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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)



Opinion No. 6063

April 29, 1982


Const 1963, art 4, Sec. 25--effect of provisions of appropriation act amending substantive statute


Authority to supervise use of investment income from proceeds of comprehensive transportation bonds


Use of investment income from proceeds of comprehensive transportation bonds.

1981 PA 32, Sec. 41(2), which provides for legislative supervision of the use of investment proceeds from comprehensive transportation bonds contrary to the provisions of 1951 PA 51, violates the reenact and publish provision of Const 1963, art 4, Sec. 25.

John P. Woodford


Department of Transportation

Highway Building

4th Floor

Lansing, Michigan

You have asked for my opinion as to the legality of 1981 PA 32, Sec. 41(2) contained in the 1981-1982 appropriation bill for the Department of Transportation. 1981 PA 32, Sec. 41 provides:

'(1) The $8,883,500.00 appropriated in section 1 for comprehensive transportation fund program: debt service: Future issue shall be used to finance the interest and principal due on bonds sold after April 1, 1981. The bond revenue shall be used to implement projects including, but not limited to, the following:

(a) Construction of a cross-lake tug and 4 barges.

(b) Rail freight capital program.

(i) Lake Orion.

(ii) Sterling Heights.

(iii) Cascade township.

(iv) Detroit/Hamtramck central industrial park.

'(2) Any interest income earned from the notes and bonds sold to finance the projects listed in subsection (1) shall be used exclusively on the projects listed in subsection (1), but only after the approval of the house and senate appropriation committees.' [Emphasis supplied.]

As to 1981 PA 32, Sec. 41(1), the Department of Transportation advises that all of the projects listed therein are, in fact, being funded, in full or in part, pursuant to the general bond resolution, as amended, with the proceeds of the $50,000,000 State of Michigan Comprehensive Transportation Bonds, Series B, dated May 1, 1981 (the 'Series B Bonds'), which were delivered in New York, New York on June 18, 1981. 1981 PA 32, Sec. 41(2), by its terms, requires interest income from proceeds of the Series B bonds to be limited exclusively to the projects listed in 1981 PA 32, Sec. 41(1), and then only after approval by the house and senate appropriation committees.

Section 8 of the said general bond resolution establishes a separate fund known as the Comprehensive Transportation Bond Construction Fund and requires that: 1) the proceeds of sale of each series of bonds, together with any premium thereon, be deposited therein; 2) the State Treasurer continually invest and reinvest all moneys in the Bond Construction Fund with the interest accruing from these investments to be credited to the Bond Construction Fund; and 3) the money in the Bond Construction Fund is to be used to pay costs of the bond projects as these projects may be modified, supplemented or amended, in accordance with Act 51, until all projects are completed or abandoned. At that time, the money remaining in the Bond Construction Fund is to be transferred, at the option of the Director of the State Transportation Department, to either the Comprehensive Transportation Fund or the Comprehensive Transportation Bond and Interest Redemption Fund.

In your letter you state:

'These bonds were issued in accordance with the authorization contained in Act 51. The above cited directions [in the general bond resolution] as to the use of the bond proceeds and any interest earned while these proceeds are on deposit contemplate the use of the moneys on any of the authorized bond projects, as needed, to complete the projects authorized.

'Can the Legislature, through boilerplate language in an appropriation act, impose additional requirements as to the use of bond proceeds and the interest thereon, such as requiring prior approval of the appropriation committees for the use of interest from the bond proceeds, and, by so doing, amend the provisions of the bond resolution, which was prepared and approved in accordance with the provisions of Act 51, Public Acts of 1951?'

The Series B bonds were issued pursuant to resolutions of the State Transportation Commission and orders of the Director of the Department of Transportation pursuant to 1951 PA 51; MCLA 247.651 et seq; MSA 9.1097(1) et seq. 1951 PA 51, supra, Sec. 18b, provides, in pertinent part:

'(1) The state transportation commission may borrow money and issue notes or bonds for the following purposes:

(a) To pay all or any portion of or to make loans, grant, or contract payments to pay all or any portion of any capital costs for the purposes described in section 9 of article 9 of the state constitution of 1963.

'(3) The notes or bonds authorized by this section shall be issued only after authorization by resolution of the state transportation commission, which resolution shall contain the following:

(a) An irrevocable pledge providing for the payment of the principal and interest on the notes or bonds from money which is restricted as to use by section 9 of article 9 of the state constitution of 1963 and which is deposited or to be deposited in the comprehensive transportation fund, in the case of bonds or notes issued for comprehensive transportation purposes as defined by law, or in the state trunk line fund, in the case of bonds or notes issued for transportation purposes other than comprehensive transportation purposes, as defined by law, or in the case of notes, if the resolution authorizing the notes provides, from money received or to be received by the state transportation department from the proceeds of bonds or renewal notes to be issued after the date of the resolution.

(b) A brief statement describing the projects for which the notes or bonds are to be issued and in the case of notes or bonds to pay notes or refund bonds, a description of the notes or bonds to be paid or refunded.

(c) The estimated cost of the projects or refunding or refinancing.

(d) The detail of the notes or bonds including the date of issue, maturity date or dates of the bonds or notes, the maximum interest rate, the dates of payment of interest, the paying agents, the provisions for registration, the redemption provisions, and the manner of execution.'

The proceeds of the Series B bonds, by the terms of the Series B authorizing resolution, are being used to fund a number of transportation projects, including but not limited to the projects enumerated in 1981 PA 32, Sec. 41(1) as confirmed by the Legislature in 1981 PA 32, Sec. 42.

The appropriation for debt service for the comprehensive transportation bonds, including Series B, from moneys in the Comprehensive Transportation Fund in 1981 PA 32, Sec. 1, is consistent with the requirement set forth in 1951 PA 51, supra, Sec. 10e(1)(a) that the first priority of expenditure for the Comprehensive Transportation Fund is the payment of debt service on bonds issued for comprehensive transportation purposes under 1951 PA 51, Sec. 18b, supra. OAG, 1981-1982, No 5959, p 318 (August 14, 1981). Numerous specifications concerning the bonds are provided for in 1951 PA 51, Secs. 18b and 18e, supra, including the general statement that other details are to be contained in the Commission's bond resolution. Among the details covered by the general bond resolution, section 8 thereof provides for the handling of interest earned on the proceeds of the bonds as noted above.

In effect, the issue presented is whether the requirements for bonding authorization of 1951 PA 51, supra, were modified by the provisions of 1981 PA 32, Sec. 41(2). OAG, 1981-1982, No 5951, p 304 (August 10, 1981), considered provisions in a Department of Social Services appropriated bill regarding special shelter standards for certain counties. At p ___, it was stated:

'The Legislature may include in an appropriation act any condition on appropriations which it may lawfully impose. State Board of Agriculture v Auditor General, 226 Mich 417; 197 NW 160 (1924). In testing whether the Legislature may lawfully impose the above-stated condition, it is necessary to consider the mandate of Const 1963, art 4, Sec. 25, which states:

"No law shall be revised, altered or amended by reference to its title only. The section or sections of the act altered or amended shall be re-enacted and published at length.'

'This provision was before the Michigan Supreme Court in Midland Township v State Boundary Commission, 401 Mich 641; 259 NW2d 326 (1977), and was discussed in OAG, 1975-1976, No 4896, p 132 (September 9, 1975). It requires the Legislature to reenact and republish any act which is amended by the Legislature in another act in a manner which 'dispenses with' or 'changes' provisions of the act amended.'

The issuance of comprehensive transportation bonds, the use of bond proceeds, and the contents of the general and series bond resolutions are governed by 1951 PA 51, supra. Under the requirements of Const 1963, art 4, Sec. 25, statutory amendments concerning the issuance of such comprehensive transportation bonds, use of their proceeds, and the statutorily required contents of the bond resolution, must be made by reenacting and republishing the provisions of 1951 PA 51, supra, intended to be amended rather than by way of enactment of provisions in an appropriation act. Accord, OAG, 1981-1982, No 6036, p 548 (January 29, 1982).

It is my opinion, therefore, that 1981 PA 32, Sec. 41(2), is void and without effect as being in violation of Const 1963, art 4, Sec. 25.

Since it is clear that 1981 PA 32 would have been enacted without section 41(2), the invalid subsection is severable from the remainder of the act, which remains valid. See, People v McMurchy, 249 Mich 147; 228 NW 723 (1930) and OAG, 1979-1980, No 5688, p 723 (April 21, 1980).

Frank J. Kelley

Attorney General

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