Baliles v. Mazur

• Decision Date: 03 December 1982
• Docket Number: No. 821123,821123
• Citation: 224 Va. 462,297 S.E.2d 695
• Parties: Gerald L. BALILES, Attorney General of Virginia v. Edward J. MAZUR, Comptroller of Virginia. Record
• Court: Virginia Supreme Court

Page 695

297 S.E.2d 695

224 Va. 462

Gerald L. BALILES, Attorney General of Virginia v. Edward J. MAZUR, Comptroller of Virginia.

Record No. 821123.

Supreme Court of Virginia.

Dec. 3, 1982.

Harry Frazier, III, Richmond (Gerald L. Baliles, Atty. Gen., William G. Broaddus, Chief Deputy Atty. Gen., Walter A. McFarlane, Deputy Atty. Gen., John G. MacConnell, Asst. Atty. Gen., James J. Knicely Hunton & Williams, Fairfax, on briefs), for petitioner.

J. Durwood Felton, III, Richmond, for respondent.

Before CARRICO, C.J., and COCHRAN, POFF, COMPTON, THOMPSON, STEPHENSON and RUSSELL, JJ.

THOMPSON, Justice.

The Attorney General, by filing a petition for a writ of mandamus, invokes our original jurisdiction pursuant to Code § 8.01-653, ¹ seeking adjudication as to the constitutionality of certain provisions of the "Virginia Public Building Authority Act of nineteen hundred eighty-one" (the Act). Acts 1981, c. 569; Code §§ 2.1-234.10 to -234.19.

On June 25, 1982, the Comptroller of Virginia (Comptroller) notified the Attorney General of doubts respecting the constitutionality, proper construction, and interpretation of the Act and raised certain questions for consideration by this court. The questions are:

1. Do the provisions of the Act empower the Virginia Public Building Authority (Authority) to undertake financial obligations to construct, improve, furnish, maintain, acquire, and operate public buildings for sale, lease, or conveyance to the Commonwealth which would violate the provisions of Article X, § 9 of the Constitution concerning the creation of debt to which the full faith and credit of the Commonwealth is pledged or committed?

2. Does the provision of the Act that the Authority shall not undertake any project or projects which are not specifically included and authorized to be undertaken in a bill or resolution passed by a majority of those elected to each house of the General Assembly violate the principle stated in Article I, § 5, and Article III, § 1, of the Constitution that the legislative, executive, and judicial departments of the Commonwealth shall be separate and distinct?

The essential facts are not in dispute and, as outlined in the petition for a writ of mandamus and accompanying brief, are:

The Authority was established as "... a body corporate and politic, constituting a public corporation and governmental instrumentality" for the purpose of "constructing, ... maintaining, ... and operating public buildings for the use of the State." The membership of the Authority includes the State Treasurer, the State Comptroller, and five additional members appointed by the Governor. Code §§ 2.1-234.12, -234.13.

The Authority is authorized to undertake only those projects specifically authorized in a bill or resolution passed by a majority of those elected to each house of the General Assembly. It has the power to (i) acquire, purchase, hold and use real and personal property; (ii) lease as lessor to the Commonwealth (and any of its political subdivisions or agencies), subject to the approval of the Governor, any project constructed by or any property at any time acquired by the Authority; and (iii) acquire by purchase, lease, or otherwise, and to construct, improve, furnish, maintain, repair, and operate projects. The Authority is also empowered to fix and collect rates, rentals, and other charges for use of its facilities or projects. Code § 2.1-234.13.

In furtherance of its purposes, the Authority may borrow money and issue notes, bonds, and other evidences of indebtedness and may secure such obligations by the pledge of its revenues, rentals, and receipts. The sum of all its obligations may not at any one time exceed $150,000,000. Id.

Code § 2.1-234.14 states, in part, that:

The principal of and interest on such bonds shall be payable solely from the funds provided in this article for such payment. Any bonds of the Authority issued pursuant to this Article shall not constitute a debt of the Commonwealth, or any political subdivision thereof other than the Authority, and shall so state on their face.

Rents, fees, and other charges for use of the Authority facilities are required to be fixed and adjusted so that the revenues, together with all available funds, will be sufficient to pay the cost of maintaining, repairing, and operating the Authority's projects, to pay the principal of and interest on its bonds, and to create reserves for such purposes. Revenues received by the Authority may be pledged and assigned to secure its obligations, but the Authority may not convey or mortgage any project or any part thereof as security for its bonds.

The Authority was organized on December 7, 1981. On January 11, 1982, the governing board (Board) unanimously adopted a resolution (the "January resolution") authorizing the acquisition and/or construction of three public office buildings and the lease thereof to the Commonwealth, and issuance of revenue bonds. The Board further authorized its chairman to take such action as may be necessary to obtain the requisite approvals from the General Assembly and the Governor. On June 17, 1982, the Board adopted a resolution (the "June Resolution") which ratified and reaffirmed the January Resolution and approved an outline of financing and plan of lease for the proposed projects.

Specifically, the January Resolution provides for the issuance of approximately $75,000,000 Public Office Building Revenue Bonds to (i) acquire the James Monroe Building (Phases I and II) (the "James Monroe Project") and the Department of Motor Vehicles Building (the "DMV Project"), both now leased to the Commonwealth by the Virginia Supplemental Retirement System (VSRS), and (ii) construct a building for the Commonwealth's Department of Computer Services (the "Computer Services Project"). Each of these projects is located in the City of Richmond. The bonds will be secured by an assignment of all the Authority's rights to rental payments, rates, and fees charged for the use of or for the services and facilities associated with each project. The January Resolution expressly states that the bonds will be limited obligations payable solely from the revenues pledged for such purposes and that they will not constitute a debt of the Commonwealth or any political subdivision thereof other than the Authority.

James Monroe and DMV Projects. In consideration of the Authority paying to the Commonwealth an amount sufficient to pay the total investment of the VSRS in these projects, the Commonwealth will sell to the Authority for a nominal price the real property and improvements constituting the two projects. As to the James Monroe Project, the Authority will lease it to the Department of General Services for a period of 20 years, with rental payments sufficient to pay annual debt service on the bonds issued to finance its acquisition and to fund adequate reserves and administrative expenses. The DMV Project will be leased to the DMV for a period of two years, subject to automatic renewal for consecutive two-year terms over a twenty-year period.

The Department of General Services is required to request an annual appropriation from the General Assembly in the amount of the succeeding biennial rent payment to provide for the use, occupancy, and maintenance of such project. The two leases provide that upon the termination of the lease in 2002 A.D., fee simple title in the projects remains in the Authority. Both leases also contain clauses providing for early termination should funds for rental payments ever become unavailable.

If the Authority acquires these two existing buildings, the rental cost to the Commonwealth, based on the anticipated tax- exempt borrowing by the Authority at 11% per year, will be approximately $7,919,839 per year, compared with the present cost for the James Monroe and DMV Projects of approximately $9,585,210 per year, for an estimated annual savings for both projects of $1,665,371.

Computer Services Project. For a nominal price, the Authority will acquire real property from the Commonwealth and construct thereon a building to be used by the Department of Computer Services. The lease has a one-year term, with subsequent automatic yearly renewals for a period of 20 years, provided the requisite annual rental payments are always made. These rental payments will be sufficient to amortize the bonds of the Authority issued to acquire and construct the project, to pay for the cost of repairs and operations, and to fund adequate reserves and administrative expenses.

The Authority will enter into a 20-year agency agreement with the Department of General Services to maintain the project, subject to cancellation in the event the underlying lease is not renewed. As with the leases in the James Monroe and DMV Projects, fee simple title in the project remains with the Authority upon the termination of the lease in 2002 A.D. Unlike the other leases, however, there is no clause in the Computer Services Project lease requiring the Department of Computer Services to make an annual request to the General Assembly for appropriations.

I. Are Revenue Bonds, Issued by the Authority, Debts of the Commonwealth in Violation of Article X, § 9, of the Constitution of Virginia?

We hold that they are not. At the outset, we point out that the enabling legislation provides in part that "[a]ny bonds of the Authority issued pursuant to this Article shall not constitute a debt of the Commonwealth, or any political subdivision thereof other than the Authority, and shall so state on their face." (Emphasis added.) Acts 1981, c. 569, Code § 2.1-234.15. Also, the resolutions of the Authority are to the same effect:

The Bonds will be limited obligations of the Authority payable solely from the revenues pledged thereto pursuant to the Indenture and shall not constitute a debt of the Commonwealth of Virginia or any political subdivision thereof other than the Authority.

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