Harrison v. Day
| Decision Date | 08 September 1961 |
| Docket Number | No. 5304,5304 |
| Citation | 121 S.E.2d 615,202 Va. 967 |
| Court | Virginia Supreme Court |
| Parties | A. S. HARRISON, JR., ATTORNEY GENERAL OF VIRGINIA (FREDERICK T. GRAY, PRESENT ATTORNEY GENERAL, SUBSTITUTED PETITIONER) v. SIDNEY C. DAY, JR., COMPTROLLER OF VIRGINIA. Record |
Charles L. Kaufman, Special Assistant to the Attorney General (A. S. Harrison, Jr., Attorney General; Kenneth C. Patty, Assistant Attorney General; William P. Oberndorfer; Hamilton Plack, on brief), for the petitioner.
Aubrey R. Bowles, Jr. (Bowles, Boyd & Herod, on brief), for the respondent.
In Harrison v. Day, 200 Va. 764, 107 S.E.2d 594, we held to be constitutional the 1958 Act of Assembly (Enabling Act) which created the Virginia State Ports Authority and defined its rights, powers and duties, which are, generally, to acquire, construct and operate the harbors and their port facilities within the State and to issue revenue bonds for these purposes. Acts 1958, ch. 174, codified as §§ 62-106.1 through 62-106.19 of the 1950 Code. In that case the Comptroller questioned the constitutionality of appropriating State funds 'to aid the Authority in the development of firm proposals for the acquisition and construction of port terminals and facilities by the Authority for presentation to the General Assembly.' Acts 1958, ch. 642, item 24, p. 971. For reasons stated in the opinion we held:
At the 1958 session the General Assembly adopted House Joint Resolution No. 70 (Acts 1958, p. 1104), which stated inter alia that the continuing development of the ports of Virginia is essential in any program of economic or industrial development of the Commonwealth, and directed the Authority to proceed to obtain facts and information regarding the cost of acquisition and construction of port terminals and facilities for presentation to the Governor and General Assembly at the 1960 session.
Thereafter the Authority entered into negotiations with the Norfolk and Western Railway Company, which owned and operated marine terminals in Hampton Roads and obtained from it a written proposal which involved a sale to the Authority of the Railway's facilities, the construction by the Authority of new facilities, the lease of the combined facilities to the Railway at a rental sufficient to amortize revenue bonds to be issued by the Authority to obtain funds necessary for the proposed purchase and construction.
After being informed of the proposal the General Assembly, at its 1960 session, appropriated $1,646,750 for the biennium to the Authority 'For acquisition, development, construction and operation of port facilities.'
At the same session the Assembly amended Code § 62-106.8(b) of the Enabling Act by adding thereto the words shown in italics, so as to provide that the Authority 'without pledging the faith and credit of the Commonwealth of Virginia':
'(b) Is authorized and empowered to rent, lease, buy, own, acquire and dispose of such property, real or personal, as the Authority deems proper to carry out the purposes and provisions of this chapter, all or any of them and to issue revenue bonds for buying or acquiring such property; and to lease to another such part or all of its property, real or personal, for such period or periods of years, upon such terms and conditions, with or without an option on the part of the lessee to purchase any or all of the leased property at such price, at or after the retirement of all indebtedness incurred by the Authority on account thereof, as the Authority shall determine.'
Thereafter the Authority entered into a Port Facility Contract (Contract) with the Railway for the purchase of property at Sewells Point and Lamberts Point, in Norfolk, for the construction thereon by the Authority of new port facilities and improvements; the issuance and sale by the Authority of its revenue bonds to defray the cost of the acquisition and construction, to be secured by a Trust Agreement and by a Lease by the Authority to the Railway of said property.
The Lease is for a term of thirty years at a rental not to exceed $60.6 million, payable in semi-annual installments sufficient to enable the Authority to pay when due all the principal, interest and redemption premiums payable on the revenue bonds, and to make any other deposits required by the Trust Agreement. If the bonds are fully retired prior to the end of the original term, the rent thereafter payable by the Railway will be reduced to an extent agreed on by the parties, or, failing such agreement, to the extent determined by a formula set forth in the Lease.
The Railway is to operate the leased premises as general cargo port terminal facilities for use by the general public on a fair and reasonable basis, free of any unjust or unreasonable discrimination, at charges and with regulations to be fixed by the Railway on a fair and reasonable basis. If the Railway should realize a profit from the operation, the Authority is to receive a portion thereof determined in accordance with a formula set out in the lease. No part of any operating loss is to be borne by the Authority.
The Railway is given the option to renew the Lease for two periods of thirty years each, at rentals and on terms and conditions to be agreed on, together with an option to purchase at the expiration of the original or renewal terms at a price determined by a formula set out in the lease, but only after all the revenue bonds have been paid.
The principal and interest of the revenue bonds are payable solely from the revenues derived by the Authority from the port facilities. It is required that they shall contain on their face a statement to the effect that 'neither the Commonwealth nor the Authority shall be obligated to pay the same or the interest thereon except from revenues of the port facility and that neither the faith and credit nor the taxing power of the Commonwealth or of any political subdivision thereof is pledged to the payment of the principal of or the interest on such bonds.' Code § 62-106.19.
The Authority agreed in the Contract, § 4.03, that it will 'urgently request' the General Assembly at each session during the original term of the Lease to make an appropriation for the purpose of participating in the cost of the port facilities to the extent of 50 per cent of the basic rent. Such appropriations will be promptly deposited in the Sinking Fund created under the Trust Agreement, and if the Railway is not then in default under the Lease the next installment or installments of the basic rent will be reduced by an amount equal to the State contribution.
The Comproller, expressing doubt about the constitutionality of the recited procedures, declined to issue a warrant authorizing payment for engineering services, and the Attorney General has filed his petition under Code § 8-714 for an adjudication of the questions raised and a writ of mandamus, to which the Comptroller has filed his demurrer and answer. There are no disputed facts and the questions raised will be dealt with in the following order:
I. Does the 1960 amendment of § 62-106.8(b) of the Code violate § 185 or § 188 of the Virginia Constitution?
Section 185 of the Constitution provides, so far as we are here concerned, that the credit of the State shall not 'directly or indirectly, under any device or pretense whatsoever' be granted to or in aid of any person, association, or corporation; and the State shall not become a party to or interested in any work of internal improvements, except public roads and public parks, or engage in carrying on any such work. Section 188 of the Constitution provides that 'No other or greater amount of tax or revenue shall, at any time, be levied than may be required for the necessary expenses of the government, or to pay the indebtedness of the State.'
As noted above, in Harrison v. Day, we held that the Enabling Act as then written did not violate either §§ 185 or 188. Section 62-106.8 (b) as then written empowered the Authority to rent, lease, buy, own, acquire and dispose of its property to carry out its purposes. The 1960 amendment added 'and to lease to another' any or all of its property. So far as the power to lease is concerned, the amendment merely gave to the Authority in express terms a power previously given in less emphatic language. Cf. Green v. City of Rock Hill, 149 S.C. 234, 147 S.E. 346.
Since, as we explicitly held in Harrison v. Day, supra, the acquisition, development and operation of port and harbor facilities as provided by the Enabling Act is a proper governmental function, the leasing of the enterprise to another by express legislative authority as the agency to do and perform the things which the Authority was created to accomplish, does not change the character of the enterprise. If it is a governmental function and a public purpose that is to be carried out by the Authority, it does not become a private function and a private purpose by being let by the Authority to another to do the work.
The object of the legislature in permitting the Lease and the object of the Authority in making the Lease is, as stated in the Attorney General's brief, not to promote the private business of the Railway, but to obtain modern and efficient general cargo port facilities, which the General Assembly has declared to be essential to the economic and industrial development of the Commonwealth and for the proper service of its agriculture and industry. This the General Assembly...
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