State ex rel. Amemiya v. Anderson, 5826

• Decision Date: 23 January 1976
• Docket Number: No. 5826,5826
• Citation: 56 Haw. 566,545 P.2d 1175
• Parties: STATE of Hawaii ex rel. Ronald Y. AMEMIYA, Attorney General, Plaintiff, v. Eileen R. ANDERSON, Director of Finance, State of Hawaii, Defendant.
• Court: Hawaii Supreme Court

Page 1175

545 P.2d 1175

56 Haw. 566

STATE of Hawaii ex rel. Ronald Y. AMEMIYA, Attorney General, Plaintiff, v. Eileen R. ANDERSON, Director of Finance, State of Hawaii, Defendant.

No. 5826.

Supreme Court of Hawai'i.

Jan. 23, 1976.

Syllabus by the Court

1. Determining what constitutes a public purpose is generally a question for the legislature to decide.

2. Though the legislature's determination on what constitutes a public purpose is not conclusive, it is given wide discretion and should not be voided by the courts unless it is manifestly wrong.

3. When a constitutional question is properly presented, it is the duty of the court to ascertain and declare the intent of the framers of the Constitution and to reject any legislative act which is in conflict therewith.

4. There is a presumption in favor of constitutionality of legislative acts and all doubts must be resolved in favor of acts in question.

5. The crucial factor in determining whether the purpose of an act, which appropriates public money or credit, constitutes a public purpose, is the ultimate objective of the act; the fact that incidental benefits accrue to private interests is immaterial.

6. In the construction of a constitutional provision, the words of the constitution are presumed to be used in their natural sense unless the context furnishes some ground to control, qualify or enlarge them.

7. Where exclusion of revenue bonds from the total indebtedness of the State depends upon a condition that issuer of bonds must be obligated by law to impose rates and charges for the use and services of the undertaking, improvement or system, sufficient to pay, among other things, the cost of operation, maintenance and repair of that undertaking, improvement or system, such condition must be complied with strictly. Furthermore, the issuer of the bonds must have sufficient proprietary control, for a period of time, over the undertaking, improvement or system. Such control is necessary to provide the required security, in the form of revenues, to make the necessary payments. (Haw.Const. art. VI, § 3(b))

Nobuki Kamida and Corinne K. Watanabe, Deputy Attys., Honolulu, for plaintiff.

Charles M. Tonaki, Honolulu (Chuck, Wong & Tonaki, Honolulu, of counsel), and Leo E. Sabatine, New York City (Wood, Dawson, Love & Sabatine, New York City, of counsel), for defendant.

Before RICHARDSON, C. J., KOBAYASHI, OGATA and MENOR, JJ., and LEWIS, Retired Justice, in place of KIDWELL, J., recused.

KOBAYASHI, Justice.

This is an action for declaratory judgment brought by State Attorney General, Ronald Y. Amemiya, as relator for the State of Hawaii (State or Attorney General), against Eileen R. Anderson, Director of Finance of the State (Director). The question submitted to this court for its resolution is whether or not the Director may issue, sell and deliver twenty million dollars ($20,000,000) worth of anti-pollution revenue bonds, authorized by Act 161, Session Laws of Hawaii 1973 (Act 161), and enter into a 'project agreement' ¹ with a private, profit-making utility company to finance a government-mandated anti-pollution project with the proceeds of the bond sales. The answer to the question depends upon whether the revenue bonds are chargeable against the State debt limitation. It is clear that, under Act 161, the intent of the legislature is that the bonds shall not be issued if they are chargeable against the debt limitation. ²

Since the case is being submitted on an agreed statement of facts, this court has original jurisdiction pursuant to section 4, Act 161, and HRS § 39-96. For the reasons stated below, we hold that the revenue bonds are chargeable against the State debt limitation.

STATEMENT OF THE CASE

Hawaiian Electric Company, Inc. (Hawaiian Electric or Company) is a private corporation that has provided public utility electric service on the island of Oahu since the 1890s. Hawaiian Electric owns and operates a generating station at Kahe, Oahu, which fronts on the ocean and uses ocean water to cool the condensers of its steam turbines. The ocean water is presently being drawn through an intake basin located at the shoreline, passed through the condensers, and discharged through tunnels which terminate at the shoreline. In the process, the temperature of the water passing through the cooling system is raised approximately ten (10) degrees Fahrenheit, thus presenting a thermal pollution problem for the offshore waters.

In order to meet both federal and state anti-thermal pollution requirements, Hawaiian Electric planned to install a new cooling system which would discharge the heated water approximately one thousand five hundred (1,500) feet offshore rather than at the shoreline as it is presently done. The cost of constructing and operating the proposed system (Kahe Project) is estimated at around twenty-million dollars ($20,000,000).

To facilitate the financing of the Kahe Project, ³ Hawaiian Electric proposed that Act 161 be used and that a project agreement be entered into by Hawaiian Electric and the Department of Budget and Finance (Department). Section 39-126 of Act 161 authorizes the Department, with the approval of the Governor, to issue revenue bonds in such amounts as may be necessary to cover to cost of an anti-pollution project. The terms of the project agreement would unconditionally obligate Hawaiian Electric to pay to the Department during the term of the agreement such rates and charges in the form of rentals The contemplated project agreement further provides:

or installment sales payments [56 Haw. 569] or otherwise, sufficient to: (a) pay the principal and interest on the revenue bonds issued including any premiums payable upon any required redemption; (b) establish or maintain such reserve, if any, as may be required by the instrument authorizing or securing the revenue bonds; (c) pay the fees and expenses of the paying agents and trustees for such revenue bonds; and (d) pay the expenses incurred by the Department in administering such bonds or in carrying out the Kahe Project or the project agreement.

(a) the Department will not operate, maintain or repair the Kahe Project nor will it receive any moneys from the Company for the operation, maintenance or repair of the project;

(b) Kahe Project will be or become the property of the Company;

(c) one of the following alternative arrangements:

1. the Department would loan the proceeds from the sale of the pollution bonds to the Company which would use such funds to acquire the Kahe Project. The Company would issue its unsecured promissory note to the Department to evidence the loan;

2. the Department would initially acquire the Kahe Project with the proceeds from the sale of the pollution control bonds and then sell it to the Company under a conditional sale agreement, under which the Company would take title to the project and would be given exclusive possession and right of use of the project. The terms of the agreement require the Company to pay to the Department, among other costs, the principal and interest on the bonds;

3. there would be a lease of the project by the Company to the Department and a lease-back by the Department to the Company of the project. The terms of the lease-back are similar to the terms of the above conditional sale agreement.

The Attorney General contends:

(1) Act 161 violates Article VI, section 2 of the Hawaii Constitution in that it appropriates public money or public property or uses the public credit for other than a public purpose;

(2) the Act 161 revenue bonds in question are chargeable against the State debt limit because they do not meet the requirements of Article VI, section 3, subparagraph (b) of the Hawaii Constitution;

(3) Act 161 violates Article III, section 1 of the Hawaii Constitution in that it contains unlawful delegations of power; and

(4) Act 161 violates Article I, section 4 of the Hawaii Constitution and section 1 of the Fourteenth Amendment to the United States Constitution (i. e. the due process and equal protection clauses) because of vagueness.

RELEVANT STATE CONSTITUTIONAL PROVISIONS AND STATUTES

The following are the relevant constitutional provisions and statutes:

Article VI, section 2 of the Hawaii Constitution reads:

No tax shall be levied or appropriation of public money or property made, nor shall the public credit be used, directly or indirectly, except for a public purpose. No grant shall be made in violation of Section 3 of Article I of this constitution.

Article VI, section 3(b) of the Hawaii Constitution reads:

In determining the total indebtedness of the State or funded debt of any political subdivision, the following shall be excluded:

* * *

* * *

(b) Revenue bonds, authorized or issued, if the issuer thereof is obligated by law to impose rates and charges for the Sections 1(a) and (b), Act 161, Session Laws of Hawaii 1973, reads:

use and services of the public undertaking, improvement or system, or to impose a user tax, or to impose a combination of rates and charges and user tax, as the case may be, sufficient to pay the cost of operation, maintenance and repair of the public undertaking, improvement or system and the required payments of the principal of and interest on all revenue bonds issued for the public [56 Haw. 571] undertaking, improvement or system, and if the issuer is obligated to deposit such revenues or tax or a combination of both into a special fund and to apply the same to such payments in the amount necessary therefor. For the purposes of this section a user tax shall mean a tax on goods or services or on the consumption thereof, the receipts of which are substantially derived from the consumption, use or sale of goods and services in the utilization of the functions or services furnished by the public undertaking, improvement or system.

Section 1. Purpose. (a) The purpose of this Act is to establish a means whereby anti-pollution measures can be financed through...