that neither opinion We are of in PA 301 nor permissive appropriation some appropriation future actual would alter the status these as revenue or notes. bonds suggestion provision is made that for the appropriation gives of such future rise possibility obligation” Legislature a "moral in the to make pol- and that "as a matter of appropriations, so, indeed the state could not refuse to do icy” notes if the default. pay the bonds or But we keenly possibility. aware of that We obligations. The con- legal deal with Constitution and "moral” determinations "policy” fides such Legislature. obligation on legal part see no We Advisory Opinion PA 301 these bonds or notes. account of We regard them as true revenue bonds notes. (2) said, As consider we have we the Job Development legal entity is a Authority separate Michigan. from the For this reason State of when makes guarantees it loans from its funds or loans made not involve the credit of others does State of Michigan. PA opinion We are of the 301 does not particulars violate the Constitution of 1963 in the herein considered. Fitzgerald, JJ., Coleman concurred with Kavanagh, C. J. Levin, J. The Justices have been asked for their opinions regarding of 1975 constitutionality

bonds or notes Fi- required nance Commission is the revenue and to determine "that properties pledged pay- for the guarantees ment sufficient”;9 thereof are loan subject requirement. to this constitutionality simply this act cannot be sustained be importance cause of the a this state have debt and credit state. ment venture Unemployment ends to be furthered. serious, pervasive socially problem. people corrosive Yet the spoken through which, through the Constitution limitations, preserve integrity seeks to the fiscal important, necessary timely particular govern However be, obliged legislation this Court is to invalidate

Case Details

Case Name: Advisory Opinion on Constitutionality of 1975 Pa 301

Court Name: Michigan Supreme Court

Date Published: Jun 10, 1977

Citation: 254 N.W.2d 528

Docket Number: Docket 57918

Court Abbreviation: Mich.