359 Mass. 769 | Mass. | 1971
To his Excellency, the Governor of the Commonwealth:
The Justices of the Supreme Judicial Court respectfully submit their answers to the questions set forth in your request of January 29, 1971, transmitted to us on the same day. The questions arose in connection with St. 1970, c. 746, “An Act providing financial assistance for a water pollution abatement program for industrial wastes.”
The act provides that the Department of Commerce and Development (department) may “enter into contracts with industrial and commercial businesses ... to provide state financial assistance in the form of loans to said businesses for the construction of water pollution waste treatment facilities to be used by said businesses . . ..” The loans are to be made on such terms and conditions as the department deems advisable. As a condition precedent to making a loan, the commissioner of the department is to certify
The department is authorized to expend a sum not exceeding $25,000,000. To meet the necessary expenditures, the State Treasurer, upon the request of the Governor, shall issue and sell bonds of the Commonwealth. The department and the division have the authority to make rules and regulations for the proper administration of the act.
The request states that the commissioner of the department- is prepared to certify one or more private corporations which have applied for loans under c. 746, but before he can do so the Governor must perform certain acts, including a request for the issuance of bonds. The Governor is fully prepared to exercise his powers under the act provided he “can legally do so.”
The request concludes: “As doubts have been raised by the Department of the State Treasurer and the Comptroller’s Division, as to whether I may constitutionally exercise the powers referred to above with respect to c. 746, and as to whether the Commissioner of Commerce and Development, the Comptroller, the State Treasurer and other officers of the Commonwealth may perform the duties and exercise
“1. Would the issuance of bonds of the Commonwealth and the use of the proceeds thereof for the making of loans to private individuals and organizations in the manner provided in St. 1970, c. 746, violate Section 1 of Article LXII of the Amendments to the Constitution of the Commonwealth —
“(a) If the interest rate payable for such loans were equal to the interest rate payable by the Commonwealth to the holders of the bonds issued to finance the same?
“(b) If the interest rate payable for such loans were less than the interest rate payable by the Commonwealth to the holders of such bonds?
“2. Would the use of the proceeds of bonds of the Commonwealth for the making of loans to private individuals and organizations in the manner provided in St. 1970, c. 746, with the principal and interest on such bonds payable from funds raised by taxation, involve the expenditure of public funds for other than a public purpose?”
In response to our invitation to interested persons to file briefs not later than February 18, 1971, briefs were filed on behalf of the Attorney General and Associated Industries of Massachusetts.
1. With reference to the second question, we believe that the use of public funds under the act would not involve an expenditure of public funds for other than a public purpose. Numerous cases have discussed the distinction between a use or service which is public and therefore a proper object of governmental expenditure and one which is private and therefore an improper object to which to devote public funds. See Opinion of the Justices, 320 Mass. 773, 775. “Each case must be decided with reference to the object sought to be accomplished and to the degree and manner in
To question 2, we answer, “No.”
2. Question 1 presents a more difficult problem. Article 62, § 1, of the Amendments to the Massachusetts Constitution provides, “The credit of the commonwealth shall not in any manner be given or loaned to or in aid of any individual, or of any private association, or of any corporation which is privately owned and managed.” The debates concerning art. 62 at the Constitutional Convention of 1917-1918 indicate “that the amendment was designed solely to force State assistance to public service enterprises to be on a 'pay-as-you-go’ basis not involving any absolute or contingent debt obligation on the part of the Commonwealth.”
Cases dealing with art. 62 have usually involved a clear loan of credit by the Commonwealth, such as a guaranty of the obligations of another. See the cases collected in Opinion of the Justices, 337 Mass. 800, 807. In that opinion such cases were distinguished from the purchase for cash (with funds borrowed in anticipation of assessments) of an option and of continuing railroad service.
The 1970 statute provides no guaranty, but it does authorize the Commonwealth to borrow money and to lend that money (apparently without new appropriation; cf. Singleton v. Treasurer & Recr. Gen. 340 Mass. 646, 649) to private businesses. Although the loan is to be for a public purpose, it is made to private persons and is likely to be of substantial benefit to them and to their property. A further difficulty is that § 1 of the 1970 statute provides only somewhat meager and general standards to guide the department in making loans and loan contracts.
In any event, there plainly is a direct connection between the State borrowing (which will remain outstanding) and the subsequent private loans, made under statutory restrictions which leave much to departmental discretion. The arrangement leads to the same inquiry as was made in Ayer v. Commissioner of Admn. 340 Mass. 586, 593, 597-599, where we felt bound to treat as “a State operation” the activities of an association which, as there to be employed, in effect and substance would be used to accomplish “constitutional evasion.”
The arrangement contemplated by the 1970 statute is comparable. The two steps of (a) borrowing by the State and (b) lending of the borrowed cash to a private borrower, would have essentially the same effect as a State guaranty of a loan to the ultimate borrower. Such a guaranty would be a violation of art. 62. To treat the arrangement under the 1970 statute differently would be to emphasize form rather than substance.
The Commonwealth, by making loans under the 1970
The relationship between the interest paid by loan recipients to the Commonwealth and the interest paid by the Commonwealth, we believe, has no bearing upon the question whether the act violates art. 62.
To question 1, we answer, “Yes.”
G. Joseph Tauro.
John V. Spalding.
R. Ammi Cutter.
Jacob J. Spiegel.
Paul C. Reardon.
Francis J. Quirico.
Robert Braticher.