Edward F. Hennessey, Francis J. Quirico, Robert Braucher, Benjamin Kaplan, Herbert P. Wilkins, Paul J. Liacos, Ruth I. Abrams.
Constitutional Law, Public purpose, Credit of the Commonwealth. Massachusetts Community Development Finance Corporation. Community Development Corporations.
The Massachusetts Community Development Finance Corporation, created pursuant to G. L. c. 40F, § 2, following legislative findings of the existence of substandard, decadent, or blighted areas in the Commonwealth, unemployment and underemployment, and the need for substantial funds to develop such areas and the unavailability of private capital, was established primarily for a valid public purpose; the expenditure of public funds for the purposes of the Finance Corporation may be constitutionally effected through the sale of Commonwealth bonds and the purchase of all the common stock of the Finance Corporation, which, apart from investments under c. 29, § 38, may use the proceeds of its stock sales only to purchase capital participation instruments in community development corporations, the projects and "target" areas of which must be approved by the Finance Corporation's board of directors after findings that its funds will confer direct public benefits, and that any private advantage will be merely incidental to carrying out the public purposes. [906-909]
The Commonwealth, consistent with art. 62, § 1, of the Amendments to the Constitution, as appearing in art. 84, may borrow funds and purchase all the common stock of the Massachusetts Community Development Finance Corporation, which, apart from investments under G. L. c. 29, § 38, may use the proceeds of its stock sales only to purchase capital participation instruments in community development corporations authorized to expend funds in accordance with the conditions and limitations set forth in G. L. c. 40F, § 4; both the Finance Corporation and community development corporations may use funds for public purposes only, and the community development corporation to which the Commonwealth's credit is extended is not a "private association" or a "corporation which is privately owned and managed" within art. 62, § 1. [909-911]
On October 18, 1977, the Justices submitted the following answers to questions propounded to them by the Governor.
To His Excellency, the Governor of the Commonwealth:
The Justices of the Supreme Judicial Court respectfully submit their answers to the questions set forth in the request of the Governor, dated August 16, 1977, and received August 17, 1977, for their opinion concerning the constitutionality of the financing of certain community development projects as set forth in G. L. c. 40F, inserted by St. 1975, c. 866, § 2.
The request recites that G. L. c. 40F, § 4, permits the State Treasurer to sell up to $10,000,000 in Commonwealth bonds to purchase shares of the Massachusetts Community Development Finance Corporation (CDFC) and that the bonding was authorized by St. 1976, c. 481, § 15. Under that bonding authorization, the Governor may request the State Treasurer to issue and sell up to $10,000,000 of Commonwealth bonds, and he must approve the interest on those bonds. The request further recites that the Governor has responsibilities to approve any such bonds under G. L. c. 29. See G. L. c. 29, § 48, as appearing in St. 1977, c. 336, § 2, and § 49, as amended through St. 1977, c. 336, § 4. Chapter 40F establishes CDFC and empowers it to use the proceeds of the sale of its common stock to invest in projects which meet detailed standards set forth in G. L. c. 40F, § 4.
The Governor's request expresses grave doubt that bonds issued to purchase all the common stock of CDFC would be "issued for a public purpose and not on behalf of a private party." The Governor has requested our opinions on the following two questions:
"1. Is the Community Development Finance Corporation, created pursuant to M.G.L. c. 40F, established primarily for a valid public purpose for which public funds can be expended consistent with Part 2, Article 4, c. 1, § 1, of the Massachusetts Constitution?
"2. If the answer to Question 1 is in the affirmative, then can the Commonwealth, consistent with Amendment Article 62, § 1, of the Massachusetts Constitution, borrow funds and purchase all of the capital stock of the Community Development Finance Corporation, which funds thereafter are to be invested by such Corporation, all as provided in M.G.L. c. 40F?"
We invited the submission of briefs and received a brief on behalf of the Governor and a brief from individual attorneys in a firm which has been requested from time to time to give its opinion as to the validity of bonds issued by the Commonwealth.
The questions have been put to us in light of the Governor's duties with respect to the issuance of bonds whose proceeds will be used to purchase the common stock of CDFC. Those proceeds will be invested by CDFC under the particular restrictions of G. L. c. 40F, § 4. Only the question of the propriety of the sale of the bonds presents a solemn occasion warranting an advisory opinion. See Answer of the Justices, 364 Mass. 838, 844 (1973); Opinion of the Justices, 363 Mass. 889, 898 (1973); Opinion of the Justices, 359 Mass. 769 (1971). Consequently, we answer the questions solely in terms of the problem which now confronts the Governor.
1. Question 1 inquires whether the expenditure of public funds for the purposes of CDFC is constitutionally proper. As just noted, this broad question need be answered only as it relates to the proceeds of the sale of Commonwealth bonds. We must consider (a) whether the objects of G. L. c. 40F and the goals of CDFC fulfil a public purpose, and (b), if there are benefits to private parties, whether those benefits are ...