Elliott v. McNair
| Decision Date | 14 July 1967 |
| Docket Number | No. 18678,18678 |
| Citation | 250 S.C. 75,156 S.E.2d 421 |
| Court | South Carolina Supreme Court |
| Parties | Jack R. ELLIOTT, Appellant, v. Robert E. McNAIR, Governor of the State of South Carolina, Daniel R. McLeod, Attorney General of the State of South Carolina, Grady L. Patterson, Jr., Treasurer of the State of South Carolina, John H. Mills, Comptroller General ofthe State ofSouth Carolina, Edgar A. Brown, Chairman of the Senate Finance Committee,Robert J. Aycock, Chairman of the Ways and Means Committee of the House ofRepresentatives, constituting the Budget and Control Board of the State ofSouth Carolina; C. LaneyTalbert, Chairman, Frank Sumner Smith, Jr., Vice Chairman, and John L. Cotton,Joe Taylor and J. Watson Wharton, constituting The Richland County Board ofAdministrators, and Rockwell Manufacturing Company, Respondents. |
Marchant, Bristow & Bates, Columbia, for appellant.
Atty. Gen. Daniel R. McLeod, Belser, Belser & Baker, Joseph D. Sapp, Columbia, Sinkler, Gibbs & Simons, Charleston, for respondents.
This action is one under the 'Uniform Declaratory Judgments Act', Sections 10--2001 et seq., 1962 Code of Laws, brought by Jack R. Elliott, the appellant herein, a taxpayer of Richland County, South Carolina. The purpose of the action is to determine the constitutionality of the recently enacted Industrial Revenue Bond Act, approved March 21, 1967, hereinafter referred to as the Act, and the validity of certain actions to be taken pursuant thereto. The appeal here is from a decree entered by the Court of Common Pleas for Richland County upholding the validity of the Act and certain proposed actions of the respondents pursuant thereto. There are no factual issues involved and the matters to be determined are questions of law. However, we do recite a brief re sume of the facts.
The respondent, Rockwell Manufacturing Company, hereinafter referred to as Rockwell, is a Pennsylvania Corporation, which sometime ago announced its intention to establish a manufacturing enterprise in Richland County. To this end Rockwell acquired, on March 23, 1967, a tract of land containing forty acres in Richland County as a site for the construction of the proposed manufacturing enterprise, hereinafter referred to as the project.
The 'County Board' of Richland County, who are respondents herein, and Rockwell have entered into an agreement, under the terms of which:
1. Rockwell proposes to convey to the County Board the forty acre tract for the same price as it paid for the same.
2. The County Board will issue Richland County Industrial Revenue Bonds in the amount of $1,000,000.00 and will use the proceeds (after expenses in connection with the transaction) to pay the purchase price of the forty acre tract and use the balance to pay the costs of constructing thereon a manufacturing plant.
3. The County Board will lease the tract and manufacturing plant to Rockwell at a rental sufficient to enable the County Board to meet the payment of the principal and interest on the bonds and to discharge its obligations pursuant to the lease and indenture hereafter referred to.
4. The County Board will secure its bonds with a trust indenture to a bank, as trustee, which will include covenants and undertakings of the sort generally found in such instruments, and which will provide that upon the failure of the County Board to pay the principal or interest on the bonds, or meet any of its obligations under the indenture, the trustee may foreclose the mortgage, have the property sold and apply the proceeds of such sale to the payment of the principal and interest of the bonds.
5. By the terms of the lease, Rockwell proposes to pay, to Richland County, to that School District of Richland County wherein the project is located, and to all political divisions or subdivisions which now or henceforth might include the sight of the project, as additional rent, those sums which Rockwell would have paid to Richland County, the School District and the other political divisions or subdivisions, had Rockwell itself been the owner of the tract of land and the project thereon situate.
6. The lease will contain several provisions granting rights to Rockwell, including either a provision granting to Rockwell the absolute option to purchase the project for the sum equal to the aggregate at such time due on the bonds plus a nominal sum, or a provision permitting Rockwell to renew its lease after the original term for a nominal sum.
In its return, Rockwell states that the reduced rate of interest available to it by reason of the tax-exempt feature of the bonds is a decided factor in establishing the economic feasibility of its undertaking. The plant of Rockwell when completed will employ some three hundred and forty persons.
The respondents, who are members of the State Budget and Control Board, hereinafter referred to as the State Board, have admitted that they have tentatively given favorable consideration to the application of the County Board for permission to issue bonds and will do so unless it be held that the Act is unconstitutional.
Thus it would appear that all conditions imposed by the Act have been, or will be, duly met, so that squarely at issue is the constitutionality of the Act and the validity of the actions of the respondents pursuant thereto.
Industrial Revenue Bond financing represents a type of financing of relatively recent origin. It dates back to the Mississippi Act of 1936 which permitted the issuance of both general obligation bonds and revenue bonds for the purpose of financing industrial enterprises. See the case of Albritton v. City of Winona, 181 Miss. 75, 178 So. 799, 115 A.L.R. 1436. More than thirty states have now enacted statutes which permit this type of financing, although only few besides Mississippi permit the issuance of general obligation bonds. In by far the great majority of instances, state statutes which authorize this type of financing, limit the bonds to those which are payable solely from the revenues of the particular project or enterprise. Accordingly, it is apparent, as in the case here, that the sole obligation of the political unit issuing the bonds is to apply the revenues resulting from the project or from its leasing to the payment of the principal and interest of the bonds. Our Act is quite specific, and Section 4 thereof provides: 'Bonds and interest coupons issued under authority of this Act shall never constitute an indebtedness of such county within the meaning of any state constitutional provision or statutory limitation and shall never constitute nor give rise to a pecuniary liability of the county or a charge against its general credit or taxing powers, and such fact shall be plainly stated on the face of each bond.'
While the several states of the United States, and their political subdivisions, have long undertaken public works which indirectly provide benefits for those who would undertake industrial enterprises, such as highways, airports, port facilities, waterworks and sewer systems, and other similar undertakings, until the advent of industrial bond financing, the issuance of bonds, to pay the cost of a particular manufacturing enterprise to be operated by a private concern was unheard of. Indeed, it seems to have been unquestioned that private corporations should do their own financing, leaving public financing confined to projects designed for the benefit of the general public. It is argued that the doctrine which sanctions industrial bond financing runs counter to the private enterprise system. However, it is our duty to examine the Act to see if it, or any provision therein, violates specific constitutional limitations. Our constitution is not a grant of power, but a limitation on what, absent limitations therein, would be a plenary power in the people or their elected representatives. Accordingly, it is not sufficient for us to find that an act is offensive to what may be prevailing notions of the proper sphere for state governments. It is necessary, in order for us to strike down an act of the General Assembly to find that it offends specific provisions of the state constitution which have limited and circumscribed legislative action in that area.
This appeal raises numerous questions concerning the Act and the actions of the respondents pursuant thereto. Contrary to the language of many state statutes which authorize industrial revenue financing by incorporated cities and towns or state and other authorities, the power to undertake this type of financing under the Act rests with the governing boards of the forty-six counties of this state. The power of a county to levy taxes and issue bonds is strictly limited by Article X, Sec. 6, of the 1895 Constitution of this State. It is there provided:
'* * * The General Assembly shall not have power to authorize any County or township to levy a tax or issue bonds for any purpose except for educational purposes, to build and repair public roads, buildings and bridges, to maintain and support prisoners, pay jurors, County officers, and for litigation, quarantine and Court expenses and for ordinary County purposes, to support paupers, and pay past indebtedness. * * *'
It is contended that the Act here violates the foregoing provision of the Constitution. It seems clear from our decisions that the limitation upon the power of the General Assembly to authorize a county to issue bonds relates solely to general obligation bonds payable from the proceeds of Ad valorem tax levies. Park v. Greenwood County, 174 S.C. 35, 176 S.E. 870, and Benjamin v. Housing Authority of Darlington County, 198 S.C. 79, 15 S.E.2d 737.
This question first arose in the Park case when the right of Greenwood County to issue bonds for the construction of an electric generating system was challenged. The holding of this Court was specific:
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