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Opinion No. 6608

January 8, 1990


Const 1963, art 9, Sec. 9--Sale of surplus lands purchased with funds restricted to transportation purposes

Const 1963, art 9, Sec. 9--Use of proceeds of sale of surplus lands purchased with funds restricted to transportation purposes

Surplus lands purchased with funds restricted to transportation purposes by Const 1963, art 9, Sec. 9, may not be conveyed to another governmental entity for less than fair market value, and the proceeds from the sale of such lands must be utilized for transportation purposes in accordance with Const 1963, art 9, Sec. 9.

James P. Pitz


Department of Transportation

P.O. Box 30050

Lansing, MI 48913

You have asked for my opinion regarding the application of Const 1963, art 9, Sec. 9, to surplus land purchased with restricted transportation funds. The question and its context are:

"May valuable property purchased with funds restricted to transportation purposes by Const 1963, art 9, Sec. 9, be conveyed to another entity for a nominal price, e.g., $1.00, where that property will then be used for other than transportation purposes?

"This question arises in a variety of contexts. For example, the Michigan Department of Transportation is presently reviewing how to dispose of a parcel of excess highway property valued in excess of one million dollars. A municipality has requested that the department convey the property to it for use as a park at a price of $1.00. Additionally, there have been past and present legislative initiatives to transfer excess highway property to local public agencies or units of government by enacting a public act to require the conveyance without payment for the value of the property. In each instance, the constitutional concern arises because the property, once conveyed, is to be used for a nontransportation purpose."

Const 1963, art 9, Sec. 9, restricts the use of specific taxes imposed on registered motor vehicles and aircraft and the fuels to propel them. It provides, in pertinent part, as follows:

"All specific taxes, except general sales and use taxes and regulatory fees, imposed directly or indirectly on fuels sold or used to propel motor vehicles upon highways and to propel aircraft and on registered motor vehicles and aircraft shall, after the payment of necessary collection expenses, be used exclusively for transportation purposes as set forth in this section."

The Legislature has no authority to divert to nontransportation purposes the taxes covered by that language. However, in the circumstance you describe, it is not the taxes themselves which are being diverted from transportation purposes, but valuable property purchased with that tax revenue.

For reasons set forth hereafter, I conclude that the Const 1963, art 9, Sec. 9, restrictions apply to both the specific tax revenue and to the surplus lands purchased with that revenue.

Letter opinion of the Attorney General [Henrik E. Stafseth (February 24, 1972) ], concluded that interest earned on this restricted tax revenue was itself subject to the restrictions. Citing State of Oregon ex rel Sprague v Straub, 240 Ore 272; 400 P2d 229 (1965), and authorities noted therein, the opinion concluded that interest, like the principal on which it is earned, is subject to the same constitutional restrictions as the revenue generated directly by the specific taxes themselves. The reasons for that conclusion were adopted from the following excerpt quoted from Sprague:

" 'The Highway Funds involved are moneys received from various motor vehicle and gasoline taxes. Section 3 of Article IX of the Constitution requires that the "proceeds" of these taxes must be spent for highway purposes. The problem here is to decide if "proceeds" includes the interest that these moneys earn while in the custody of the Treasurer.


"It is recognized that the people's approval of the amendment to Article IX Section 3 provides no actual expression of a will and intent that interest that may be earned by the accumulated revenues controlled by the amendment should accrue to the highway fund. There is a strong inference, however, that the clear intent of the people to compel the specific revenues to be used for one purpose implies that it would include all of the interest that would accrue during the State Treasurer's holding of the revenues for their eventual use. We so hold.' " 400 P2d at 232-233.

A similar conclusion was reached by the court in State Highway Comm'n v Spainhower, 504 SW2d 121, 125 (Mo, 1973), interpreting the Constitution of the State of Missouri:

"This problem has not been considered in Missouri. It is clear however that the people of Missouri ... intended that no money be diverted from the state road fund and no other use be permitted of the fund except for the enumerated state highway purposes.... With the state road fund so restricted against transfer or use for any other purpose, interest or income from such fund must be credited to that fund under Article IV, Section 15, and held against withdrawal or use for any purpose other than state highway purposes, including diversion to the general revenue fund."

More recently, that same court held that fees paid for copies of driving records and motor vehicle registrations provided by a governmental office financed almost exclusively with constitutionally restricted funds must themselves be deposited in the state highway department fund, not the general fund. Thus, in State Highway and Transportation Comm'n of Missouri v Director, Missouri Dep't of Revenue, 672 SW2d 953, 955 (Mo, 1984) the court stated:

"While the fees collected by the Motor Vehicle Unit for a copy thereof may not be received directly from highway users, they are traceable to and obtained mediately from the initial highway user. This is especially true when considered in light of the fact that the operations of the Motor Vehicle Unit are financed almost exclusively by appropriations from the SHD Fund. Accordingly, the fees are 'derived from highway users.' "

In Craig County Excise Bd v Texas-Empire Pipe Line Co, 195 Okla 627; 159 P2d 1003, 1003-1005 (1945), the court ruled that the constitutional restrictions on the expenditure of tax revenue applied also to the assets purchased with it:

"This appeal is presented to review a judgment of the Oklahoma Court of Tax Review sustaining a tax protest.... This money had been derived during the fiscal year from the sale of condemned equipment, the rental of county road machinery and from the Grand River Dam Authority for work performed on highways in the area of the Grand River Dam. All of the receipts were connected with the county highway fund of Craig County.


"Our attention is also directed to article 10, sec. 19 of the Oklahoma State Constitution, which contains the following provision: ' no tax levied and collected for one purpose shall ever be devoted to another purpose.'

"The provision of the constitution above quoted has been held applicable to excise taxes such as the gasoline excise tax....


"We therefore conclude that the prohibition upon the diversion of funds credited by taxes levied for a specified purpose into another and foreign purpose extends to money in restoration or reimbursement to such fund for moneys expended therefrom."

See also 85 CJS, Taxation, Sec. 1057, p 648.

The question which you have raised presents a very similar issue. The people's approval of Const 1963, art 9, Sec. 9, similarly evinces an intent to earmark these funds to be used solely for the purposes enumerated in that provision and prevent their diversion for nontransportation related purposes. That is the nature of constitutional earmarking of tax revenue. See 85 CJS, Taxation, Sec. 1057, p 646.

A strict, literal reading of the words of Const 1963, art 9, Sec. 9, could lead to the conclusion that the restrictions apply to the specific tax revenues and to nothing else. Such an analysis was employed in an opinion regarding oil and gas lease revenues under the 1908 State Constitution. See I OAG, 1957, No 2828, p 294 (June 12, 1957). However, in the thirty-two years since that opinion was issued, related questions have been answered differently by the courts and the Michigan Constitution has changed. While I am in agreement with the conclusion of I OAG, 1957, No 2828, supra, that oil and gas lease revenue for highway right-of-way is not restricted to transportation purposes, that conclusion was based upon a different legal analysis.

Const 1963, art 9, Sec. 35, dedicates revenue from oil and gas leases of state-owned land to the Michigan Natural Resources Trust Fund:

"There is hereby established the Michigan natural resources trust fund. The trust fund shall consist of all bonuses, rentals, delayed rentals, and royalties collected or reserved by the state under provisions of leases for the extraction of nonrenewable resources from state owned lands, except such revenues accruing under leases of state owned lands acquired with money from state or federal game and fish protection funds or revenues accruing from lands purchased with such revenues...."

This dedication of revenue must be read in conjunction with Const 1963, art 9, Sec. 9, in a way that harmonizes and gives effect to both provisions. Kunzig v Liquor Control Comm'n, 327 Mich 474, 480-481; 42 NW2d 247 (1950), Lucas v Wayne County Election Comm'n, 146 MichApp 742, 747; 381 NW2d 806 (1985), lv den 424 Mich 903 (1986).

To give effect to the terms of Const 1963, art 9, Sec. 35, would not conflict with the terms of Const 1963, art 9, Sec. 9. The dedication of oil and gas lease revenue constitutes an exception to the restrictions which might otherwise apply to revenue generated by leasing property purchased with funds restricted to transportation purposes.

The words of a constitution are to be read in accordance with the rule of "common understanding" and in light of the purpose of the provision in question. These rules were adopted by the Michigan Supreme Court in Traverse City School Dist v Attorney General, 384 Mich 390, 405; 185 NW2d 9 (1971), as follows:

"The primary rule is the rule of 'common understanding' described by Justice Cooley:

" 'A constitution is made for the people and by the people. The interpretation that should be given it is that which reasonable minds, the great mass of the people themselves, would give it. "For as the Constitution does not derive its force from the convention which framed, but from the people who ratified it, the intent to be arrived at is that of the people, and it is not to be supposed that they have looked for any dark or abstruse meaning in the words employed, but rather that they have accepted them in the sense most obvious to the common understanding, and ratified the instrument in the belief that that was the sense designed to be conveyed." (Cooley's Const Lim 81)....'

"A second rule is that to clarify meaning, the circumstances surrounding the adoption of a constitutional provision and the purpose sought to be accomplished may be considered. On this point this Court said the following:

" 'In construing constitutional provisions where the meaning may be questioned, the court should have regard to the circumstances leading to their adoption and the purpose sought to be accomplished.' Kearney v. Board of State Auditors (1915), 189 Mich 666, 673." (Emphasis by court.)

Accordingly, a reasonable interpretation of Const 1963, art 9, Sec. 9, makes it apparent that the people intended to set aside these revenues to be used solely to fulfill the goals and meet the expenses of the transportation program. It is the very essence of constitutionally restricted funds to prevent the government from diverting those funds to some other purpose, however worthy that other purpose might then seem to be. Thus, OAG, 1979-1980, No 5558, p 380, 381-382 (September 10, 1979), stated:

"81A C.J.S. States Sec. 228, pp. 799-800 (1977), speaks to the issue of transfer or diversion of special funds to other purposes:

" ' "Disposition of special funds. Where a special fund is created or set aside by statute for a particular purpose or use, it must be administered and expended in accordance with the statute, and may be applied only to the purpose for which it was created or set aside, and not diverted to any other purpose, or transferred from such authorized fund to any other fund." '


"Therefore, answering your second question, in order to avoid a direct conflict with a constitutional provision, there may not be any transfer, loan, diversion, or appropriation of those funds designated for use in road programs to some other use not contemplated by the Constitution...."

Only a strict literal reading of the Constitution--which ignores the intention of it--could support the conclusion that only the specific tax dollars themselves need be devoted to transportation purposes. Common sense and the rules of constitutional construction preclude such a reading.

It is my opinion, therefore, that surplus lands purchased with funds restricted to transportation purposes by Const 1963, art 9, Sec. 9, are subject to the same restrictions as the original funds themselves, and that accordingly, such lands may not be conveyed to another governmental entity for less than fair market value. It is my further opinion that the proceeds from the sale of such lands must be utilized for transportation purposes in accordance with the requirements of Const 1963, art 9, Sec. 9.

Frank J. Kelley

Attorney General