Nohrr v. Brevard County Educational Fac. Auth.
247 So.2d 304 (1971)
Rule of Law:
A public authority may issue revenue bonds to finance projects for private educational institutions, provided the bonds are payable solely from project revenues and do not pledge public credit. However, securing such bonds with a mortgage that includes a right of foreclosure constitutes an unconstitutional indirect pledge of public credit if not approved by a public election.
Facts:
- The Florida Legislature enacted the 'Higher Educational Facilities Authorities Law,' allowing counties to create authorities to assist institutions of higher education with financing for expansion projects.
- Pursuant to this law, the Board of County Commissioners of Brevard County created the Brevard County Educational Facilities Authority ('the Authority').
- Florida Institute of Technology (F.I.T.), a private university in Brevard County, applied to the Authority for assistance in financing the construction of a dormitory-cafeteria.
- The Authority adopted a resolution to issue $880,000 in revenue bonds to fund the F.I.T. project.
- The bonds were to be paid back solely from the rents and other revenues generated by the new dormitory-cafeteria.
- To secure the bonds, the financing plan included a mortgage on the project, granting bondholders the right of foreclosure in the event of a default.
- The plan explicitly stated that neither the faith and credit nor the taxing power of the state or county was pledged to pay the bonds.
Procedural Posture:
- The Brevard County Educational Facilities Authority filed a complaint in the Circuit Court of Brevard County to validate the proposed revenue bonds.
- The State of Florida filed an answer denying the validity of the bonds.
- Philip F. Nohrr was permitted to intervene as a defendant to challenge the bonds' validity.
- The Circuit Court, as the court of first instance, entered a final judgment validating the revenue bonds.
- Philip F. Nohrr, as appellant, filed a direct appeal of the final judgment to the Supreme Court of Florida.
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Issue:
Does the Florida Constitution permit a county educational facilities authority to issue revenue bonds, secured by a mortgage with a right of foreclosure, to finance a construction project for a private university without a public election?
Opinions:
Majority - Adkins, J.
No. While the issuance of revenue bonds payable solely from project revenues is permissible, securing those bonds with a mortgage that includes a right of foreclosure constitutes an indirect pledge of public credit that is unconstitutional without a voter election. The revenue bonds themselves do not violate Article VII, § 10 of the Florida Constitution because they are payable solely from project revenues and explicitly disclaim any liability on the part of the state or county. The financing serves a legitimate public purpose by promoting higher education. However, the mortgage provision is unconstitutional because the threat of foreclosure on a university facility would create a powerful 'moral compulsion' for the county or state legislature to levy taxes or appropriate funds to prevent the loss of the property. This indirect coercion to use public funds is tantamount to a pledge of credit, which requires voter approval. Therefore, the bonds are validated, but the mortgage and foreclosure provisions are stricken from the trust indenture.
Dissenting - Boyd, J.
No. The Florida Constitution does not permit this type of bond issue. The 1968 Constitution, in Article VII, § 10(c), specifically lists the types of capital projects for which revenue bonds can be issued to aid private entities (e.g., airports, port facilities, industrial plants). Because educational facilities for private universities are not on that list, this type of bond financing is not authorized.
Analysis:
This decision clarifies the 'pledge of credit' clause in the Florida Constitution by establishing a 'moral obligation' or 'coercion' test. It distinguishes between permissible revenue bonds that place no financial liability on the public and impermissible financing schemes that, while not creating direct liability, create such strong political or moral pressure on the government to prevent a private default that they function as an indirect pledge of public credit. This precedent significantly impacts public financing for private projects, requiring planners to structure deals that avoid security mechanisms, like foreclosure rights, that could trigger this moral obligation and thus necessitate a public referendum.
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