section 4, we are faced with considerations not before the court in Amador. We are asked to read the word "special" out of the phrase "special taxes," in violation of settled rules of construction and in the face of the language of section 3, which indicates that the drafters knew how to say "any" taxes when that is what they meant. Our choice here is not simply between acceptance of one of a number of different meanings of an ambiguous term in a statute, but between disregarding the word "special" altogether in section 4, or affording it some meaning consistent with the intent of the voters in enacting the provision. Application of the rule of strict construction of provisions which require extraordinary majorities for the enactment of legislation is particularly appropriate in these circumstances.

In keeping with these principles, we construe the term "special taxes" in section 4 to mean taxes which are levied for a specific purpose rather than, as in the present case, a levy placed in the general fund to be utilized for general governmental purposes. This is a common meaning of the term, as is evident from the authorities cited above. More important, such a construction will provide the voters with the "effective" property tax relief we discussed in Amador to the extent the section clearly requires a two-thirds vote for he adoption of a "special tax,” while ascribing some meaning to every word used in the section. (See Los Angeles County Transportation Commission v. Richmond, supra,31 Cal.3d 197, 208, 182 Cal.Rptr. 324,643 P.2d 941.)

KAUS, Justice, dissenting.

As the various opinions in this case make clear, the terms of Proposition 13 itself provide no hint of what the drafters of the initiative had in mind when they used the term "special taxes" in article XIIIA, section 4. As I noted in my separate opinion in Los Angeles County Transportation Commission v. Richmond (1982) 31 Cal.3d 197, 208-209, 182 Cal. Rptr. 324, 643 P.2d 941, however, "the description and discussion of [section 4] in the election pamphlet which was before the voters suggest to me that the purpose

Discussion Notes

1. Proposition 36, which was an initiative to amend Article XIIIA to close "loopholes" created by cases such as the Farrell decision, was defeated at the polls in 1984.

2. See also, David M. Rosenberger, "Historical Perspective on Constitutional Limitation of Property Taxes in Michigan," Wayne Law Review 24 (March 1978): 939; Note, "Proposition 2 1/2 in Massachusetts: Another Proposition 13 or a Tax

of this section was simply to limit the authority of a city, county or special district to impose new 'special taxes' to replace property tax revenue that the city, county or special district lost as a result of the other portions of Proposition 13." (Orig. italics).

If section 4 was indeed intended to restrict the ability of local entities to replace the property tax losses mandated by Proposition 13, then the interpretation of "special taxes" adopted by the court is clearly off the mark. As construed by the majority, section 4 places no limit whatsoever on the ability of local entities to levy the traditional, run-of-the-mill revenueraising taxes for general municipal purposes, but-quite perversely-only makes it more difficult for such entities to levy much more unusual and more limited "special purpose" taxes. Since I can think of no plausible reason for the drafters to have intended such an irrational and ineffectual scheme, I must respectfully dissent.

In my view, section 4 will serve its apparent intended purpose only if the phrase "special taxes" is read to mean "new," additional," or "supplemental" taxes which are enacted to replace tax revenue lost as a result of Proposition 13's limitations on the property tax. Contrary to the majority's suggestion, I do not believe that this interpretation reads the word "special" out of section 4 altogether. If the word "special" were completely eliminated, section 4 could be read to require a two-thirds vote of the electorate to authorize any tax levied by local entities after July 1, 1978, including the mere continuation of local taxes that were already in place before the adoption of Proposition 13. The inclusion of the modifier "special" in section 4 was intended to make it clear that local entities are permitted to maintain their pre-Proposition 13 nonproperty taxes without a two-thirds voter approval; only "new" or "additional" i.e., "special"-taxes, which would inevitably replace the property tax revenue withheld by other portions of Proposition 13, are subject to the two-thirds requirement.

In sum, given the purpose of the provision, I conclude that the tax in question is a "special tax" within the meaning of section 4 of Article XIIIA. Accordingly, I would deny the requested writ.

Reform Measure with Potential Constitutional Problems?" New England Law Review 15 (No. 2 1980): 309; Note, The Legal Ramifications of Proposition 13: Protecting State Fundamental Rights in Federal Court," Syracuse Law Review 30 (Summer 1979): 937.

3. Review the materials at the end of Chapter 10, Section A, concerning state constitutional limits on mandates to local government as part of the "tax revolt."

Sharpless v. Mayor of Philadelphia, 21 Pa. 147 (1853) was, in the words of Chief Justice Jeremiah S. Black, "beyond all comparison, the most important cause that has ever been in this court since the formation of the government." 21 Pa. at 158. He wrote, in upholding a city's subscription of stock as a public purpose,

Neither has the legislature any constitutional right to create a public debt, or to levy a tax, or to authorize any municipal corporation to do it, in order to raise funds for a mere private purpose. No such authority passed to the Assembly by the general grant of legislative powers. This would not be legislation. Taxation is a mode of raising revenue for public purposes.

21 Pa. at 168-69 (emphasis in original).

State constitutions have been amended over the years to contain many detailed provisions limiting state and local government power to borrow and finance a wide range of projects. These "debt limits" were inserted in state constitutions as responses to perceived abuses of the borrowing power usually through the sale of bonds for long term capital projects. See generally, M. David Gelfand, "Seeking Local Government Financial Integrity Through Debt Ceilings, Tax Limitations, and Expenditure Limits: The New York City Fiscal Crisis, the Taxpayers' Revolt, and Beyond," Minnesota Law Review 63 (April 1979): 545.

How strictly should these state constitutional debt limits be interpreted in modern times? Read the cases in this section with this question in mind.

Brack v. Mossman 170 N.W. 2d 416 (Iowa 1969)

LEGRAND, Justice.

This is a class action by an Iowa City taxpayer against Ray B. Mossman, Elwin T. Jolliffe, and Howard R. Bowen, who are respectively treasurer, vice president and president of the University of Iowa; against the Board of Regents of the State of Iowa; and against the individual members of the Board....

Plaintiff brought this action in equity alleging the action of the Board in authorizing construction of a multi-level parking ramp under chapter 262, Code of Iowa, 1966, is illegal and void....

The plaintiff relies on two propositions for reversal. They are:.... (2) the parking ramp project violates chapter 262, Code, for reasons hereafter discussed, including the claim the method of financing authorized is unconstitutional because under its terms the state incurs a debt without complying with section 5, Article VII, Constitution of Iowa.

It is conceded the net revenue from this parking ramp alone will not be sufficient to meet the bond obligation, but the revenue produced from the entire parking operations of the university will be more than adequate to do so. The bonds, when issued, will pledge the income from the entire integrated parking system to their payment. As the amount of the outstanding bonds is reduced, the net revenue will help finance the construction of other parking ramps on the campus, several of which are already scheduled between 1971 and 1976.

IV. Plaintiff concedes the "big issue" is whether this is a self-liquidating project. If not, it creates an indebtedness which the State is obligated to pay. This would violate Section 5, Article VIII of our Constitution. If the income from this facility alone would pay off the cost of its construction, there could be no question raised. Iowa Hotel Ass'n. v. Board of Regents, supra. Plaintiff admits as much. However, the record shows such income will not be sufficient to do so. The bonds which the Board intends to issue will pledge not only the income from the new parking ramp but also the income from the entire university parking system. It is this to which plaintiff objects.

Before discussing this further we mention that the method of financing set up in chapter 262, Code, is the so-called special-fund theory which has long been approved by virtually all states.

It permits public improvements to be constructed without resort to taxation and without pledging the credit of the State to payment. Payment is made from the income of the improvement itself. It is universally held such financing does not create a debt within the definition of that term as used in most state constitutions.

That this is a popular and approved practice see annotations at 72 A.L.R. 695, 96 A.L.R. 1393, and 146 A.L.R. 328.

Iowa is among the many states which have adopted its use. . . .

Courts which have dealt with special-fund financing are split into two groups. Some limit the governmental unit involved to those projects which will be completely self-liquidating from the income obtained from the new construction itself. Others permit the use of income from such construction and income from already existing facilities to defray the new construction costs.

Plaintiff is asking us to adopt the first or strict special-fund doctrine rather than the last or broad theory. He relies most heavily on Boe v. Foss, 76 S.Dak. 295, 77 N.W.2d 1, 10, which accepted the strict theory in ruling income from existing university dormitories could not legally be applied toward financing new

ones.

The South Dakota court held the effect of permitting such withdrawal of money to which the State was already entitled inevitably required the spending of tax money to replace it. It held this created a state debt. Several other jurisdictions follow this formula.

We make no attempt to distinguish this case from the present one. We only say it represents the minor

ity view and one with which we cannot agree. As said in Lacher v. Board of Trustees, 243 Md. 500, 221 A.2d 625, 630, the South Dakota doctrine is followed by only "a small minority of courts."

The overwhelming weight of authority is to the contrary. Most courts hold that financing such as the Board proposes here-when authorized by statute and when the State cannot become obligated to paydoes not create a debt against the State. Section 262.49, Code, provides in part:

No obligation created hereunder shall ever be or become a charge against the state of Iowa but all such obligations, including principal and interest, shall be payable solely:

1. From the net rents, profits and income arising from the property so pledged or mortgaged.

2. From the net rents, profits, and income which has not been pledged for other purposes arising from any similar building, facility, area or improvement under the control and management of said board.

3. From the fees or charges established by said board for students attending the institution for use or availability of the building, structure, area, facility or improvement for which the obligation was incurred....” (Emphasis added.)

In addition the record shows the bonds themselves, when issued, will contain a clause limiting the source of their payment to parking revenue only.

It is beyond dispute Section 262.49 (2) intended that income from the already existing parking system could be applied to pay for new construction of like type. It is clear the existing system consists of "similar building[s], facilit[ies], area[s], and improvement[s]" whose income the statute says may be used for this purpose.

But plaintiff says the statute cannot constitutionally accomplish this because, regardless of its terms, it burdens the State with an obligation to pay the indebtedness incurred by the Board. If it does, plaintiff is correct in saying it violates Section 5, Article VII of the Constitution. We deem it unnecessary to discuss the provisions of Article VII since we hold no state indebtedness arises under the circumstances already set out.

Discussion Notes

1. Which view of the special fund theory, the strict or broad view, would the Iowa voters who ratified the state constitutional debt limit probably have favored? Would they favor the special fund theory at all?

2. Is the revenue bond financing mechanism a way of "getting around" state constitutional debt limits? If so, are there costs associated with this practice? See C. Robert Morris, Jr., "Evading Debt Limits with Public Building Authorities: The Costly Subversion of State Constitutions," Yale Law Journal 68 (December 1958): 234; Comment, "Judicial Demise of State Constitutional Debt

Limitations," Iowa Law Review 56 (February 1971): 646; Note, "Pennsylvania Constitutional Debt Limitations: Circumvention and Proposed Reform," Temple Law Quarterly 37 (Fall 1963): 69.

3. See State ex rel. Dept. of Development v. State Building Commission, 139 Wis. 1, 406 N.W.2d 728 (1987), holding that the state constitutional ban on state involvement in "internal improvements" applied to loans for low and moderate income housing.

4. See generally, Janice C. Griffith, "Moral Obligation" Bonds: Illusion or Security?" Urban Lawyer 8 (Winter 1976): 54.

State ex rel. Brown v. Beard 48 Ohio St.2d 290, 358 N.E.2d 569 (1976)

PER CURIAM.

The issue presented is whether respondents' actions with respect to the issuance and sale of revenue bonds herein constitute a lending of the state's credit in violation of Section 4, Article VIII of the Ohio Constitution.

Section 4, Article VIII, provides that "[t]he credit of the state shall not, in any manner, be given or loaned to, or in aid of, any individual association or corporation whatever; nor shall the state ever hereafter become a joint owner, or stockholder, in any company or association in this state, or elsewhere, formed for any purpose whatever." In State, ex rel. Saxbe, v. Brand (1964), 176 Ohio St. 44, 197 N.E.2d 328, this court held that a loan to a private borrower of proceeds from the sale of revenue bonds by a state agency constitutes a prohibited giving or lending of the state's credit.

However, respondents urge that the law has been modified by the adoption of Section 13 of Article VIII of the Ohio Constitution in 1965, and, as amended, in 1974. Section 13 provides for certain exceptions from the lending-of-credit limitation of Section 4 of Article VIII. Its stated purpose is "[T]o create or preserve jobs and employment opportunities, to improve the economic welfare of the people of the state... to ac

quire, construct, enlarge, improve, or equip, and to sell, lease, exchange, or otherwise dispose of property, structures, equipment, and facilities within the State of Ohio for industry, commerce, distribution, and research, to make or guarantee loans and to borrow money and issue bonds or other obligations to provide moneys for the acquisition, construction, enlargement, improvement, or equipment, of such property, structures, equipment and facilities."

Respondents contend that "when it gives financial assistance to the private building industry for the preservation of the jobs and creation of new equipment," its actions fall within the stated purpose of Section 13 because they are designed to improve the "economic welfare of the people." This language, however, is prefatory and must be evaluated in light of the specific thrust of the provision that the excepted state credit be "for industry, commerce, distribution, and research." The actions of the board herein, relating to issuance of revenue bonds for moderate and low cost housing, are not directly related to those specific purposes enumerated in Section 13 and must fail. To hold otherwise would render ineffective the provisions of Section 4 of Article VIII. Further, this court rejects respondents' argument that moderate and low cost housing is related to industry and commerce to such an extent as to fall within either of those constitutionally designated categories.

For reason of the foregoing, the actions of respondents herein are in violation of Section 4, Article VIII of the Ohio Constitution, and are therefore invalid.

Discussion Notes

1. In 1982, the voters in Ohio adopted the following section of Article VII of the Ohio Constitution:

Section 14 Financing of certain housing; revenue bonds; loans from corporations.

To create or preserve opportunities for safe and sanitary housing and to improve the economic welfare of the people of the state, it is hereby determined to be in the public interest and a proper public purpose for the state to borrow money and issue bonds and other obligations to make available financing, at reasonable interest rates to consumers substantially reflecting savings in the cost of money to lenders resulting from the implementation of this section, for the acquisition, construction, rehabilitation, modeling, and improvement of privately owned multiple-unit dwellings used and occupied exclusively by persons sixty-two years of age and older, and privately owned, owner occupied single family housing by providing loans to, or through the agency of, or originated by, or purchasing loans from, persons regularly engaged in the business of making or brokering residential mortgage loans, all as determined by or pursuant to law. Laws may be passed to carry into effect such purpose and to authorize for such purpose the borrowing of money by, and the issuance of bonds or other obligations of the state and to authorize the making of such loans, which laws, bonds, obligations, and loans shall not be subject to the requirements, limitations, or prohibitions of any other sec

tion of Article VIII, or sections 6 and 11 of
Article XII, Ohio constitution, provided
that moneys raised by taxation shall not be
obligated or pledged for the payment of
bonds or other obligations issued pursuant
to laws enacted under this section.

The powers granted in this section.
shall be in addition to and not in deroga-
tion of existing powers of the state.

Any corporation organized under the laws of this state may lend or contribute moneys to the state on such terms as may be agreed upon in furtherance of laws enacted pursuant to this section.

2. For an exhaustive study of the Ohio provisions, see David M. Gold, "Public Aid to Private Enterprise Under the Ohio Constitution: Sections 4, 6 and 13 of Article VIII in Historical Perspective," University of Toledo Law Review 16 (Winter 1985): 405.

3. The issuance of revenue bonds by state and local government to finance construction of industrial plants has greatly increased in recent years. Often specific constitutional authorization is required because of otherwise restrictive state constitutions. See generally, Charles C. Mulcahy and Thomas P. Guszkowski, "The Financing of Corporate Expansion Through Industrial Revenue Bonds," Marquette Law Review 57 (No. 2, 1974): 201; Donald A. Bell and Winton M. Hinkle, "A Guide to Industrial Revenue Bond Financing," Washburn Law Journal 9 (No. 3, 1970): 372. What impact could the federal government have on the use of revenue bonds by state and local governments?

Washington State Housing Finance Commission v. O'Brien

100 Wash. 2d 491, 671 P.2d 247 (1983)

DIMMICK, Justice.

Does the authority granted by the Legislature to the Washington State Housing Finance Commission violate the Washington State Constitution which prohibits lending of the state's credit? We find that it does not.

The Legislature created the Commission after investigating the impact of Washington's severe economic recession on the state's housing needs. It found that the sustained high interest rate in the mortgage market precluded home buying for many low to middle income families. The ramifications from the stagnant housing market were numerous. Home construction was at record lows, and current housing supply was critically below the population's needs, for both home buyers and renters. Many persons unable to procure financing to buy homes were forced into the rental market. With rental housing in high demand, low income units became difficult to find. Increasingly, substandard housing became occupied.