Minnesota Housing Finance Agency v. Hatfield

Decision Date17 August 1973
Docket NumberNo. 44111,44111
Citation297 Minn. 155,210 N.W.2d 298
PartiesMINNESOTA HOUSING FINANCE AGENCY, Respondent, v. Rolland F. HATFIELD, Secretary of the Minnesota Housing Finance Agency, Appellant.
CourtMinnesota Supreme Court

Syllabus by the Court

1. Notes and bonds issued or sold by Minnesota Housing Finance Agency, which was created by the legislature, payable solely out of earnings of housing projects do not constitute a state debt so as to violate Minn.Const. art. 9, §§ 6 and 7.

2. Assistance in financing housing for persons of low and moderate income involves a governmental function in protecting the public health and as such does not contravene Minn.Const. art. 9, § 5, which prohibits the state from becoming a party in carrying on works of internal improvement except as authorized by the Constitution.

3. Minn.Const. art. 9, § 1, provides that the 'power of taxation shall never be surrendered, suspended or contracted away. Taxes * * * shall be levied and collected for public purposes * * *.' Section 10 provides that the 'credit of the State shall never be given or loaned in aid of any individual, association or corporation * * *.' The application of these proscriptions depends upon a determination of whether the collection of taxes and the extension of credit is for a public purpose. While the act under consideration involves assistance in providing housing for people having moderate incomes as well as those having low incomes, we find that under the facts of this case the assistance to be furnished is for a public purpose and therefore permissible under Minn.Const. art. 9, §§ 1 and 10.

4. Defendant has submitted nothing to controvert numerous affidavits and exhibits submitted by plaintiff in support of its motion for summary judgment. As a result, summary judgment was proper.

Trench, Ericson, MacGregor, Lohmann & O'Brien and Dudley C. Ericson, Minneapolis, for appellant.

Warren Spannaus, Atty. Gen., St. Paul, Leonard, Street & Deinard and George Reilly, Minneapolis, for respondent.

Heard and considered en banc.

KNUTSON, Chief Justice.

This is an appeal from a summary declaratory judgment involving the constitutionality of L.1971, c. 702 (Minn.St. c. 462A). The act involves a comprehensive plan 'to facilitate the construction and rehabilitation of housing projects for families of low and moderate income by providing for mortgage loans, development loans, and technical assistance to qualified housing sponsors to be used for construction and rehabilitation.' The act creates the Minnesota Housing Finance Agency, hereinafter MHFA, to administer the act and prescribes the powers and duties of such agency. It authorizes the agency to issue bonds and other obligations, provides for the terms and security thereof and the means to pay such bonds and other obligations and interest thereon, and authorizes the agency to grant 'seed money' or temporary loans to 'nonprofit' sponsors for the planning and commencement of the housing projects contemplated by the act.

The rationale for the statute is stated in Minn.St. 462A.02, subd. 1, as follows:

'It is hereby found and declared that as a result of public actions involving highways, public facilities and urban renewal activities, and as a result of the spread of deteriorated housing and blight to formerly sound urban and rural neighborhoods, and as a result of the inability of private enterprise and investment to produce without public assistance a sufficient supply of decent, safe and sanitary residential dwellings at prices and rentals which persons and families of low and moderate income can afford, there exists within the state of Minnesota a serious shortage of decent, safe and sanitary housing at prices or rentals within the means of persons and families of low and moderate income.'

The act is lengthy, and a summary of its provisions should suffice for the purpose of this decision. Subd. 2 of § 462A.02 declares that this housing shortage 'is inimical to the safety, health, morals and welfare of the residents of the state and to the sound growth and development of its communities.' An adequate supply of a variety of housing serving people of all income levels is declared to be essential to the growth and prosperity of the state. Subds. 3 and 4 state that the present patterns of housing in the state limit the ability of private industry to provide sufficient financing for low and moderate income housing and that Federal housing assistance programs are insufficient to meet the housing needs of low- and moderate-income families. 1 The legislature further finds that sufficient housing financing will not exist without state action to increase the available private and Federal funds.

Subd. 5 declares that the MHFA created by the act will serve a public purpose by promoting the health, welfare, and prosperity of the people. Subd. 6 declares that it is also a valid public purpose to--

'* * * construct housing for low and moderate income families who would otherwise be unable to obtain adequate housing at prices or rentals they could afford and to assist in the elimination of substandard housing conditions and to prevent the recurrence of such conditions by housing persons of varied economic means and a wide range of incomes in the same developments and neighborhoods properly planned and related to public facilities and sources of employment and services and to provide the necessary powers to accomplish these public purposes.'

MHFA, the agency created to fulfill these purposes, consists of the state planning director, the state auditor, and three public members appointed by the governor. MHFA is specifically empowered to make, or participate in making, Federally insured construction loans and mortgage loans to sponsors of housing for low- and moderate-income persons and families, but only if it has determined that loans 'are not otherwise available, wholly or in part, from private lenders upon equivalent terms and conditions.' Minn.St. 462A.05, subds. 2 and 3. MHFA may also make temporary loans, with or without interest, to nonprofit sponsors of such housing to defray development costs. Minn.St. 462A.05, subd. 5. Finally, the agency may purchase Federally insured securities if the proceeds of the securities will be used for housing for families and persons of low and moderate income. Minn.St. 462A.05, subd. 4.

The agency is empowered to finance its activities by issuing negotiable bonds and notes, the bonds to mature no later than 50 years from date of issue. Minn.St. 462A.06, subd. 12, and 462A.08. The statute specifically states that these notes and bonds shall not be a debt on the state and that the face of the bonds shall contain a statement to that effect. Minn.St. 462A.14. These bonds, as well as the property and income of the agency, are exempt from all taxation by the state or any of its subdivisions. Minn.St. 462A.19.

The sum of $250,000 was appropriated to the agency 'for the purpose of this act.' L.1971, c. 702, § 25.

On February 17, 1972, MHFA adopted Resolution 72--4, agreeing to participate in the financing of a housing project under which South High Non-Profit Housing Corporation, hereinafter South High, would construct housing for families and persons of low and moderate income. The financing plan was that Shelter Mortgage Corporation (Shelter) would lend $616,100.90 to South High as a construction loan. Shelter would then sell 90 percent of the loan, and of all additional construction loans, to MHFA. To finance this purchase from Shelter, MHFA was to sell tax-exempt Housing Development Notes. The first $500,000 of these notes were to be sold to the First National Bank of Minneapolis and the remainder were to be sold after advertising for bids. These notes are salable at an interest rate less than the rate for equivalent taxable notes, and Shelter has agreed to pass this saving on to South High so that South High will receive a construction loan on terms otherwise unavailable from private lenders. Under similar provisions, MHFA further agreed to make a long-term Federally insured mortgage loan to South High for up to $4,500,000 under § 236 of the National Housing Act.

In connection with this transaction, defendant, as secretary of the agency, was directed to execute the participation agreement with Shelter; print, execute, and deliver the first $500,000 of Housing Development Notes to the First National Bank of Minneapolis; and advertise for bids on the remainder of the notes. Because of doubts as to the constitutionality of Minn.St. c. 462A, defendant, Rolland F. Hatfield, MHFA's secretary, refused to take these actions.

The second transaction directly involved in this action was an agreement with Greater Minneapolis Metropolitan Housing Corporation (Metro), a nonprofit corporation, to participate in 'seed money' loans to cover the development costs of sponsors of housing construction for families and persons of low and moderate income. MHFA agreed to purchase from Metro up to 20 percent of the amount loaned to each sponsor, subject to the limits of $4,000 per sponsor and a total participation of $20,000 outstanding at any one time. These loans were to be made only to nonprofit sponsors eligible for Federally insured construction and mortgage loans. The money for these loans was to come from the $250,000 appropriated to the agency. Because of doubts as to the constitutionality of Minn.St. c. 462A, defendant refused to execute this agreement.

MHFA brought this action seeking a declaratory judgment that the act is constitutional and valid and that defendant as secretary of MHFA is empowered and obligated to perform certain ministerial duties pursuant to the resolutions adopted by MHFA. In support of a motion for summary judgment, MHFA submitted 22 affidavits with 600 pages of exhibits. The trial court granted the motion after making exhaustive and extremely helpful findings of fact containing detailed references to the exhibits...

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