Witzenburger v. State ex rel. Wyoming Community Development Authority

• Decision Date: 13 February 1978
• Docket Number: No. 4788,4788
• Citation: 575 P.2d 1100
• Parties: Edwin J. WITZENBURGER, State Treasurer of the State of Wyoming, Appellant (Defendant below), v. STATE of Wyoming ex rel. WYOMING COMMUNITY DEVELOPMENT AUTHORITY, Appellee (Plaintiff below), v. STATE of Wyoming, Appellee (Intervenor below).
• Court: Wyoming Supreme Court

Page 1100

575 P.2d 1100

Edwin J. WITZENBURGER, State Treasurer of the State of Wyoming, Appellant (Defendant below), v. STATE of Wyoming ex rel. WYOMING COMMUNITY DEVELOPMENT AUTHORITY, Appellee (Plaintiff below), v. STATE of Wyoming, Appellee (Intervenor below).

No. 4788.

Supreme Court of Wyoming.

Feb. 13, 1978.

Rehearing Denied April 26, 1978.

See 597 P.2d 1386.

Thomas S. Smith, Smith, Stanfield & Scott, Laramie, signed the brief and appeared in oral argument on behalf of appellant.

Dean W. Borthwick, Borthwick & McCall, Cheyenne, signed the brief and appeared in oral argument on behalf of appellee.

V. Frank Mendicino, Atty. Gen., and Steve F. Freudenthal, Asst. Atty. Gen., Cheyenne, signed the brief and V. Frank Mendicino, appeared in oral argument on behalf of appellee-intervenor.

Before GUTHRIE, C. J., and McCLINTOCK, RAPER, THOMAS and ROSE, JJ.

RAPER, Justice.

The Forty-third Wyoming State Legislature enacted the "Wyoming Community Development Authority Act," Chapter 188, Session Laws of Wyoming, 1975, appearing in the Wyoming Statutes as §§ 9-826 through 9-848, W.S.1957, 1975 Cum.Supp.; in this opinion it will be referred to as "the Act." Its constitutionality has been challenged by the appellant-defendant, the State Treasurer, State of Wyoming. The district judge in an action for declaratory judgment brought by the appellee-plaintiff, the Wyoming Community Development Authority, reserved to this court 14 separate constitutional questions. ¹ The principal question is whether revenue bonds issued by the Wyoming Community Development Authority, for the payment of which excise tax revenue to be derived in future years is committed under the so-called "special" fund theory, come within the debt limit prohibitions of §§ 1 and 2, Article XVI, Wyoming Constitution:

"Sec. 1. The State of Wyoming shall not, in any manner, create any indebtedness exceeding one percentum on the assessed value of the taxable property in the state, as shown by the last general assessment for taxation, preceding; except to suppress insurrection or to provide for the public defense.

"Sec. 2. No debt in excess of the taxes for the current year, shall in any manner be created in the State of Wyoming, unless the proposition to create such debt shall have been submitted to a vote of the people and by them approved; except to suppress insurrection or to provide for the public defense."

We shall hold that such a pledge by a state agency and the legislature to pay off bonds issued for money borrowed by the Authority from revenues to be derived from excise taxes, in whole or in part, to be collected in the future is unconstitutional and explain why. The other constitutional questions reserved and questions raised on appeal will be discussed and decided to the extent necessary as they are reached in the opinion.

The Wyoming Community Development Authority Act is a complex piece of legislation, relating to the issuance of tax-free (§ 9-841) revenue bonds to finance public facilities of the state or any of its agencies, counties, municipalities or political subdivisions pronounced necessary by the legislature, due to the expansion of mineral activity within the state, causing impacted situations in various localities. The legislature declared its findings and purposes in enactment of the law in the language of § 9-827:

"It is hereby declared that there exists in this state by reason of the location and expansion of mineral extractive industries and other industrial developments, an acute shortage of adequate municipal, educational, recreational, cultural and other community facilities, and public services and municipally owned utilities, which conditions threaten and adversely affect the health, safety, morals and welfare of the people of this state. It is further declared that a critical shortage of adequate housing exists in the state because of the location and expansion of industries and industrial developments and the lack of funds of private mortgage lending institutions of the state which are available to finance new housing at reasonable rates. It is further declared that the rapidly expanding or expected population of the state cannot be provided with such needed facilities and services by conventional planning and financing sources. It is further declared that the provisions of this act (§§ 9-826 9-848) constitute a valid public purpose, of primary benefit to all citizens of the state of Wyoming." (Emphasis added.)

In order to carry out those purposes, the Wyoming Community Development Authority was created. It will be referred to in this opinion as the "Authority." It was declared to be "a body corporate and politic, constituting a political subdivision of the state operated solely for the public benefit." Its membership consists of 10 directors, appointed by the governor, with the advice and consent of the senate. The Authority is declared to be perpetual or until terminated by law, provided that in the latter case, there are no other bonds or other obligations of the Authority outstanding, unless provision be made for their payment. Section 9-829, W.S.1957, 1975 Cum.Supp.

The Authority has extensive powers, including the right to sue or be sued, have a seal, execute contracts, make by-laws, contract with any person, municipality or state agency, purchase and hold property, as well as sell and transfer it, build civic projects or water projects, manage projects, provide advisory, consultative or educational services to anyone, public or private, lend money to municipalities and state agencies, ² borrow money and issue its negotiable bonds and provide for the rights of the holders, mortgage or pledge any or all of its revenue or property, invest funds in all types of indebtedness, including the purchase of loans from mortgage lenders, residential real property, make loans to mortgage lenders and, finally, to do any and all things necessary or convenient to carry out the purposes and exercise the powers granted. A large portion of the Act is devoted to its power to issue its tax-free negotiable bonds, including a limitation on such issue to $100,000,000.00 outstanding at any time. Section 9-837.

By § 9-839, the legislature provided that debt service funds be established by the Authority to secure payment of outstanding bonds, as follows:

"(a) Prior to the delivery of each bond issue, the authority may create and establish one (1) or more debt service reserve funds and at such time or times as the authority determines, shall pay into such funds an amount not exceeding in the aggregate the maximum amount of principal and interest payable on the bonds thereby secured during any succeeding year, from:

"(i) Any proceeds of sale of bonds to the extent provided in the resolution of the authority authorizing the issuance thereof; and

"(ii) Any other moneys which may be received or made available to the authority for the purposes of such funds from any other source or sources.

"(b) The authority may also create and establish one (1) or more special reserve funds into which there shall be deposited from that portion of the moneys received by the state from the excise tax levied upon the privilege of extracting trona, coal, petroleum, natural gas, oil shale or other fossil fuel minerals which would be raised by an excise tax of one half ( 1/2) of one percent (1%) and which has not heretofore been pledged to any constitutional trust fund, an amount which does not exceed the maximum amount of principal and interest payable on the bonds thereby secured in any succeeding year.

"(c) The moneys held in or credited to any debt service or special reserve fund established under this section, except as hereinafter provided, shall be used solely for the payment of the principal of bonds of the authority secured by such reserve fund, as the same mature, or are redeemed prior to maturity, the purchase of such bonds of the authority, the payment of interest on such bonds of the authority or the payment of any redemption premium required to be paid when such bonds are redeemed prior to maturity. Prior to using any moneys in the debt service reserve fund the moneys, if any, deposited in the special reserve fund securing bonds shall be used for such purposes. Any moneys expended from a special reserve fund shall be replaced on a pro rata basis with any other such special reserve fund from the first excise tax proceeds thereafter received not required to be otherwise applied. The interest earned on the amount deposited in any reserve fund may be used for the purpose of defraying the cost of the authority's operations. After June 30, 1979, all interest earned on the amount deposited under the provisions of subsection (b) of this section shall be deposited in the State general fund. No money in any reserve fund may be withdrawn at any time such as would reduce the amount of such fund to less than the amount which is pledged in the proceedings authorizing the issuance of the bonds secured by the reserve fund, except for the purpose of paying principal and interest on such bonds maturing and becoming due, and for the payment of which other moneys of the authority are not available.

"(d) To assure the continued operation and solvency of the authority for carrying out the public purposes of this act (§§ 9-826 to 9-848), there may be appropriated, at the discretion of the legislature, and paid to the authority for deposit in each debt service reserve fund such sum, if any, as shall be certified by the chairman of the authority to the governor as necessary to restore such fund or funds to an amount equal to the maximum amount of principal and interest maturing and becoming due in the next succeeding year on the bonds of the authority then outstanding and secured by such fund or funds. The chairman of the authority shall annually, on or before August 31 in each year, make and deliver to the governor his certificate stating the sum, if any, required to...