413 U.S. 734 (1973), 71-1523, Hunt v. McNair

Docket Nº:No. 71-1523
Citation:413 U.S. 734, 93 S.Ct. 2868, 37 L.Ed.2d 923
Party Name:Hunt v. McNair
Case Date:June 25, 1973
Court:United States Supreme Court
 
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Page 734

413 U.S. 734 (1973)

93 S.Ct. 2868, 37 L.Ed.2d 923

Hunt

v.

McNair

No. 71-1523

United States Supreme Court

June 25, 1973

Argued February 21, 1973

APPEAL FROM THE SUPREME COURT OF SOUTH CAROLINA

Syllabus

In this action for injunctive and declaratory relief appellant challenges the South Carolina Educational Facilities Authority Act as violative of the Establishment Clause of the First Amendment insofar as it authorizes a proposed financing transaction involving the issuance of revenue bonds benefiting a Baptist controlled college. The Act establishes an Educational Facilities Authority to assist (through the [93 S.Ct. 2870] issuance of revenue bonds) higher educational institutions in constructing and financing projects, such as buildings, facilities, and site preparation, but not including any facility for sectarian instruction or religious worship. Neither the State nor the Authority is obligated, directly or indirectly, to pay the principal of or interest on the bonds; nor is the State's taxing power pledged or implicated. All expenses of the Authority also must be paid solely from the revenues of the projects. The Authority gave preliminary approval to an application submitted by the college, only 60% of whose students are Baptists. As subsequently modified, the application requests the issuance of revenue bonds to be used for refinancing capital improvements and completing the dining hall. Under the statutory scheme, the project would be conveyed to the Authority, which would lease it back to the college, with reconveyance to the college on full payment of the bonds. The lease agreement would contain a clause obligating the institution to observe the Act's restrictions on sectarian use and enabling the Authority to conduct inspections. The provision for reconveyance would restrict the project to nonsectarian use. The trial court denied appellant relief, and the State Supreme Court affirmed. After this Court had vacated the judgment and remanded the case for reconsideration in the light of Lemon v. Kurtzman, 403 U.S. 602, and other intervening decisions, the State Supreme Court adhered to its earlier decision.

Held: The Act as construed by the South Carolina Supreme Court does not, under the guidelines of Lemon v. Kurtzman, supra, at 612-613, violate the Establishment Clause. Pp. 741-749.

(a) The purpose of the Act is secular, the benefits of the statute being available to all institutions of higher education in the

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State, whether or not they have a religious affiliation. Pp. 741-742.

(b) The statute does not have the primary effect of advancing or inhibiting religion. The college involved has no significant sectarian orientation, and the project must be confined to a secular purpose, with the lease agreement, enforced by inspection provisions, forbidding religious use. Pp. 742-745.

(c) The statute does not foster an excessive entanglement with religion. The record here does not show that religion so permeates the college that inspection by the Authority to insure that the project is not used for religious purposes would necessarily lead to such entanglement. The Authority's statutory power to participate in certain management decisions also does not have that effect, in view of the narrow construction by the State Supreme Court, limiting such power to insuring that the college's fees suffice to meet bond payments. Absent default, the lease agreement would leave full responsibility with the college regarding fees and general operations. Pp. 745-749.

258 S.C. 97, 187 S.E.2d 645, affirmed.

POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART, WHITE, BLACKMUN, and REHNQUIST, JJ., joined. BRENNAN, J., filed a dissenting opinion, in which DOUGLAS and MARSHALL, JJ., joined, post, p. 749.

POWELL, J., lead opinion

MR. JUSTICE POWELL delivered the opinion of the Court.

Appellant, a South Carolina taxpayer, brought this action to challenge the South Carolina Educational Facilities Authority Act (the Act), S.C.Code Ann. § 22-41

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et seq. (Supp. 1971), as violative of the Establishment Clause of the First Amendment insofar as it authorizes a proposed financing transaction involving the issuance of revenue bonds for the benefit of the Baptist College at [93 S.Ct. 2871] Charleston (the College).1 The trial court's denial of relief was affirmed by the Supreme Court of South Carolina. 255 S.C. 71, 177 S.E.2d 362 (1970). This Court vacated the judgment and remanded the case for reconsideration in light of the intervening decisions in Lemon v. Kurtzman, Earley v. DiCenso, and Robinson v. DiCenso, 403 U.S. 602 (1971); and Tilton v. Richardson, 403 U.S. 672 (1971). 403 U.S. 945 (1971). On remand, the Supreme Court of South Carolina adhered to its earlier position. 258 S.C. 97, 187 S.E.2d 645 (1972). We affirm.

I

We begin by setting out the general structure of the Act. The Act established an Educational Facilities Authority (the Authority), the purpose of which is "to assist institutions for higher education in the construction, financing and refinancing of projects . . . ," S.C.Code Ann. § 22-41.4 (Supp. 1971), primarily through the issuance of revenue bonds. Under the terms of the Act, a project may encompass buildings, facilities, site preparation, and related items, but may not include

any facility used or to be used for sectarian instruction or as a place of religious worship nor any facility which is used or to be used primarily in connection with any part of the program of a school

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or department of divinity for any religious denomination.

S.C.Code Ann. § 22-41.2(b) (Supp. 1971). Correspondingly, the Authority is accorded certain powers over the project, including the powers to determine the fees to be charged for the use of the project and to establish regulations for its use. See infra at 747-749.

While revenue bonds to be used in connection with a project are issued by the Authority, the Act is quite explicit that the bonds shall not be obligations of the State, directly or indirectly:

Revenue bonds issued under the provisions of this chapter shall not be deemed to constitute a debt or liability of the State or of any political subdivision thereof or a pledge of the faith and credit of the State or of any such political subdivision, but shall be payable solely from the funds herein provided therefor from revenues. All such revenue bonds shall contain on the face thereof a statement to the effect that neither the State of South Carolina nor the Authority shall be obligated to pay the same or the interest thereon except from revenues of the project or the portion thereof for which they are issued and that neither the faith and credit nor the taxing power of the State of South Carolina or of any political subdivision thereof is pledged to the payment of the principal of or the interest on such bonds. The issuance of revenue bonds under the provisions of this chapter shall not directly or indirectly or contingently obligate the State or any political subdivision thereof to levy or to pledge any form of taxation whatever therefor or to make any appropriation for their payment.

S.C.Code Ann. § 22-41.10 (Supp. 1971).

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Moreover, since all of the expenses of the Authority must be paid from the revenues of the various projects in which it participates, S.C.Code Ann. § 221.5 (Supp. 1971), none of the general revenues of South Carolina is used to support a project.

On January 6, 1970, the College submitted to the Authority for preliminary [93 S.Ct. 2872] approval an application for the issuance of revenue bonds. Under the proposal, the Authority would issue the bonds and make the proceeds available to the College for use in connection with a portion of its campus to be designated a project (the Project) within the meaning of the Act. In return, the College would convey the Project, without cost, to the Authority, which would then lease the property so conveyed back to the College. After payment in full of the bonds, the Project would be reconveyed to the College. The Authority granted preliminary approval on January 16, 1970, 255 S.C. at 76, 177 S.E.2d at 365.

In its present form, the application requests the issuance of revenue bonds totaling $1,250,000, of which $1,050,000 would be applied to refund short-term financing of capital improvements and $200,000 would be applied to the completion of dining hall facilities.2 The

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advantage of financing educational institutions through a state-created authority derives from relevant provisions of federal and South Carolina state income tax laws which provide in effect that the interest on such bonds is not subject to income taxation.3 The income tax exempt status of the interest enables the Authority, as an instrumentality of the State, to market the bonds at a significantly lower rate of interest than the educational institution would be forced to pay if it borrowed the money by conventional private financing.

Because the College's application to the Authority was a preliminary one, the details of the financing arrangement have not yet been fully worked out. But Rules and Regulations adopted by the Authority govern certain of its aspects. See Jurisdictional Statement, Appendix C, pp. 47-51. Every lease agreement between the Authority and an institution must contain a clause

obligating the Institution that neither the leased land, nor the facility located thereon, shall be used for sectarian instruction or as a place of religious worship, or in connection with any part of the program of a school or department of divinity of any religious denomination.

258 S.C. at 101, 187 S.E.2d at 647. To insure that this covenant is honored, each lease agreement must allow the...

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