California Housing Finance Agency v. Elliott

• Decision Date: 21 July 1976
• Docket Number: S.F. 23431
• Citation: 551 P.2d 1193,131 Cal.Rptr. 361,17 Cal.3d 575
• Court: California Supreme Court
• Parties: , 551 P.2d 1193 CALIFORNIA HOUSING FINANCE AGENCY, Petitioner, v. S. Michael ELLIOTT, as Chairperson etc., Respondent.

Page 361

131 Cal.Rptr. 361

17 Cal.3d 575, 551 P.2d 1193

CALIFORNIA HOUSING FINANCE AGENCY, Petitioner, v. S. Michael ELLIOTT, as Chairperson etc., Respondent.

S.F. 23431.

Supreme Court of California In Bank.

July 21, 1976.

As Modified on Denial of Rehearing Aug. 18, 1976.

Evelle J. Younger, Atty. Gen., Victor Sonenberg and Jeffrey L. Gunther, Deputy Attys. Gen., for petitioner.

Richard C. Salladin, W. Reece Bader, Roger L. Davis, Frederick Brown and Orrick, Herrington, Rowley & Sutcliffe, San Francisco, for respondent.

RICHARDSON, Justice.

The California Housing Finance Agency (the Agency) seeks a writ of mandate compelling respondent, its chairperson and acting president, to print revenue bonds pursuant to the Zenovich-Moscone-Chacon Housing and Home Finance Act (the Act) (§ 41000 et seq. of the Health & Saf. Code, to which all subsequent statutory citations refer unless otherwise noted) and resolutions promulgated thereunder by the Agency. Respondent, by way of a demurrer to the petition for mandate, asserts that the Act and the Agency's resolutions suffer from numerous constitutional infirmities, and refuses to issue the requested bonds without an appropriate order from us. We have concluded that the Act, construed to incorporate the provisions of article XXXIV, section 1, of the state Constitution (local elections for low-cost housing projects), is constitutional. Rather than compelling respondent to print the bonds at this time, however, we have left the Agency free to choose whether or not it wishes to proceed with the bond issuance in light of this opinion.

Preliminarily, we note that mandate is the proper remedy to compel a public officer to perform ministerial acts such as issuance of bonds. It is well established that the constitutional validity of the law authorizing a bond issuance may be determined in a proceeding for such a writ. (California Educational Facilities Authority v. Priest (1974)12 Cal.3d 593, 598, 116 Cal.Rptr. 361, 526 P.2d 513; Metropolitan Water Dist. v. Marquardt (1963) 59 Cal.2d 159, 170--171, 28 Cal.Rptr. 724, 379 P.2d 28; Golden Gate Bridge, etc., Dist. v. Felt (1931) 214 Cal. 308, 315--319, 5 P.2d 585.) We exercise our original mandate jurisdiction under article VI, section 10, of the California Constitution and California Rules of Court, rule 56, to review matters of public importance requiring prompt resolution. (California Educational Facilities Authority v. Priest, supra, 12 Cal.3d at p. 598, 116 Cal.Rptr. 361, 526 P.2d 513; San Francisco Unified School Dist. v. Johnson (1971) 3 Cal.3d 937, 944--945, 92 Cal.Rptr. 309, 479 P.2d 669; County of Sacramento v. Hickman (1967) 66 Cal.2d 841, 845, 59 Cal.Rptr. 609, 428 P.2d 593.) We have long recognized that the matter of public housing is one of great public concern and importance. (Housing Authority v. Dockweiler (1939) 14 Cal.2d 437, 449, 94 P.2d 794.) Moreover, the Legislature has determined that there exists a vital and immediate need for decent, low-cost housing in this state (§§ 41001--41003). Accordingly, we issued an alternative writ of mandate to consider the important questions raised by the parties.

We examine the Act, the resolutions adopted pursuant thereto, and the several constitutional challenges presented.

The Act

The primary purpose of the Act is to 'meet the housing needs of persons and families of low or moderate income' (§ 41331). In furtherance of this purpose, the Agency is authorized to issue revenue bonds in the aggregate principal amount of $450 million (§ 41700). Proceeds of the bonds are to be made available to 'housing sponsors' (described generally in § 41044 as various types of private developers and local public entities) in the form of development loans, construction loans, mortgage loans (for new construction and rehabilitation) and advances in anticipation of such loans, to construct, develop and acquire housing developments (§§ 41450--41452). In addition, bond proceeds under the Act may be used either to purchase loans from qualified mortgage lenders (§§ 41455--41457) or to lend funds to qualified mortgage lenders on the condition that they make such loans (§§ 41465--41469). The construction so financed may include commercial and other nonhousing facilities as are determined by the Agency to be an integral part of the housing developments and necessary or convenient in connection with the provision of housing pursuant to the Act (§ 41043).

The Act further appropriates $10 million from the general funds of the state to be paid into a supplementary bond security account. This fund is to be used 'to secure payment of the principal of, and interest and sinking fund payment on, . . . (the bonds issued under the Act).' (§ 41715.)

Under the Act the Agency is required to evaluate project proposals, monitor construction, and supervise the maintenance of the housing developments (§§ 41391, 41480--41482), and to regulate the eligibility of and terms of agreement between sponsors and tenants (§§ 41480, subds. (c), (d), (e)). We will examine these and other powers of the Agency in our consideration of the specific constitutional issues raised herein.

The Resolutions

Resolutions were adopted by the Agency pursuant to the Act on February 17, 1976. A master resolution contains the general authorization for the bond issuance and the specific terms and conditions of the bonds. This resolution is supplemented by three additional resolutions, each of which authorizes the issuance of $15 million principal amount of agency bonds.

The first supplemental resolution authorizes the issuance of bonds, denominated Series A, to fund loans to private housing sponsors (both limited profit and nonprofit) who will construct, develop and acquire low-rent housing. A portion of these proceeds is to be set aside either to purchase loans from qualified mortgage lenders or to lend to qualified mortgage lenders for the making of loans, including those made for the purpose of refinancing existing mortgage obligations. The housing units financed under this resolution are to be leased to persons and families who, under Agency standards, are unable to pay the rentals a which unassisted private enterprise is providing suitable housing.

The second supplemental resolution authorizes the sale of Series B bonds, the proceeds of which, as with Series A bonds, are to be used to make loans directly to private housing sponsors (both limited profit and nonprofit). These sponsors are to use the funds to construct, develop and acquire mixed income housing, however, rather than low rent housing. The resolution defines mixed income housing as that in which no more than 75 percent of the rental units are rented to persons and families deemed by the Agency to meet the eligibility requirements contained in the first resolution.

The third supplemental resolution authorizes the sale of Series C bonds, the proceeds of which are to be used to make loans directly to local public entities acting as approved housing sponsors. These entities are to use the funds to construct, develop and acquired mixed income housing developments, as defined in the second supplemental resolution.

Respondent asserts that the foregoing resolutions and the Act under which they were adopted violate the following state constitutional provisions: (1) article XVI, section 6, proscribing the lending of public credit and gift of public funds; (2) article XVI, section 3, prohibiting any state appropriation to an institution not under the exclusive management and control of the state; (3) article XVI, section 1, limiting the amount of state indebtedness which may be incurred without voter approval; and (4) article XXXIV, section 1, requiring voter approval in any community in which a low-rent housing project is to be developed or acquired by a state public body. We consider in turn each of these constitutional challenges.

1. The Extension of Public Credit and the Gift of Public Funds

Respondent argues that the resolutions hereinabove described violate the constitutional prohibition against the lending of public credit and the gift of public funds. (Cal.Const., art. XVI, § 6.) In particular, he focuses on the provisions which authorize the Agency to make loans to private housing sponsors and mortgage lenders at below-market interest rates, to purchase loans from certain lenders, and to refinance already existing mortgages. He also objects to the creation of the supplementary bond security fund. Each of these features, he contends, involves the unconstitutional use of state funds for the benefit of private individuals.

The Agency asserts that the housing program falls within the well recognized 'public purpose' exception to the constitutional prohibition against the gift of public funds. Under the public purpose doctrine, public credit may be extended and public funds disbursed if a direct and substantial public purpose is served and nonstate entities are benefited only as an incident to the public purpose. (County of Alameda v. Janssen (1940) 16 Cal.2d 276 281, 106 P.2d 11; Winkelman v. City of Tiburon (1973) 32 Cal.App.3d 834, 845, 108 Cal.Rptr. 415.) '. . . [T]he benefit to the state from an expenditure for a public purpose is in the nature of consideration and the funds expended are therefore not a gift even though private persons are benefited therefrom.' (County of Alameda v. Carleson (1971) 5 Cal.3d 730, 745--746, 97 Cal.Rptr. 385, 396, 488 P.2d 953, 964, citations omitted.) Respondent, while acknowledging the validity of this exception, contends that it is inapplicable because the programs in question primarily benefit certain private parties and only indirectly aid the public.

The determination of whether a particular program serves a public purpose is generally vested in the Legislature. (Id., at p. 746, 97 Cal.Rptr. 385, 488 P.2d 953.) In the matter before us, the Legislature has determined that decent housing is an 'essential motivating force'...