CITIES AND TOWNS - SEATTLE MODEL CITY PROGRAM - USE OF FEDERAL FUNDS - DONATIONS

CITIES AND TOWNS - SEATTLE MODEL CITY PROGRAM - USE OF FEDERAL FUNDS - DONATIONS

(1) The provisions of Article VIII, § 7 of the Washington Constitution, relating to gifts or loans of funds or credit by a municipality, do not apply to the expenditure by a city of federal funds which have been granted to it to finance programs authorized and approved by the Secretary of Housing and Urban Development under Title I of the Demonstration Cities and Metropolitan Development Act of 1966 (80 Stat. 1255; 42 U.S.C. §§ 3301-3313).

(2) To the extent that their programs are carried out in a manner consistent with the state Constitution, § 1, Chapter 77, Laws of 1970 (RCW 35.21.660) contains a sufficient grant of authority to enable all cities in this state to do all things which are necessary in order to carry out the purposes of such contracts as they may have entered into under the provisions of Title I of the Demonstration Cities and Metropolitan Development Act of 1966.

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                                                                November 5, 1970

Honorable David G. Sprague
State Representative, 37th District
705 Logan Building
Seattle, Washington 98101
Honorable George Fleming
State Representative, 37th District
705 Logan Building
Seattle, Washington 98101

                                                                                                                 Cite as:  AGO 1970 No. 24

Gentlemen:

            By letter previously acknowledged, you have requested an opinion of this office upon two questions which, by subsequent correspondence, have been clarified to read as follows:

            (1) Do the provisions of Article VIII, § 7 of the Washington  [[Orig. Op. Page 2]] Constitution, relating to gifts or loans of funds or credit by a municipality, apply to the expenditure by a city of federal funds which have been granted to it to finance programs authorized and approved by the Secretary of Housing and Urban Development under Title I of the Demonstration Cities and Metropolitan Development Act of 1966 (80 Stat. 1255; 42 U.S.C. §§ 3301-3313)?

            (2) To what extent do the provisions of § 1, chapter 77, Laws of 1970 (RCW 35.21.660) enable the cities of this state to do those things which are necessary in order to carry out the purposes of such contracts as they may have entered into with the federal government under the provisions of the aforesaid federal act?

            We answer question (1) in the negative and question (2) in the manner set forth in our analysis.

                                                                     ANALYSIS

            Before proceeding to a consideration of the legal issues posed by your questions, it will be necessary to note the pertinent provisions of the demonstration cities act.  Under Title I of the act,1/ three types of grants are available:  "planning" grants under 42 U.S.C. § 3304; "administration" grants under 42 U.S.C. § 3305 (b); and "program" grants under 42 U.S.C. § 3305(c).  We are here concerned only with the latter; i.e., "program" grants.  The federal statutory formula governing these grants, as set forth in 42 U.S.C. § 3305 (c), reads as follows:

            "(c) To assist the city to carry out the projects or activities included within an approved comprehensive city demonstration program, the Secretary [of Housing and Urban Development] is authorized to make grants to the city demonstration agency of not to exceed 80 per centum of the aggregate amount of non-Federal contributions otherwise required to be made to all projects or activities assisted by Federal grant-in-aid programs (as defined in [42 U.S.C.] section 3312(1) . . .) which are carried out in connection  [[Orig. Op. Page 3]] with such demonstration program: . . ."2/   (Emphasis supplied.)

            Thus, unlike the federal share of "planning" and "administration" grants, both of which are limited to not more than 80% of the costs of planning and administration of each individual program,3/ the federal share of program costs is determined by reference to a formula under which the federal share of the costs of any particular program may be not merely 80% but in fact 100% of the entire costs of that program.  Under this formula, it is the aggregate amount of all non-Federal contributions required to be made to all federally assisted projects, and not the cost of each individual program, that constitutes the base for measurement of the federal "program" grants.  Indeed, from the materials which you have submitted in connection with your request involving the model cities operation in the city of Seattle, it appears that a total of 17 out of 38 proposed programs will be funded entirely by federal funds, and the remaining 21 programs will be funded in part by federal funds.4/   Moreover, these federal funds may only be used in carrying out these programs and for no other purposes.

            Question (1):

            Article VIII, § 7 of the Washington Constitution, to which your first question refers, reads in pertinent part as follows:

            "No county, city, town or other municipal corporation shall hereaftergive any money, or property, or loan its money, or credit to or in aid of any individual,  [[Orig. Op. Page 4]] association, company or corporation, except for the necessary support of the poor and infirm, . . ."  (Emphasis supplied.)

            In the light of the language of this constitutional provision, and in view of the foregoing analysis of the basis for, and the nature of, federal "program" grants to which this opinion is limited we believe that the issue raised by your first question may properly be rephrased as follows:  Is a city prohibited by Article VIII, § 7 of the Washington Constitution from acting, in effect, as a mere conduit for or dispenser of federal funds to finance federally authorized and approved programs under the demonstration cities act, when the nature of the transaction between the federal government and the ultimate beneficiary of the grant may be characterized as a "gift"?

            In considering this question, we first must note and consider the fact that Article VIII, § 7,supra, makes a verbal distinction between a gift of "any money" and a loan of "its money."  Assuming for purposes of this opinion that the expenditures of federal funds in question are, in fact, "gifts" which would be unconstitutional if made with city funds,5/ then perhaps it could be argued that since Article VIII, § 7 forbids a gift of "any money," regardless of its source, it applies here.  However, we do not believe that this verbal distinction is of any such moment.  Rather, we believe that the phrase "any money" must be read in conjunction with the later phrase "its money," and in light of the manifest purpose of Article VIII, § 7 as a whole, with the result that the phrase should be considered as if it forbade a city to give ". . . its money and/or property or lend its money or credit . . ."6/   It is in this manner, and with this purpose, that our supreme court has consistently construed Article VIII, § 7.

             [[Orig. Op. Page 5]]

            For example, as early asPaine v. Port of Seattle, 70 Wash. 318, 127 Pac. 580, affirming 70 Wash. 294, 126 Pac. 628 (1912), the court stated that gifts by a city of ". . . its money and property and loan[s of] its money and credit to a company or corporation [are] in violation of the prohibition contained in § 7, of Article 8, . . ."  (Emphasis supplied.)7/   (Id., at 322.)  Shortly thereafter, the intent and purpose of Article VIII, § 7 was restated in such a manner as to negate any distinction between "any money" and "its money."  InJohns v. Wadsworth, 80 Wash. 352, 141 Pac. 892 (1914), the court stated that Article VIII, § 7 was intended to prohibit the ". . . giving [of] money and loaning [of] credit for other than corporate or public purposes, . . ."  (Id., at 354.)8/

             [[Orig. Op. Page 6]] Again, inHogue v. Port of Seattle, 54 Wn.2d 799, 341 P.2d 171 (1959), the purpose of Article VIII, § 7 was stated to be the prevention of ". . . gift[s] of money and property and . . . loan[s] of money or credit in aid of private persons . . ."  (Id., at 816.)  Finally, a comparable statement of the purpose of the constitutional prohibition appears inLuders v. Spokane, 57 Wn.2d 162, 356 P.2d 331 (1960), where it was said that Article VIII, § 7 ". . . was designed to prohibit municipal gifts and the use of municipal funds for nonmunicipal purposes. . . ."  (Id., at 165.)

            In all of the cases which our research has disclosed in which the purposes of Article VIII, § 7 were discussed (as opposed to those in which the provision was simply quoted without discussion of its intent or meaning), the court has declined to regard the verbal distinction between "any money" in the case of gifts and "its money" in the case of loans as being of any substance whatever.  Rather, the court has seemed to read the two phrases together with the result that the provision, in effect, forbids any municipal corporation to ". . . give any [of its] money, or property, or loan [any of] its money, or credit, to or in aid of any individual, association, company or corporation, . . ."  As stated by the court of appeals inState ex rel. O'Connell v. P.U.D. # 1,supra,9/

            ". . .  The niceties of distinction among the various prohibitions are not often clearly enunciated nor are such distinctions often necessary. . . ."

            As we have found, our courts have not insisted upon a strict observance of these "niceties" of verbal distinction, and we decline to do now what has not been done in the past.10/

             [[Orig. Op. Page 7]]

             Having found that the purpose of Article VIII, § 7 is to prevent a municipal corporation from making gifts ofits money, it remains to be considered whether funds derived by a city from federal revenue sources under the circumstances involved in your present question are to be considered "its" (i.e., the city's) money and, hence, subject to the limitations of Article VIII, § 7.  In this regard, again, we must attach greater importance to the manifest intent of the constitutional provision than to "niceties" of its semantic and/or grammatical arrangement.  As stated by the court inState ex rel. Clausen v. French, 107 Wash. 667, 182 Pac. 610 (1919):

            ". . . precision may be exacted in determining the meaning of the language of a statute, while generally, in the case of a constitution, its provisions should be construed in the common and natural view; always the most important thing being to determine, if possible, what the real intention of the lawmakers was. . . ."  (Id., at 673.)11/

             In this instance, the intent of Article VIII, § 7 is easily ascertained by reference to the evils which it was designed to cure.  The earliest discussion of these matters by our court is contained in Rauch v. Chapman, 16 Wash. 568, 48 Pac. 253 (1897).12/   The court there stated:

            ". . .  A recurrence to the history of the times will show that many counties and municipalities had become largely indebted, beyond their capacity to pay, for public improvements of various kinds.  In many of these states, [which were drafting constitutions at the same time as Washington] for a considerable period of time, counties and municipalities aided railway building, and  [[Orig. Op. Page 8]] many of them became bankrupt by reason of the obligations and liabilities incurred in such aid of railway companies and various other public improvements which were deemed advantageous in the rapid development of the territory . . .  Hence, another limitation upon the power of . . . municipalities . . . found expression . . . in § 7 of Art. 8 . . ."  (Id., at 574.)13/

             Thus, the evil sought to be avoided by Article VIII, § 7 was the depletion of the municipal treasury through subsidization of private businesses.

            With this historical perspective upon this constitutional provision, we think it clear that this section was not intended to prohibit the expenditure by a city of moneys derived from outside (nonstate or nonmunicipal) sources under the circumstance here in question.  It is our view that Article VIII, § 7 was intended to prohibit municipal corporations from gratuitously diverting to nonmunicipal purposes funds which would otherwise have been available to be spent upon proper municipal purposes.14/ However, as we have seen, the federal funds to which your question pertains are available to be spent only upon programs and for purposes approved by the Secretary of Housing and Urban Development, as provided for in the demonstration cities act.  The city to which a grant is made acts only as a conduit for these funds,15/ and as an agency for the administration of an  [[Orig. Op. Page 9]] essentially federal program or programs.16/   The fundswould not in any case be available to be spent by the city for a purpose not within the ambit of the federal act; and therefore, in direct answer to your first question, we would not regard them as being within the intendment of Article VIII, § 7.

            Question (2):

            The issue raised by your second question pertains to the significance of § 1, chapter 77, Laws of 1970 (RCW 35.21.660) a statute which reads as follows:

            "Notwithstanding any other provision of law, all cities shall have the power and authority to enter into agreements with the United States or any department or agency thereof, to carry out the purposes of the Demonstration Cities and Metropolitan Development Act of 1966 (PL 89-754; 80 Stat. 1255), and to plan, organize and administer programs provided for in such contracts.  This power and authority shall include, but not be limited to, the power and authority to create public corporations, commissions and authorities to perform duties arising under and administer programs provided for in such contracts."

            The plain intent of this statute, as we read it, is to grant to all cities in this state whatever statutory powers are necessary in order to ". . . carry out the purposes of the Demonstration Cities and Metropolitan Development Act of 1966 . . ." pursuant to agreements or contracts with the United States and its agencies entered into by such cities.  Its effect, then, is clearly to remove any objections based upon a lack of authority which might otherwise be made to the participation of the cities of this state in any of the programs or activities contemplated by the federal act under contracts with the federal government.  However, in the exercise of this granted authority, of course, each of the cities must still conform to any restrictions or prohibitions which are contained in our state Constitution for no mere statute can be said to sanction or permit any actions by a city which are in conflict with the constitution.