STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5421

December 27, 1978

BONDS:

Revenue bonds for middle-income housing

COUNTIES:

Issuance of revenue bonds for middle-income housing

HOUSING:

Issuance of revenue bonds by counties for middle-income housing

WORDS AND PHRASES:

'Public improvements'; 'Housing facilities'

A county may not issue revenue bonds, the proceeds of which are to be used to finance construction of privately-owned dwellings.

Honorable Michael J. O'Brien

State Senator

The Capitol

P. O. Box 30036

Lansing, Michigan 48909

Honorable Paul A. Rosenbaum

State Representative

The Capitol

P. O. Box 30036

Lansing, Michigan 48909

Honorable Claude A. Trim

State Representative

The Capitol

P. O. Box 30036

Lansing, Michigan 48909

Citing the revenue bond act of 1933, being 1933 PA 94; MCLA 141.101 et seq; MSA 5.2731 et seq (hereinafter referred to as the 'Act'), you seek my opinion as to the authority of counties to borrow money and issue revenue bonds for the purpose of making monies available through financial institutions for mortgage loans for single-family dwellings. I am advised that the proposals would permit mortgage loans of up to $100,000 to families with an adjusted gross income of up to $45,000. It is anticipated that interest on the bonds issued by the counties will be 7% and the interest rate on the mortgage loans will be 8 to 8 1/2% per year. The mortgage repayments are to be pledged for the repayment of principal and interest on the bonds and the county will have a first lien on the dwelling so financed. Since it is anticipated that the interest paid to bondholders will be exempt fromFederal, State and local income tax, they are willing to invest their money for a return that is less than the market rate and this in turn permits the county to lend mortgage monies at a rate of interest below that established by the market.

Accordingly, your question may be stated as follows:

Const 1963, art 7, Sec. 1 provides:

In addition, Const 1963, art 7, Sec. 8 provides:

Further, Const 1963, art 9, Sec. 13 provides:

The foregoing constitutional provisions indicate that counties exercise the powers only as granted to them by law and Constitution and may borrow by issuing their evidences of indebtedness subject to the provisions of the Constitution and the law.

The purpose of the revenue bond act, supra, is to authorize municipal corporations to engage in public improvements financed through the issuance of bonds payable from the revenues to be derived from the operation of the improvements. See Gilbert v Traverse City, 267 Mich 257; 255 NW 585 (1934). Counties are among the public corporations authorized by the Act to issue revenue bonds for public improvements. Public improvements are defined in Sec. 3 of the Act to include housing facilities. The Act does not, however, expressly authorize the use of bond proceeds for making mortgage loans for the purchase of private dwellings by private individuals.

In Sabaugh v City of Dearborn, 384 Mich 510; 184 NW2d 363 (1971), the Court held that the acquiring and maintaining of public housing for senior citizens of a city is a 'public work' within the compass of Const 1963, art 7, Sec. 23, supra. In Sabaugh, 384 Mich at 517; 185 NW2d at p. 365, the Michigan Supreme Court went on to say:

The purpose of the proposed program, however, does not involve the acquisition of public housing but rather provides for loans to private citizens for the purpose of acquiring or rehabilitating privately-owned dwellings. Research fails to disclose any Michigan cases which would authorize counties to borrow money under the Act for the purpose of making such loans.

I am aware that the Michigan Supreme Court has advised that public benefit results from the encouragement of construction of housing for persons of low and moderate income. Advisory Opinion re Constitutionality of PA 1966, No 346, 380 Mich 554; 158 NW2d 416 (1968). This advice was given, however, where the statute specifically authorized such a program and where there was participation in national housing finance programs. Similarly, our Supreme Court, in In re Brewster Street Housing Site, 291 Mich 313; 289 NW 493 (1939) specifically approved the involvement of public entities in the ownership and operation of low-cost housing projects intended to remedy slum conditions and eradicate blighted areas. In Advisory Opinion re Constitutionality of PA 1966, No 346, 380 Mich at 578; 158 NW2d at 427, the court noted the public benefit of increasing the supply of housing for those who could otherwise not afford safe and sanitary dwellings and stated:

Reference to laws of this state which do authorize loans to private persons or entities for specific public purpose discloses express authority and power granted by the legislature to the public entities to make such loans. See, for example, hospital finance authority act, 1969 PA 38; MCLA 331.31 et seq; MSA 14.1220(1) et seq; state housing development authority act of 1966, 1966 PA 346; MCLA 125.1401 et seq; MSA 16.114(1) et seq, higher education loan authority act, 1975 PA 222; MCLA 390.1151 et seq; MSA 15.2096(1) et seq, higher education facilities authority act, 1969 PA 295; MCLA 390.921 et seq; MSA 15.2097(121a) et seq, industrial development revenue bond act of 1963, 1963 PA 62; MCLA 125.1251 et seq; MSA 5.3533(21) et seq, Derezinski-Geerlings job development authority act, 1975 PA 301; MCLA 125.1701 et seq; MSA 3.540(101) et seq and economic development corporations act, 1974 PA 338; MCLA 125.1601 et seq; MSA 5.3520(1) et seq. It is of some importance that the legislature has specifically considered a publicly-financed single-family mortgage loan program. In enacting that loan program, the legislature left no doubt as to its intent to devise a statutory scheme designed for the purpose of making residential mortgage loans and utilizing the mortgage payments therefrom to repay the bonds financing the program. See state housing development authority act of 1966, supra. The legislature's silence in the revenue bond act, supra, as to a residential mortgage loan program therefore may not be interpreted as authority to engage in such activity when the legislature has so clearly provided for the issuance of bonds, the proceeds of which are to be utilized in such a residential-lending program.

While the Act does authorize counties to borrow monies for public improvements and also specifically provides for 'housing facilities' among those public improvements, the legislature has not made provisions therein for making loans to private persons or entities. Thus, in construing the Act, consideration is given to the principle expressio unius est exclusio alterius. Perry v Village of Cheboygan, 55 Mich 250; 21 NW 333 (1884); Weinberger v Regents of the University of Michigan, 97 Mich 246; 56 NW 605 (1893); Marshall v Wabash Railway Co, 201 Mich 167; 167 NW 19 (8 ALR 435) (1918); Taylor v Mich Public Utilities Comm, 217 Mich 400; 186 NW 485 (1922); Van Sweden v Van Sweden, 250 Mich 238; 230 NW 191 (1930).

The Act was last amended by 1978 PA 216. Section 3 of the Act as so amended reads in part as follows:

Thus, a county is empowered to borrow money and issue revenue bonds to acquire part of a public housing facility and may join with other governmental units in the acquisition of a public housing facility. This language, however, does not expressly provide for mortgage loans for private dwellings nor may such a legislative intent be implied. Compare Farr v City of Grand Rapids, 112 Mich 99; 70 NW 411 (1897); Bond v Cowan, 272 Mich 296; 261 NW 331 (1935).

A study of 1978 PA 216, supra, demonstrates that this enactment also amended Secs. 7, 9 and 21 of the Act. Section 7(2) provides that the 'principal of and interest upon the bonds shall be payable, except as provided in this act, solely from net revenues derived from the operation of the public improvement. . . .' [Emphasis added]

As amended, Sec. 9 provides that:

Section 21, as amended, provides that:

The analysis of the amended provisions of 1933 PA 94, Secs. 3(b), 7, 9 and 21, supra, by means of 1978 PA 216, demonstrates an intent upon the part of the legislature that the principal and interest on revenue bonds issued by a county for acquisition of a housing facility or facilities or parts thereof be paid solely from net revenues derived from the operation of said public improvement, that a certain number of holders of the bonds have the right to protect and enforce the statutory lien and compel the performance of the duty of the county to fix sufficient rates so as to meet the principal and interest obligation, and compel the county-borrower to covenant and agree, to maintain, at all times, the rates for the services furnished by the public management in an amount sufficient to meet the principal and interest on said bonds and to revise rates so as to produce the necessary amounts, where necessary.

The same legislature amended 1966 PA 326, Sec. 1c(2); MCLA 438.31c; MSA 19.15(1c), by means of 1978 PA 440. It is noted that this section contains an exception to the usury statute to allow any rate of interest on a first mortgage on a note which is secured by a first lien against real property, 'but the note, mortgage, contract or other evidence of indebtedness shall not provide that the rate of interest initially effective may be increased for any reason whatsoever.' It must also be observed that 1968 PA 326, Sec. 2, MCLA 438.32; MSA 19.15(2), provides that any seller or lender or his assigns who enters into any contract or areement which does not comply with the provisions of the act is barred from the recovery of any interest, fees, delinquency, or collection charges or attorney fees.

Had the legislature intended to empower counties to borrow money and issue revenue bonds for the purpose of financing home mortgages, it would have made appropriate amendments to 1933 PA 94, Secs. 7, 9 and 21, supra, to bar any increase in the rates of interest to be charged mortgagors. In the alternative, the legislature could have amended 1966 PA 326, Sec. 1(d)(2), supra, to except therefrom mortgages financed by counties or other governmental units with proceeds from revenue bonds.

The fact that the same legislature did not make the appropriate amendments to either 1933 PA 94, supra, or 1966 PA 326, supra, so as to protect the revenue bondholders is persuasive that the legislature did not intend to empower counties or other governmental units to borrow money and issue revenue bonds for the purpose of financing home mortgages. Reichert v Peoples State Bank for Savings, 265 Mich 668; 252 NW 484 (1934).

Therefore, it is my opinion that a county may not borrow money and issue revenue bonds under 1933 PA 94, supra, and use the proceeds therefrom to finance the construction of privately-owned dwellings.

Frank J. Kelley