Opinion of the Justices to the House of Representatives

• Citation: 368 Mass. 880,335 N.E.2d 362
• Parties: OPINION OF THE JUSTICES TO THE HOUSE OF REPRESENTATIVES.
• Decision Date: 12 September 1975
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 362

335 N.E.2d 362

368 Mass. 880

OPINION OF THE JUSTICES TO THE HOUSE OF REPRESENTATIVES.

Supreme Judicial Court of Massachusetts.

Sept. 12, 1975.

On September 12, 1975, the Justices submitted the following answers to questions propounded to them by the House of Representatives.

To the Honorable the House of Representatives of the Commonwealth of Massachusetts:

The Justices of the Supreme Judicial Court respectfully submit these answers to the questions set forth in an order adopted by the House on June 30, 1975, and transmitted to us on July 8, 1975. The order recites that there is pending before the General Court House Bill No. 5935, entitled, 'An Act establishing a Massachusetts industrial mortgage insurance agency,' and that grave doubt exists as to its constitutionality if enacted into law. A copy of the bill was transmitted to us with the order. We invited interested parties to submit briefs on both sides of the issues. The only brief received was that of the Attorney General.

Section 1 of the proposed bill explains the necessity for an industrial mortgage insurance agency (agency). It states that 'the high cost . . . (and) lack of availability of industrial loans for small business makes it extremely difficult' for industrial enterprises in the Commonwealth to hold their present employment levels or to expand. As a result of increasing costs in many areas, 'the commonwealth suffers from structural economic weaknesses which contribute to a rising level of chronic unemployment and underemployment.' This 'lack of gainful employment puts additional pressure on the state's welfare programs and increases the cost of unemployment compensation.' Creation of the agency 'would encourage the making of industrial loans . . . for the public purpose of furthering industrial expansion' and would 'promote the prosperity and general welfare of all citizens.' It would increase gainful employment, decrease welfare and unemployment compensation costs, increase the tax base of the Commonwealth, increase the availability of capital for small enterprises, increase available industrial space, and provide reclamation of existing sites and lower cost capital for abatement of industrial pollution.

For these purposes, the bill would establish the Massachusetts Industrial Mortgage Insurance Agency, 'a body corporate and politic, constituting a public corporation and government instrumentality.' The agency would be placed in, but not subject to, the Department of Commerce and Development and would 'maintain a close liaison with . . . (that department) in order to facilitate a coordinated effort in the area of industrial development.'

The bill further provides that the agency would be governed by a board of directors (board) of five members, four of whom would be appointed by the Governor, and at least three of whom have had experience in the fields of real estate development and credit. The board would have power to appoint agents and employees as it deemed necessary.

The bill establishes an industrial mortgage insurance fund which would receive all premiums collected by the agency and which could receive State appropriations or other monies made available to it. The fund would be held by one or more banks or trust companies for the security of holders of industrial mortgage loans and would be governed by a trust agreement between the agency and the trustees.

The agency would be empowered to provide insurance on loans 'made to finance the acquisition, construction or alteration' of industrial development facilities. The agency is authorized to enter into agreements for insurance, fix premium rates and exercise any powers necessary or incidental to those enumerated. The insurance so provided would be payable only from the fund and would 'not constitute a debt or pledge of the faith and credit of the commonwealth.'

In determining whether to insure a loan, the board would be required to make a series of findings specified by the bill which would insure the safety of the loan and guarantee, to the extent possible, that the project being financed 'is such that a definite benefit to the economy of the commonwealth may reasonably be expected.' The board would be required to examine the nature and extent of the employment opportunities to be generated by the project. Additionally, before insuring any particular loan, the board would be required to make a finding that the insuring of the loan would not cause the insured debt service coming due in any one calendar year on account of all insured loans to exceed one hundred per cent of the amount in the mortgage insurance trust.

We have been presented with the following two questions:

'1. Would it be a violation of the Constitution of the Commonwealth for the General Court to establish a public corporation within, but not subject to the supervision or regulation of the Department of Commerce and Development with power, among other things, to provide insurance of loans, or their debt service, made to finance the acquisition, construction or alteration or any combination thereof, of industrial development facilities through an industrial mortgage insurance fund derived from premiums and other proceeds of its operations and from appropriations by the General Court?

'2. Does the inclusion of the term 'recreation enterprises' within the definition of industrial development facilities, as that definition has been discussed in various opinions of the justices, raise a constitutional question as to the validity of its being a public purpose within the meaning of the Massachusetts Constitution?'

We answer them in order.

1. At the outset, we note that this question is of a general nature and does not point to any particular part of the bill, nor to any precise section of the Constitution, about which there are doubts. We have often stated that we are not required to answer such questions. Opinion of the Justices, 328 Mass. 679, 691, 106 N.E.2d 259 (1952). Opinion of the Justices, 330 Mass. 713, 727, 113 N.E.2d 452 (1953). Opinion of the Justices, 347 Mass. 789, 791, 196 N.E.2d 912 (1964). Opinion of the Justices, 357 Mass. 846, 851, 259 N.E.2d 564 (1970). However, it seems clear that the doubts here exist as to (a) whether there is a valid public purpose, (b) whether there is a violation of the 'credit clause' (art. 62, § 1, of the Amendments to the Massachusetts Constitution, as appearing in art. 84), and (c) whether placement of the agency in, but not subject to, the Department of Commerce and Development violates any constitutional provisions. Accordingly, we will construe the question in this manner and proceed to answer it. See Opinion of the Justices, 349 Mass. 794, 801, 208 N.E.2d 823 (1965).

a. 'It is a fundamental principle of constitutional law frequently declared that money raised by taxation can be used only for public purposes and not for the advantage of private individuals.' Opinion of the Justices, 337 Mass. 777, 781, 150 N.E.2d 693, 696 (1958), quoting from Opinion of the Justices, 320 Mass. 773, 775, 67 N.E.2d 588 (1946). See Massachusetts Constitution, Part II, c. 1, § 1, art. 4. See also Opinion of the Justices, 231 Mass. 603, 611, 122 N.E. 763 (1919); Boston v. Merchants Natl. Bank. 338 Mass. 245, 248, 154 N.E.2d 702 (1958); Massachusetts Housing Fin. Agency v. New England Merchs. Natl. Bank, 356 Mass. 202, 212, 249 N.E.2d 599 (1969). The crucial inquiry in cases such as this, where there may be benefits to private parties, is whether the private benefits are primary or are merely incidental to achievement of the public purpose. Allydonn Realty Corp. v. Holyoke Housing Authy., 304 Mass. 288, 292--293, 23 N.E.2d 665 (1939). Lowell v. Boston, 322 Mass. 709, 737, 79 N.E.2d 713 (1948), app. dism. sub nom. Pierce v. Boston, 335 U.S. 849, 69 S.Ct. 84, 93 L.Ed. 398 (1948). Court St. Parking Co. v. Boston, 336 Mass. 224, 229, 143 N.E.2d 683 (1957), app. dism. sub nom. Rosengard v. Boston, 355 U.S. 272, 78 S.Ct. 331, 2 L.Ed.2d 257 (1957). Opinion of the Justices, 341 Mass. 738, 749, 167 N.E.2d 745 (1960). Opinion of the Justices, 359 Mass. 769, 772, 268 N.E.2d 149 (1971). 'The paramount test should be whether the expenditure confers a direct public benefit of a reasonably general character, that is to say, to a significant part of the public, as distinguished from a remote and theoretical benefit,' Opinion of the Justices, 337 Mass. 777, 781, 150 N.E.2d 693, 697 (1958), and whether the 'aspects of private advantage . . . are reasonably incidental to carrying out a public purpose in a way which is within the discretion of the Legislature to choose.' Court St. Parking Co. v. Boston, supra, 336 Mass. at 231, 143 N.E.2d at 688.

Here, the declared purpose of the proposed bill is the '(stimulation of) industrial growth and expansion' in order to increase the gainful employment of citizens of the Commonwealth. 'The reduction of unemployment and alleviation of economic distress,' as well as the '(s)timulation of investment and job opportunity . . . are proper public purposes.' Anderson v O'Brien, 84 Wash.2d 64, 70, 524 P.2d 390, 394 (1974). See Roan v. Connecticut Industrial Bldg. Commn., 150 Conn. 333, 339--340, 189 A.2d 399 (1963); Roe v. Kervick, 42 N.J. 191, 215, 199 A.2d 834 (1964). See also Howes Bros. Co. v. Unemployment Compensation Commn., 296 Mass. 275, 5 N.E.2d 720 (1936), cert. den. 300 U.S. 657, 57 S.Ct. 434, 81 L.Ed. 867 (1937); Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1245 (1937). The Legislature, in requiring the board to make findings as to how the insurance of each loan will affect employment and to consult with local officials in this regard, has taken adequate precautions to ensure that these valid public purposes will be served by creation of the agency. The fact that some benefits may accrue to private parties as a result is not constitutionally fatal to the proposed bill....