Washington Higher Educ. Facilities Authority v. Gardner
| Decision Date | 23 May 1985 |
| Docket Number | No. 50931-0,50931-0 |
| Citation | 103 Wn.2d 838,699 P.2d 1240 |
| Parties | , 25 Ed. Law Rep. 596 WASHINGTON HIGHER EDUCATION FACILITIES AUTHORITY, Petitioner, v. Booth GARDNER, Governor, and John A. Cherberg, Lieutenant Governor, as Members of the Washington Higher Education Facilities Authority, Respondents. |
| Court | Washington Supreme Court |
Riddell, Williams, Bullitt & Walkinshaw, Nyle G. Barnes, Stimson Bullitt, Seattle, for petitioner.
Ken Eikenberry, Atty. Gen., Philip H. Austin, Senior Deputy, Olympia, for respondents.
This case was brought as a petition for a writ of mandamus, Const. art. 4, § 4, asking this court to require the Governor and Lieutenant Governor to show cause why they should not sign resolutions 84-1 and 84-2 issuing bonds in the name of the Washington Higher Education Facilities Authority (Authority). We accepted jurisdiction pursuant to RAP 16.2(d) upon an adequate agreed statement of facts signed by the parties.
The issues before the court involve the constitutionality of bonds to be issued under RCW 28B.07, Washington Higher Education Facilities Authority--private nonprofit educational institutions act (WHEFA). The act enables participants to benefit from the federal tax exempt status of state issued bonds. Recipients of the bond proceeds in question are Seattle University and Pacific Lutheran University (PLU). Both are universities with ties to religious institutions. We conclude, however, that under the safeguards of the statutory scheme, these proposed bonds do not violate our state constitution.
WHEFA states that nonprofit higher education institutions are a necessary and valuable part of the state's higher education resources, providing diversity, choice and greater accessibility to the state's students. In order to accomplish the stated public purpose of enabling higher education institutions to build and improve their facilities, the act authorizes the issuance of special obligation bonds. These bonds may be issued for the benefit of any participants, but participants thus benefited must bear the costs of repayment. RCW 28B.07.050. Neither the state nor any subdivision is obligated on the bonds. RCW 28B.07.060.
A participant is a higher education institution which finances or refinances a project under this act. RCW 28B.07.020(5). A higher education institution is described as
a private, nonprofit educational institution, the main campus of which is permanently situated in the state, which is open to residents of the state, which neither restricts entry on racial or religious grounds, which provides programs of education beyond high school leading at least to the baccalaureate degree, and which is accredited by the Northwest Association of Schools and Colleges or by an accrediting association recognized by the council for postsecondary education.
The act sets up a seven-member Authority, including the governor, lieutenant governor, the executive coordinator of the state council for postsecondary education, and four public members. RCW 28B.07.030(2).
The following facts are agreed to by the parties: At a meeting September 5, 1984, four members of the Authority voted in favor of resolutions 84-1 and 84-2. Resolution 84-1 approved issuance of revenue bonds in the amount of $11,600,000 for the benefit of Seattle University. Resolution 84-2 approved issuance of revenue bonds in the amount of $10,000,000 to PLU. The bonds were to be issued in the name of the Authority, with a trust fund created from bond proceeds, and the proceeds loaned to Seattle University and PLU.
The resolutions were processed according to the rules of the Authority and consistent with the statutory requirements. The proposed trust indentures bear the requisite disclaimers as to any state obligation or general obligation of the Authority. Further, the indentures provide that each bond will carry the same disclaimer on its face. All debt service shall be paid by the benefited institutions. All funds shall be kept completely separate from other funds of the Authority. In addition, all costs associated with issuance of the bonds are to be borne by the benefited participants. The Authority's general administrative costs are apportioned among all participants, with no cost accruing to the State.
While four members of the Authority voted in favor of the bond resolutions, only two members signed. The act requires all voting members voting yes to sign, RCW 28B.07.030(5); thus, this petition for an alternative writ of mandamus. Private counsel had advised the Governor and Lieutenant Governor not to sign the resolutions, indicating there might be difficulty marketing the bonds because of possible constitutional questions regarding the religious nature of the institutions to be benefited, and a loan of the State's credit.
Seattle University is conducted under the auspices of the Society of Jesus (Jesuits), an order of the Roman Catholic Church. The university is governed by a Board of Trustees composed of 12 lay persons and 7 Jesuits. The President of Seattle University must be a Jesuit. Students are required to take two courses in theology and religious studies from among a wide variety of courses offered. These required courses are academic in nature.
PLU is governed by a Board of Regents, the majority of whom are either ex officio leaders in the Lutheran Church or elected by divisions within the church. Six at large members are elected at the annual meeting and may be non-Lutherans. PLU requires two courses in religion, but the courses may include non-Christian classes or may be avoided by taking a nontraditional program.
Both institutions intend to apply their bond proceeds to facility improvements. Because the bonds are secured only by obligation of the respective institutions, the anticipated rate of interest reflects each institution's creditworthiness. Estimates of the rate of interest indicate that Seattle University will save $11,037,600 as a result of issuance of the bonds by the Authority. It is estimated PLU would save $9,500,000. These savings result from the difference between anticipated market rates of nontaxable bonds and taxable bonds. Because the Authority is a state agency, its bonds are tax exempt to holders under section 103 of the Internal Revenue Code (I.R.C. § 103 (1982)).
Each institution has agreed to pass the resulting savings on to the students of each institution "in the form of reductions of tuition and fees, foregone increases of tuition and fees, grants-in-aid and/or scholarships ..." Section 8.11 of Loan and Security Agreement dated September 1, 1984. The institutions have both agreed to refrain from applying the proceeds of the bonds to religious objects or buildings except to the extent permitted by law. Section 5.01(b) of Loan and Security Agreement.
In addition, all costs associated with issuance of the bonds are to be borne by the benefited participants. The general administrative costs of the Authority are apportioned among all participants. The Authority receives no financial assistance from the State.
Three parts of the Washington Constitution must be examined to determine if they are violated by the authorization of bonds under WHEFA to benefit Seattle University and PLU.
The following constitutional provisions are at issue:
No public money or property shall be appropriated for or applied to any religious worship, exercise or instruction, or the support of any religious establishment ...
All schools maintained or supported wholly or in part by the public funds shall be forever free from sectarian control or influence.
The credit of the state shall not, in any manner be given or loaned to, or in aid of, any individual, association, company or corporation.
As we have pointed out on a number of occasions, a party challenging the constitutionality of a statute must demonstrate beyond a reasonable doubt that the statute is invalid and must rebut the presumption that all legally necessary facts exist. County of Skamania v. State, 102 Wash.2d 127, 132, 685 P.2d 576 (1984); In re Marriage of Johnson, 96 Wash.2d 255, 258, 634 P.2d 877 (1981); Bellevue v. State, 92 Wash.2d 717, 720, 600 P.2d 1268 (1979). But see Utter, Freedom and Diversity in a Federal System: Perspectives on State Constitutions and the Washington Declaration of Rights, 7 U. Puget Sound L.Rev. 491, 507-08 (1984).
The question as to whether the sale of tax exempt nonrecourse revenue bonds by the Authority violates Const. art. 1, § 11 has been answered by our opinion in Washington Health Care Facilities Auth. v. Spellman, 96 Wash.2d 68, 633 P.2d 866 (1981) (). We determined it did not, finding the use of the State's tax exempt status was neither a conferring of "public money" nor "property" which would run afoul of article 1, section 11 prohibitions.
A comparison of the health care facilities act, RCW 70.37 (), and WHEFA shows they are nearly identical. Our analysis in Health Care v. Spellman thus controls. While the private church-related colleges will receive benefits, these benefits are derived through operation of the Internal Revenue Code. These benefits from federal tax exemptions are not "money or property" of the citizens of this state. The State parts with nothing in allowing its tax exempt status to be used by the Authority. Because these federal tax benefits are neither public "money" nor "property", they do not come under the prohibitions of article 1, section 11.
The same reasoning also applies to the prohibitions of article 9, section 4 against the use of "public...
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