Village of Deming v. Hosdreg Company , 62 N.M. 18 ( 1956 )

McGHEE and KIKER, JJ., dissenting.

McGHEE, Justice,

(dissenting).

My views have been expressed heretofore in the opinion unanimously concurred in by the membership of this Court, now withdrawn by -the majority opinion. I remain of the opinion the program inaugurated under Ch. 234, Laws of 1955, and Ordinance No. 251 of the Village of Deming, violates § 14, Art. IX of .the New Mexico Constitution, for thereunder a private corporation will receive substantial benefits through the offices of the Village which the latter enjoys only by virtue of being a governmental authority. These benefits are, I believe, subject to precise monetary calculation as respects the tax freedom the program will apparently now enjoy. And if no exact figure may be given for the value to private industry of a municipal revenue bond issue, it nevertheless has a real value. Yet because no money passes directly from the Village to the defendant the majority opinion tells us no donation has been effected. I doubt that any good businessman would endorse this artifice.

With the exception of the Florida courts, all the authorities have approved similar industrial programs and the voices of dissent are few. ’Certain of these cases are relied on by the majority opinion. Others are: Halbert v. Helena-West Helena Indus. Develop. Corp., Ark.1956, 291 S.W.2d 802; Wilmington Parking Authority v. Ranken, Del.1954, 105 A.2d 614; Dyche v. City of London, Ky.1956, 288 S.W.2d 648; Miller v. Police Jury of Washington Parish, 1954, 226 La. 8, 74 So.2d 394; North Carolina State Ports Authority v. First-Citizens Bank & Trust Co., 1955, 242 N.C. 416, 88 S.E.2d 109.

Some of these cases involve instances where the taxing powers áre invoked in aid of the project, and the case from Arkansas is perhaps most notable of all in that the bonds are issued by a local development non-profit corporation, not a division of government, and the State Board of Finance is given discretion to purchase as much as fifty percent of the principal amount of the bond issue up to a certain amount.

To anyone who sees, as I do, a tangible donation made by municipal government to a private corporation or concern in these programs, the reading of the authorities is an Adventure in Wonderland where naught is upside-down to anyone but him. I am immune to the “Take-Me” formula composed of municipal ownership and the stated policy of balancing economy.

The feature of municipal ownership is a sham. By the tentative lease the defendant leases the project for 30 years for an annual rental sufficient to discharge the bonds, and other expenses ($15,000,000) and at the end of the term may renew the lease for another 30-year period at annual rental of $1,000 or purchase the project outright for $10,000. Assuming that the business lessee does operate the project for the initial thirty-year period, at the termination thereof, the lessee having been under obligation to maintain the plant in good repair, even deducting then allowable depreciation, the plant would still be worth the substantial part of the original capital investment, $15,000,000, if not in excess thereof. I have no doubt the lessee would choose to renew for an additional thirty-year term, at rental of $1,000 per year, in preference to purchasing the plant for $10,-000, in order to avail itself of continued freedom from taxation, for the amount saved in tax exemption over the additional thirty-year term would certainly exceed the liability for payment of rentals. In effect a donation of tax exemption for sixty years has been approved. It is no less forbidden surely to contract to make a future donation than to make such donation presently.

We are told by the Act, the proposed Lease, and the majority of this Court that the project is to bring about that great public good — a balanced economy. What we are not told is that the defendant lessee is under no obligation to serve the public or its policy, and authority for the Village itself to operate the project is expressly denied by the Act. The honeymoon of this marriage between municipal government and business may not continue indefinitely. See, for example: Greenfeld v. Supervisors’ Dist. No. 3 of Perry County, 5 Cir., 1953, 205 F.2d 323.

While the Village will suffer no direct liability to retire the revenue bonds from municipal funds, if it should befall that the defendant is in default in its obligation, the Village will still have outstanding at least a titular indebtedness, which certainly would affect the credit of the Village and render any future sale of revenue bonds for some municipal program greatly more difficult and probably more expensive. See 66 Harv.L.Rev. 898 ; 35 Va.L.Rev. 285, pp. 293, 294.

The majority make considerable show of their unwillingness to read words into our constitutional provision, and also insert a “red herring” in discussing railroad construction. The provision in question reads:

“Neither the state, nor any county, school district, or municipality, except as otherwise provided in this Constitution, shall directly or indirectly lend or pledge its credit, or make any donation to or in aid of any person, association or public or private corporation, or in aid of any private enterprise for the construction of any railroad; provided, nothing herein shall be construed to prohibit the state or any county or municipality from making provision for the care and maintenance of sick and indigent persons.” § 14, Art. IX.

The majority have judicially amended this provision by adding, following the word “railroad”, unless the public might receive some incidental benefit therefrom.

The majority opinion also sets up a new rule that tax exemptions are to be liberally construed. The outmoded rule of strict construction is stated in Peisker v. Unemployment Compensation Commission, 1941, 45 N.M. 307, 115 P.2d 62, to mention but one case.

For the reasons stated, I dissent.

KIKER, J., concurs.