WDW PROPERTIES v. City of Sumter, 25174.

CourtUnited States State Supreme Court of South Carolina
Citation342 S.C. 6,535 S.E.2d 631
Docket NumberNo. 25174.,25174.
PartiesWDW PROPERTIES, a South Carolina general partnership, Appellant, v. CITY OF SUMTER, South Carolina; South Carolina Jobs-Economic Development Authority; and Uptown Synergy, LLC, Respondents.
Decision Date24 July 2000

Thomas E. Player, Jr., of Player & McMillan, LLC, of Sumter, for appellant.

Steve A. Matthews and B. Eric Shytle of Sinkler & Boyd, P.A., of Columbia, for respondents.

WALLER, Justice:

WDW Properties (WDW) brought a declaratory judgment action challenging the legitimacy of a program in which the proceeds of tax-exempt bonds issued by a state agency would be loaned to a developer renovating retail and commercial properties in a blighted area of the city of Sumter (City). A master-in-equity rejected WDW's claims after a bench trial and WDW appeals.1


The parties have stipulated to the following facts. The Internal Revenue Code authorizes the use of federally tax-exempt local government bonds that finance business enterprises in designated urban "empowerment zones." See 26 U.S.C. §§ 1391-1392 (Supp.1999). The secretary of the United States Department of Housing and Urban Development (HUD), at the request of local government officials, in 1998 declared about 18 square miles located in Richland and Sumter counties as an urban empowerment zone.2 The governing body of City in 1999 declared its downtown to be a "slum and blight area" and designated it as a "redevelopment project area" located in the empowerment zone.

Uptown Synergy plans to develop the Hampton at Main Project, located in the redevelopment project area. The $4.3 million project consists of interior and exterior renovations of three adjoining historic buildings, which would be leased for commercial office and retail space. The project is expected to create twenty full-time jobs, and the developer hopes to target low- and moderate-income persons for employment at the various offices and retail businesses. In its application for financing to the South Carolina Jobs-Economic Development Authority (JEDA), Uptown Synergy stated the project would "serve as the cornerstone for the revitalization of downtown Sumter and the surrounding communities."

JEDA's governing board adopted a resolution in which it pledged to seek authorization from the state Budget and Control Board to issue $2.5 million in economic development revenue bonds that would be exempt from state and federal income taxation. Under loan documents executed in 1999, JEDA would loan the bond proceeds to Uptown Synergy to finance about 58 percent of the project's cost. Uptown Synergy would repay the loan with revenue from the project. No tax money is involved or pledged with regard to the project. However, the tax-exempt nature of the bonds would result in lower interest costs to Uptown Synergy than it would pay if it had to obtain conventional financing.

WDW, a general partnership, owns and leases Liberty Square, which includes mini-warehouse units, retail businesses, and commercial office space. Liberty Square is not located in the empowerment zone and is not eligible for government-sponsored financing. Uptown Synergy's project would compete with Liberty Square for tenants and patrons. The apparent reason for WDW's lawsuit is its belief that government-sponsored financing gives Uptown Synergy an unfair economic advantage in the competition for tenants and patrons.

Did the master err in holding that the JEDA loan program serves a public purpose through the redevelopment of blighted urban areas?

When an appeal involves stipulated or undisputed facts, an appellate court is free to review whether the trial court properly applied the law to those facts. J.K Constr., Inc. v. Western Carolina Regional Sewer Authority, 336 S.C. 162, 519 S.E.2d 561 (1999). This Court will not declare a statute or regulation unconstitutional unless its repugnance to the Constitution is clear and beyond a reasonable doubt. Southeastern Home Bldg. & Refurbishing, Inc. v. Platt, 283 S.C. 602, 325 S.E.2d 328 (1985); Pelzer, Rodgers & Co. v. Campbell & Co., 15 S.C. 581 (1881).


WDW contends the master erred in ruling that the JEDA loan program at issue in this case serves a public purpose through the redevelopment of blighted urban areas. The master erred by reading Carll v. South Carolina Jobs-Economic Development Authority, 284 S.C. 438, 327 S.E.2d 331 (1985), to mean that so long as the issuance of a given series of bonds is authorized by the JEDA Act, then the issuance of such bonds necessarily serves a required public purpose. Carll should be interpreted only to hold that the issuance of revenue bonds to finance industrial facilities serves a public purpose, a principle previously established by this Court, WDW argues.

WDW bases its argument on the fact that, when Carll was decided in 1985, JEDA regulations prohibited loans to retail or food establishments. Current JEDA regulations allow economic development bond loans to commercial businesses in certain situations, including downtown redevelopment and in economically distressed areas. WDW believes those regulatory changes mean Carll is not dispositive.3 WDW urges us to follow the views expressed in State ex rel. McLeod v. Riley, 276 S.C. 323, 278 S.E.2d 612 (1981), and Anderson v. Baehr, 265 S.C. 153, 217 S.E.2d 43 (1975). In McLeod, this Court considered amendments to the Industrial Revenue Bond Act4 that allowed the issuance of revenue bonds for the benefit of commercial and retail facilities. The Court also considered a statute allowing the State to issue general obligation bonds to finance an alcohol fuel development program. The Court struck down both the amendments and the statute as unconstitutional, ruling, among other things, that neither primarily served a public purpose.

The McLeod Court stated that revenue bonds for retail and commercial businesses would provide only a "remote or indirect public benefit." Such businesses would not alleviate the pervasive problems of lack of industry and employment, would provide a minuscule number of jobs compared to industrial projects, and would merely result either in the relocation of existing businesses or importation of national chains to compete with existing businesses. McLeod, 276 S.C. at 332, 278 S.E.2d at 617. Approving the issuance of revenue bonds for retail and commercial businesses would "permit local governments to effectually promote undertakings to compete in free enterprise with other businesses which do not have the advantage which the Act would give." Id. at 333, 278 S.E.2d. at 617.

In Anderson, supra, the city of Spartanburg intended to issue revenue bonds in order to purchase property in blighted areas (through condemnation if necessary), find an interested developer, and lease or sell the property to the developer in the hope that such payments would cover repayment of the city-issued bonds. The Court held that the act, which it described as allowing the city to "join hands" with unknown private developers, did not serve a public purpose because the benefit to the developer would be substantial, while the benefit to the public would be negligible and speculative. The Court also noted the Legislature had not made any findings of public purpose in the act. Anderson, 265 S.C. at 159-63, 217 S.E.2d at 46-47.

In response, City argues that Carll, supra, is dispositive. City further asserts that the views expressed in McLeod and Anderson have been implicitly rejected by later cases in which this Court has taken a broader view of public purpose and exhibited greater deference to the legislative determinations regarding public purpose. The public purpose doctrine "is an evolving concept that reflects the changing needs of society." Even if Carll is not dispositive, the JEDA loan program in this case serves a public purpose, City asserts.

Revenue bonds such as those that JEDA would issue in this case are payable solely from the revenues of the particular project or enterprise, not from taxpayer funds. See Wolper v. City Council of City of Charleston, 287 S.C. 209, 214, 336 S.E.2d 871, 874 (1985)

; Anderson v. Baehr, 265 S.C. at 159-60, 217 S.E.2d at 46; Elliott v. McNair, 250 S.C. 75, 83, 156 S.E.2d 421, 425 (1967); Black's Law Dictionary 1319 (1990). Revenue bond debt, as well as general obligation debt incurred by the government and repaid by government funds, may be incurred only for a public purpose. S.C. Const. art. X, § 13(9); Elliott, 250 S.C. at 86,

156 S.E.2d. at 427 (holding that Industrial Revenue Bond Act serves a public purpose as required by state constitution); Feldman & Co. v. City Council of Charleston, 23 S.C. 57, 62-63 (1885) (holding that a law authorizing taxation for any purpose other than a public purpose is void).5

In Carll, we rejected several constitutional challenges to the 1983 act creating JEDA. In discussing whether the Act served a public purpose, we explained that

[a]ll legislative action must serve a public rather than a private purpose. In general, a public purpose has for its objective the promotion of the public health, morals, general welfare, security, prosperity, and contentment of all the inhabitants or residents within a given political division.... It is a fluid concept which changes with time, place, population, economy and countless other circumstances. It is a reflection of the changing needs of society.

Carll, 284 S.C. at 442-43,327 S.E.2d at 334 (citations omitted); see also S.C.Code Ann. §§ 41-43-10 to —280 (1986 & Supp. 1999) (codifying South Carolina Jobs—Economic Development Fund Act). We held that the JEDA Act served a public purpose because its provisions were reasonably related to the legitimate public goals of economic development and job creation. We observed the Legislature's findings regarding the State's economic development problems were "detailed and comprehensive." Id.

We agree with WDW...

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