State v. Dade County

• Citation: 250 So.2d 875
• Decision Date: 07 July 1971
• Docket Number: No. 41002,41002
• Parties: The STATE of Florida, Appellant, v. COUNTY OF DADE, a political subdivision of the State of Florida, Appellee.
• Court: United States State Supreme Court of Florida

Page 875

250 So.2d 875

The STATE of Florida, Appellant, v. COUNTY OF DADE, a political subdivision of the State of Florida, Appellee.

No. 41002.

Supreme Court of Florida.

July 7, 1971.

Richard E. Gerstein, State's Atty., and Milton Robbins, Asst. State's Atty., for appellant.

Stuart Simon, County Atty., Thomas P. Abbott, Asst. County Atty., and Mitchell, Petty & Shetterly, New York City, for appellee.

McCAIN, Justice.

This is a direct appeal from a final decree of the Dade County Circuit Court, validating and confirming the issuance of $3.85 million Industrial Development Revenue Bonds, of the County of Dade, to be issued for the purpose of financing the acquisition of an industrial or manufacturing plant for processing meats, owned and operated by Spencer Foods, Inc., and for the rehabilitation, improvement, renovation and equipment of the plant so acquired. We have jurisdiction by direct appeal pursuant to Fla.Const. Art. V., § 4(2), F.S.A. as a bond validation proceeding.

The purchase price of the Spencer Foods plant has been fixed at $2,927,535, and the estimated cost of rehabilitation, improvements, renovation, and equipment is $500,000. The County determined that the amount necessary for defraying the cost of the project would require authorization and issuance of negotiable industrial development revenue bonds under the Florida Industrial Development Financing Act, Chapter 69--104, Laws of Florida, Fla.Stat. §§ 159.25 to 159.43, F.S.A., inclusive, in the aggregate principal amount of $3,850,000. The principal amount is to be payable solely from the revenue derived from the County's ownership, operation, leasing, or sale of the demised premises. The County further determined, based upon reasonable estimates of the revenues to be derived from its ownership, operation, leasing, or sale of the premises, that such revenues would be adequate to pay the principal, interest and redemption premium, if any, on the bonds.

The County, as lessor, also agreed to lease to Spencer Foods, Inc., as lessee, the plant as so rehabilitated and improved together with any additional improvements as provided in the agreement securing the bonds.

The lease, which is authorized by the bond ordinance passed by the County of Dade, provides that Spencer Foods, Inc., is obligated at its own expense to operate, repair, and maintain the plant and improvements, to pay rent in the aggregate in an amount sufficient to pay all of the interest, principal and redemption premiums, if any, on all bonds issued under the Agreement, and to pay all other costs incurred by the County in connection with the financing, acquisition and construction of the plant, including the continued ownership and administration of the leased premises, except as may be paid out of the proceeds of the bonds or otherwise.

The lease further provides that its term shall not terminate earlier than the date on which all bonds including interest, principal and redemption premiums, if any, and all other obligations incurred by the County in connection with the leased premises shall be paid in full or adequate funds for such payment shall be deposited in trust. Additionally, the lease provides that the obligation of Spencer Foods, Inc. to pay rent shall not be subject to cancellation, termination or abatement until such payment of the bonds or provision for such payment shall be made.

Finally, the County determined upon advice of counsel that the interest on the bonds sought to be validated would be exempt from Federal Income taxes under existing law, including § 103(c) of the Internal Revenue Code of 1954. On this point, in the final judgment validating the bonds, the trial judge found:

'(9) The determination by the County Board upon the advice of counsel for the County, as recited in said Ordinance No. 70--93 and in the Agreement, that the interest on the bonds authorized to be issued under said Ordinance shall be exempt from Federal income taxes under existing law constitutes a compliance with the provisions of Section 10 of Article VII of the Florida Constitution and the Act, that the Bonds will be valid and binding obligations of the County of Dade authorized to be issued under and pursuant to the provisions of the Act and said Section 10 of Article VII and to validate said bonds, and the validity of the bonds shall not be affected by any determination subsequent to their issuance that the interest on such bonds was not either at the time of such issuance or at any time thereafter, exempt from Federal income taxes.'

We are concerned with two issues on this appeal: (1) whether the project constitutes a 'capital project' for which bonds of the County may be issued under the Florida Industrial Development Financing Act; and (2) whether the determination by the County upon advice of counsel prior to the issuance of the bonds that the interest on the bonds would be exempt from income taxes under the existing laws of the United States was sufficient to meet the requirement of Section 10(c) of Article VII of the 1968 Florida Constitution regarding such tax exemption, which section provides for:

'* * * the issuance and sale by any county, municipality, special district or other local governmental body of * * * (2) revenue bonds to finance or refinance the cost of capital projects for industrial or manufacturing plants to the extent that the interest thereon is exempt from income taxes under the then existing laws of the United States, when, * * * the revenue bonds are payable solely from revenue derived from the sale, operation or leasing of the projects * * *'

This constitutional provision has been implemented by the Florida Industrial Development Financing Act, Chapter 69--104, Laws of Florida, Fla.Stat. §§ 159.25 to 159.43, F.S.A., inclusive. Fla.Stat. § 159.27(5), F.S.A. defines 'project', in pertinent part, as follows:

'(5) 'Project' means any capital project comprising an industrial or manufacturing plant, including one or more buildings and other structures, * * * any rehabilitation, improvement, renovation, or enlargement of, or any addition to, any buildings or structures for use as a * * * processing plant * * * and including also the sites thereof and other rights in land therefor whether improved or unimproved * * *'

'Cost', as applied to a project, is defined in Fla.Stat. § 159.27(2), F.S.A. of the Act to embrace, in addition to construction and other costs,

'the cost of acquisition of property, including rights in land and other property, both real and personal and improved and unimproved.'

Thus, by its terms, the Florida Industrial Development Financing Act covers the type of project here contemplated. As can be seen, the rehabilitation, improvement and renovation of a processing plant is specifically permitted, and 'cost' is defined to include the acquisition of improved real and personal property.

Appellant urges, however, that the...