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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 5652

February 13, 1980

CONSTITUTIONAL LAW:

Approval of electors to borrow money and issue bonds for school construction

SCHOOLS AND SCHOOL DISTRICTS:

Approval of electors to borrow money and issue bonds for school construction

School districts may not borrow money and issue bonds for school construction without a vote of the school electors, except to borrow money and issue bonds for the purpose of repayment of loans made by the school district pursuant to Const 1963, art 9, Sec. 16.

Portions of 1976 PA 451, Secs. 144, 251, 335, 442 and 631 permitting the borrowing of money and the issuance of bonds without a vote of the people are unconstitutional.

Dr. Eugene T. Paslov

Interim Superintendent of Public Instruction

Department of Education

Lansing, Michigan

You have requested my opinion on the following question:

May school districts issue qualified or unqualified bonds after December 22, 1978 without approval of the electors to the extent of 5 percent of the school equalized valuation of a school district as set forth in sections 144, 251, 335, and 442 of the School Code of 1976?

1976 PA 451; MCLA 380.1 et seq; MSA 15.4001 et seq, is known as the School Code of 1976. The board of education of a fourth class school district pursuant to 1976 PA 451, supra, Sec. 144, the board of education of a third class school district under 1976 PA 451, supra, Sec. 251, the board of education of a second class school district in accordance with 1976 PA 451, supra, Sec. 335, and the board of education of a first class school district pursuant to 1976 PA 451, supra, Sec. 442, are empowered to borrow money and issue bonds for certain purposes.

It should be noted that in 1976 PA 451, Sec. 144(2), supra, the Legislature, in pertinent part, has provided:

'A loan shall not be made and bonds shall not be issued for a term longer than 30 years or for a sum which, together with the total outstanding bonded indebtedness of the school district, exceeds the greater of 5% of the 1975 state equalized valuation of the taxable property within the district, excluding the 1975 state equalized valuation of property transferred from the district after the 1975 tax levy, or the state equalized valuation of taxable property within the district for the year in which the bonds are issued, unless the proposition of making the loans or of issuing bonds is submitted to a vote of the school electors of the district at an annual or special school election and approved by the majority of the school electors voting on the question. Bonds which require the approval of the school electors may be issued for the purposes stated in this section in an amount equal to that provided by part 17.' (Emphasis supplied.)

This same underscored statutory language is repeated verbatim in 1976 PA 451, Secs. 251, 335 and 442, supra. In substance, it is also repeated in 1976 PA 451, supra, Sec. 1351(2), as it applies generally to bonded indebtedness of school districts. Thus, as originally enacted and last amended by 1977 PA 43, 1976 PA 451, Sec. 144(2) supra, and its respective counterparts authorize the borrowing of money and the issuance of bonds up to 5 percent of the 1975 state equalized valuation of taxable property within the district with certain exclusions without a vote of the electors. This authority was upheld by a panel of the Court of Appeals in Fizer v Onekama Consolidated Schools, 83 Mich App 584; 269 NW2d 234, lv app den, 406 Mich 910 (1979). It should be noted that this case was decided on May 23, 1978, prior to the general election on November 7, 1978.

On November 7, 1978 the electors of this state ratified an emendment to Const 1963, art 9, Sec. 6 proposed by initiative petition. As so amended, Const 1963, art 9, Sec. 6 provides as follows:

'Except as otherwise provided in this constitution, the total amount of general ad valorem taxes imposed upon real and tangible personal property for all purposes in any one year shall not exceed 15 mills on each dollar of the assessed valuation of property as finally equalized. Under procedures provided by law, which shall guarantee the right of initiative, separate tax limitations for any county and for the townships and for school district therein, the aggregate of which shall not exceed 18 mills on each dollar of such valuation, may be adopted and thereafter altered by the vote of majority of the qualified electors of such county voting thereon, in lieu of the limitation hereinbefore established. These limitations may be increased to an aggregate of not to exceed 50 mills on each dollar of valuation, for a period of not to exceed 20 years at any one time, if approved by a majority of the electors qualified under Section 6 of Article II of this constitution, voting on the question.'

'The foregoing limitations shall not apply to taxes imposed for the payment of principal and interest on bonds approved by the electors or for the payment of assessments or contract obligations in anticipation of which bonds are issued approved by the electors, which taxes may be imposed without limitation as to rate or amount; or, subject to the provisions of sections 25 through 34 of this article, to taxes imposed for any other purpose by any city, village, charter county, charter township, charter authority or other authority, the tax limitations of which are provided by charter or by general law.

'In any school district which extends into two or more counties, property taxes at the highest rate available in the county which contains the greatest part of the area of the district may be imposed and collected for school purposes throughout the district.' (Emphasis supplied.)

The underscored language appearing in Const 1963, art 9, Sec. 6 is new language added to the constitution by the people.

This section of the constitution, as amended by the people, was considered in OAG 1977-1978, No. 5417, p ___ (December 20, 1978), and it was held that ad valorem property taxes may not be levied to pay the principal and interest on bonded indebtedness in excess of the 15 mill limitation contained in Const 1963, art 9, Sec. 6, first paragraph, without an affirmative vote of the electors in the governmental unit issuing the bonds.

In Const 1963, art 9, Sec. 16, the people have provided:

'The state, in addition to any other borrowing power, may borrow from time to time such amounts as shall be required, pledge its faith and credit and issue its notes or bonds therefor, for the purpose of making loans to school districts as provided in this section.

'If the minimum amount which would otherwise be necessary for a school district to levy in any year to pay principal and interest on its qualified bonds, including any necessary allowances for estimated tax delinquencies, exceeds 13 mills on each dollar of its assessed valuation as finally equalized, or such lower millage as the legislature may prescribe, then the school district may elect to borrow all or any part of the excess from the state. In that event the state shall lend the excess amount to the school district for the payment of principal and interest. If for any reason any school district will be or is unable to pay the principal and interest on its qualified bonds when due, then the school district shall borrow and the state shall lend to it an amount sufficient to enable the school district to make the payment.

'The term 'qualified bonds' means general obligation bonds of school districts issued for capital expenditures, including refunding bonds, issued prior to May 4, 1955, or issued thereafter and qualified as provided by law pursuant to Section 27 or Section 28 of Article X of the Constitution of 1908 or pursuant to this section.

'After a school district has received loans from the state, each year thereafter it shall levy for debt service, exclusive of levies for nonqualified bonds, not less than 13 mills or such lower millage as the legislature may prescribe, until the amount loaned has been repaid, and any tax collections therefrom in any year over and above the minimum requirements for principal and interest on qualified bonds shall be used toward the repayment of state loans. In any year when such levy would produce an amount in excess of the requirements and the amount due to the state, the levy may be reduced by the amount of the excess.

'Subject to the foregoing provisions, the legislature shall have the power to prescribe and to limit the procedure, terms and conditions for the qualification of bonds, for obtaining and making state loans, and for the repayment of loans.

'The power to tax for the payment of principal and interest on bonds hereafter issued which are the general obligations of any school district, including refunding bonds, and for repayment of any state loans made to school district, shall be without limitation as to rate or amount.

'All rights acquired under Sections 27 and 28 of Article X of the Constitution of 1908, by holders of bonds heretofore issued, and all obligations assumed by the state or any school district under these sections, shall remain unimpaired.'

The Michigan Supreme Court has construed this section of the Constitution of 1963 in Advisory Opinion re Constitutionality of 1973 PA 1 and 2, 390 Mich 166, 174; 211 NW2d 28, 30 (1973). The Supreme Court held:

'Section 16 authorizes borrowing for the purpose of making loans to school districts for funding capital expenditures. It contemplates the issuance of state notes or bonds pledging its full faith and credit and also the issuance of school district bonds for repayment of the loan according to the provisions therefor specified by the Legislature. In this connection it is noteworthy that the power to tax for the repayment of principal and interest on such bonds is expressly without limitation as to rate or amount.'

The underscored language of Const 1963, art 9, Sec. 6, as amended, must be read in connection with the known condition of affairs which served as the occasion for its adoption, and be construed, if there be any doubtful expression therein, so as to forward the purpose of objection for which the amendment was adopted. Civil Service Commission v Auditor General, 302 Mich 673; 5 NW2d 536 (1942). The meaning intended by the people in adopting such amendment must be found in their common experience. Lockwood v Commissioner of Revenue, 357 Mich 517; 98 NW2d 753 (1959).

It is abundantly clear that the purpose of the people in amending Const 1963, art 9, Sec. 6 was to require a vote of the people before a governmental unit, including school districts, may issue bonds and levy taxes upon the property of the district. See OAG, 1977-1978, No. 5417, supra. However, the people did not at the same election amend Const 1963, art 9, Sec. 16. As construed by the Michigan Supreme Court in Advisory Opinion re Constitutionality of 1973 PA 1 and 2, supra, a school district may continue to issue bonds for repayment of loans made by the state in accordance therewith without a vote of the people.

It must follow that the underscored statutory language quoted in 1976 PA 451, Sec. 144, supra, and appearing in 1976 PA 451, Secs. 251, 335, 442 and 631, supra, is unconstitutional because it violates Const 1963, art 9, Sec. 6. Since it is clear that the Legislature would have enacted 1976 PA 451, Secs. 144, 251, 335, 442 and 631, supra, without the unconstitutional language a part thereof, the lawful portions of 1976 PA 451, Secs. 144, 251, 335, 442 and 631, supra, are valid. OAG, 1965-1966, No 4575, p 389 (December 23, 1966).

Therefore, it is my opinion that school districts may not borrow money and issue bonds without a vote of the school electors, except to borrow money and issue bonds for the purpose of repayment of loans made by the state pursuant to Const 1963, art 9, Sec. 16.

Frank J. Kelley

Attorney General


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