Linscott v. Orange County Indus. Dev. Auth.
443 So. 2d 97 (1983)
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Rule of Law:
Under the 1968 Florida Constitution, non-recourse industrial development revenue bonds that are payable solely from project revenues do not constitute a pledge of public credit. Therefore, such bonds are valid if the project serves a public purpose, and a legislative determination that economic development constitutes a public purpose is entitled to great weight.
Facts:
- The Orange County Industrial Development Authority (Authority) adopted a resolution to issue industrial development revenue bonds not to exceed $4,500,000.
- The purpose of the bonds was to finance the construction of a regional headquarters facility in Orange County for a private entity, American States Insurance Company.
- The resolution specified that the bonds would be payable solely from the revenue and proceeds derived from the sale, operation, or leasing of the project.
- The resolution explicitly stated that the bonds would not constitute a debt of the Authority, the state, or any political subdivision, and that neither the faith and credit nor the taxing power of the state or its subdivisions would be pledged to pay the bonds.
Procedural Posture:
- The Orange County Industrial Development Authority filed a complaint in the circuit court to validate the proposed issuance of industrial development revenue bonds.
- The circuit court entered a final judgment validating the bonds.
- Jerry R. Linscott, a citizen and taxpayer of Orange County, filed a direct appeal of the circuit court's judgment to the Supreme Court of Florida.
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Issue:
Does the issuance of non-recourse industrial development revenue bonds to finance the construction of a private insurance company's headquarters, a non-industrial project, violate Article VII, Section 10 of the Florida Constitution's prohibition against pledging public credit for a private purpose?
Opinions:
Majority - Shaw, J.
No. The issuance of these non-recourse revenue bonds does not violate the Florida Constitution's prohibition against pledging public credit. The court reasoned that Article VII, Section 10(c) of the 1968 Florida Constitution effectively reinterpreted the prohibition, establishing that non-recourse revenue bonds are not a pledge of public credit. Because public credit is not pledged, the stringent 'paramount public purpose' test from prior case law is inapplicable. Instead, the project need only serve a 'public purpose.' The legislature, through Chapter 159 of the Florida Statutes, has determined that private economic development serves such a public purpose, and this determination is given great weight. Even though an insurance headquarters is not an 'industrial plant' as listed in Section 10(c), that list is not exclusive, and the bonds are valid because they do not pledge public credit and serve a legislatively-recognized public purpose.
Dissenting - Boyd, J.
Yes. The issuance of these bonds violates the Florida Constitution. The dissent argues that Article VII, Section 10(c) creates specific, limited exceptions (airports, ports, industrial plants) to the general prohibition against using public credit to aid a private entity, rather than reinterpreting the prohibition itself. Since an insurance office building does not fall into one of these explicit exceptions, the 'paramount public purpose' test must be applied. Under this long-standing test, general economic stimulation is not a sufficient public benefit to justify using public bond proceeds primarily to aid a private business. Therefore, because the project is not an enumerated exception and does not serve a paramount public purpose, the bonds should be invalidated as an unconstitutional use of the Authority's credit to aid a private corporation.
Analysis:
This decision significantly broadened the scope of public financing for private commercial projects in Florida by lowering the required constitutional standard. It replaced the strict 'paramount public purpose' test with a more lenient 'public purpose' test for any project financed with non-recourse revenue bonds. By giving great deference to legislative determinations of what constitutes a public purpose, the court opened the door for local authorities to finance a wide array of non-industrial commercial ventures, like office buildings, so long as they can be linked to economic development. This precedent solidifies the principle that if taxpayer funds are not at risk, the government has considerable latitude to facilitate private enterprise through its bonding authority.
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