housing bonds payable from rents held to be outside debt limitation despite a “moral make-up clause”
How later courts described this case
- housing bonds payable from rents held to be outside debt limitation despite a “moral make-up clause”
- bonds issued under Housing Act to be paid only from rent revenues does not create “debt”
Written by the judges who cited it.
The opinion
DENECKE, J.,
specially concurring.
I specially concur to point out that any legisla *408 tion providing for “revenue” bonds is at least partially inconsistent with the basic policy underlying Art, XI, §7.
Art XI, § 7, provides that the legislature shall not create any indebtedness for the state in excess of $50,000. "We are holding in this case and have held in other cases that when the state is not legally obligated to repay the debt out of the General Fund, which is the case in “revenue” bonds, Art XI, § 7 is not violated.
All counsel conceded at oral argument, however, that the state could not permit a default in the repayment of “revenue” bonds even though the revenue was insufficient for repayment. If the state did permit a default, the state credit rating would be lowered and the interest rate the state would have to pay would increase. Because of these practicalities, as a fiscal necessity, not as a legal obligation, the General Fund will be called upon to repay “revenue” bonds if the revenue is insufficient. This will occur whether the statute authorizing the bonds provides that the state “shall” repay, “may” repay or is silent.