The STATE of Florida, Appellant, v. The JACKSONVILLE PORT AUTHORITY, Appellee, 204 So. 2d 881

DREW, Justice. This is an appeal of the State from a decree of the Circuit Court of Duval County, Florida, validating $111,000,000.00 Special Purpose Bonds proposed to be issued by the Jacksonville Port Authority, a public agency, for the construction and acquisition of Special Purpose Facilities to be located on Blount Island, Duval County, which island .is now owned by the Authority. Such facilities are to consist of shipyard and repair facilities, including buildings, improvements, fixtures, docks, dry docks, wharfs, bulkheads, machinery and equipment.

The Authority has entered a lease and a “Supplemental Agreement” with Lockheed Aircraft Corporation, a private corporate tenant covering S00 acres of land on Blount Island, and the Special Purpose Facilities to be placed thereon. The first term of the lease extends 25 years with option in Lockheed to renew the lease for ten consecutive additional terms of five years each. Rentals to he paid thereunder are estimated to he sufficient to pay the principal and interest of said bonds and all sinking fund or other payments required thereunder. Such rentals are -the only funds pledged to retire the bonds.

The ad valorem tax power of the County is expressly precluded in the bond resolution from ever being resorted to in servicing the bonds. Lockheed agrees to use the leased premises and the facilities to be placed thereon “ * * * for the operation of a shipyard and ship repair facility * * * [and to] provide repair, overhaul, modification and services to the general public when consistent with its commitments to the United States Government.” These commitments to the Government refer to contracts Lockheed expects to enter with the Navy for the construction of Fast Deployment Logistic Cargo Ships.

In validating the bonds the Chancellor found, inter alia, “FOURTH: That said Special Purpose Facilities so leased will be used by Tenant to offer ship construction, repair and maintenance services to the general public and the various agencies of the State and Federal Government, including the United States Navy under a program known as the Fast Deployment Logistics Ship Project; that the Jacksonville area has for years been the site of many activities of the United States Navy and has contributed thereto and benefited therefrom, and the construction and acquisition of the said Special Purpose Facilities and the lease of such facilities by the Authority to Tenant will directly contribute to the development of the public port and shipping facilities of the Authority and will generally benefit the Jacksonville area and the State of Florida and will contribute directly to the national defense.” Objecting to the decree of validation, the State contends solely that the proposed Authority bonds considered in relation to the terms of the Lockheed lease would be vio-lative of

Section 10,

Article IX of the State Constitution, F.S.A., because the bonds would be issued to obtain money to construct and acquire said facilities primarily for Lockheed’s benefit on the credit of the Authority. And so it is that once again we are confronted with the above identified

section of the Florida Constitution which provides, “The credit of the State shall not be pledged or loaned to any individual, company, corporation or association * * * The Legislature shall not authorize any county, city, borough, township or incorporated district to become a stockholder in any company, association or corporation or to obtain or appropriate money for, or to loan its credit to, any corporation, association, institution or individual.” This

section was first adopted in 1875 as an amendment to the Constitution of 1868. Its purpose was to stop the practice of public bodies becoming stockholders or bond holders and in other ways loaning their credit to and becoming interested in the organization and operations of railroads, banks and other commercial institutions. Many of these enterprises were poorly managed and failed, resulting in such governmental entities as were interested therein in becoming responsible for their debts and other obligations, which obligations fell ultimately on taxpayers. This

section has come down to us in substantially the form in which it first existed in 1875. The question of whether the public welfare will be promoted by the issuance of public securities to finance or aid in the financing or the construction and operation of private enterprise as is presently being done in some states under specific constitutional or statutory provisions is not for this Court to decide. Perhaps the modern trend of government encroachment on the free enterprise system is the wise road to follow.

So long, however, as the Constitution reads as it does now, it seems clear that we have no choice in the matter. The most recent decision of this Court in this area is State v. Manatee County Port Authority decided in January of this year. There is no difference whatever in the principle involved in the Manatee case and in this case. If anything, the record here establishes a far more direct extension of public credit and facilities to this private corporation than was proposed in the Manatee County case. In the past fifteen years a majority of this Court has consistently adhered to the mandates of this

section of the Constitution when confronted by proposals to issue public securities in which the private interests to be served by the overall project was more than incidental. The cases are legion in which this Court has flatly refused to approve the issuance of public securities for the purpose of assisting in the establishment of industrial developments, housing projects, building apartment houses, baseball stadiums and projects of such nature, no matter how worthy the objectives might have been in such cases where the benefit to the public was shown to be only incidental.

The dissenting opinions which have been filed in many of these cases are the best evidence of the fact that this Court has limited the issuance of such public securities to those instances where the private purpose served [if any] was purely incidental such as that which existed in the Gate City case in Jacksonville, the Panama City case and many others. It is said in some of the dissenting opinions that this Court has not been consistent in its views upon the subject. The basic principle involved has been consistently adhered to.

The factual issue, however, of whether the public purpose was the overriding and paramount purpose has evoked dissension in the Court from time to time. The cleavage, if any, lies in this area. What, now, are the facts in this case ? The Authority claims power to issue these bonds under

Chapter 63-1447, Laws of Florida, Acts of 1963, which confers upon it the “power to construct, acquire and operate shipping facilities of all kinds, to lease the same on such terms, conditions and period of time as the Authority may determine” and “to solicit shipping and other business and do all things necessary or advisable to promote commerce and increase tonnage through the Port of Jacksonville.” To accomplish these purposes, the Authority is authorized “to issue revenue bonds, to pay all or part of the costs of acquisition or construction * * * of any proj ect and to pledge the revenues to secure the payment of bonds.” This language does not authorize the project being undertaken.

The language clearly indicates the conferring of authority to carry on the public purpose of operating a port for the promotion of commerce. In connection therewith, of course, there exists the necessity of the construction of buildings, wharves, docks and other things to attain that purpose. Admittedly such is a public purpose the same as building sewers, highways, operating police departments, fire departments and performing any other essential public function. Shipping and commerce and transportation are essential public services. But that is not what is contemplated here.

In numerous decisions of this Court beginning with Gate City Garage v. Jacksonville, this Court laid down the principle that if the paramount purpose is a public purpose, such project may as an incident thereto lawfully benefit private corporations or individuals. In each of the cases where this was discussed, notably in Panama City v. State, this Court went at length into the question of the percentage of the project which was devoted to necessary public purposes.

In the Panama City case we said that rentals from concession buildings amounted to slightly less than 20% of the total anticipated revenue from the overall project and that such concession buildings would occupy 1.22% of the total area involved. We held that such were “mere incidents to the main or primary purpose and for the convenience of those who used the buildings and facilities for a public purpose.” In this case it is said that up to this time approximately $35,000,000 has been expended in the total harbor development of the Port of Jacksonville by both the federal and local authorities.

At the present time the Authority has outstanding something less than $5,000,000 in improvement bonds. It has been authorized by popular freeholder election to issue an additional $25,000,000 of bonds which, according to the record here, were voted for the purpose of improving Blount Island, which is the principal territory involved in this case. Not all of these bonds, according to this record, have been sold. The proposed issue of bonds of $111,000,000, is many times the total of the Authority’s current obligations.

Every dollar raised by the issue here involved is to be used for the purpose of building a shipyard for the private use of a private corporation. The public will have utterly no control or dominion of these facilities for profit for a possible period of 75 years.

In addition to this, the Authority by the supplemental agreement appearing in the record has obligated itself to use all or such portions as are necessary of the $25,000,000 general obligation bonds already authorized for the purpose of constructing and paying for, (such amounts not to be refundable by Lockheed) bridges, temporary highways, railroad tracks, water supplies, electric power, fire fighting equipment and the construction of permanent bridges and highways leading to these facilities.

So, in all, the contemplated expenditure of these public funds will amount to approximately $136,000,000, and this does not include such supplemental projects as from time to time might be authorized. It is noteworthy and highly pertinent to observe the conditions of the lease and the supplemental agreement with reference to the complete control of this project by this private corporation for three-quarters of a century.

Moreover, in the actual expenditure of these public funds, a careful study of the supplemental agreement and the lease reveal that decisions in connection with it are not made solely by the Authority. In the event of disputes, certain designated nationally recognized engineering firms, named in the agreement, are the ultimate authority.

An examination of the record clearly establishes that the only public purpose to be served by this project is the promotion of the Port and the general welfare of the area served by increasing payrolls, providing employment, etc., which this Court has said is not a public purpose as contemplated by our decisions and the Constitution. Finally, while the problem so far as this Court is concerned is answered in the constitutional language, the issuance of public securities of this nature does not so far appear to be essential to the general welfare or the development of this state.

Within the past few weeks Disney Enterprises has commenced a project which it is said will ultimately entail the expenditure of more than 600 million dollars. This Court can take judicial knowledge of the Martin complex in Orange County, Westinghouse and Anheuser-Busch in Hillsborough County, Honeywell in Pinellas County, Pratt & Whitney in Palm Beach County and many others including pulp mills, paper plants and phosphate plants, all of which so far as the records of this Court show have moved into this state without the aid of financing of the nature here proposed.

Moreover, in 1966 this state added 397 new plants and 156 major plant expansions yielding 33,223 new jobs. These facts establish that Florida has prospered and continues to grow and prosper under the free enterprise system. It confirms the wisdom of our forefathers nearly a hundred years ago in writing into the Constitution one provision which to this date remains unchanged. The questioned decree, for the reasons herein pronounced and on the authority of previous decisions of this Court, is hereby reversed with directions that the petition for validation be dismissed. It is so ordered. CALDWELL, C.

J., and THOMAS and O’CONNELL, JJ., concur. ERVIN, J., dissents with opinion. ROBERTS and THORNAL, JJ., dissent and concur with ERVIN, J. . Bailey v. City of Tampa, 1926, 92 Fla. 1030, 111 So. 119. . Fla.1966, 193 So.2d 162. . Less than 6 months ago, this Court said: “ * * * We have repeatedly held that use of part of the proceeds of such bonds for incidental private operations will not vitiate the entire issue, but we have reiterated the restriction that diversion of any part of the funds will not be tolerated unless the expenditure is purely incidental to the main project.

Such were the effects of the decisions in Adams v. Housing Authority of City of Daytona Beach, Fla., 60 So.2d 663; Gate City Garage, Inc. v. City of Jacksonville, Fla., 66 So.2d 653; Panama City v. State, Fla., 93 So.2d 608; State v. Clay County Development Authority, Fla., 140 So.2d 576, and in the later case of State v. Washington County Development Authority, Fla., 178 So.2d 573, and in the recent case of Brandes v. City of Deerfield Beach, Fla., 186 So.2d 6.” State v. Manatee County Port Authority, note 2, supra. . Gate City Garage, Inc. v. City of Jacksonville, Fla., 66 So.2d 653. . Panama City v.

State, Fla., 93 So.2d 608. . Note 4, supra. . Note 5, supra. . The following are a few quotes from the supplemental agreement with refer-enee to the management of construction and acquisition of the special purpose facilities : “To assure the orderly completion of the Special Purpose Facilities, the Authority and Tenant shall each appoint a project engineer and an assistant project engineer (the project engineers so designated by the parties are hereinafter collectively referred to as the ‘Project Engineers’) to supervise the development, acquisition and construction of the Special Purpose Facilities.

The persons so designated by each party may be changed at any time upon written notice of such change to the other party.

In the absence of the project engineer of either party at any time, the assistant project engineer of either party shall be entitled to act as the project engineer of that party. “In addition, the Authority will employ and retain Tenant to manage the development, acquisition and construction of the Special Purpose Facilities. “The Authority recognizes that Tenant has employed Bechtel Corporation (‘Bechtel’) a nationally recognized engineering firm, to assist Tenant in designing and engineering the Special Purpose Facilities.

Tenant may delegate certain portions of its duties in the management of the development, acquisition and construction of the Special Purpose Facilities to Bechtel or such other qualified experts as Tenant may select.

The amounts paid by Tenant to Bechtel or such other qualified experts on account of such services shall be a part of Tenant’s ‘expenses’ which are reimbursed by the Authority. “The Project Engineers shall develop contracting, procurement, operating, supervisory, and auditing procedures to control and implement the acquisition and construction of the Special Purpose Facilities, utilizing the services of Tenant as the manager of the development acquisition and construction, wherever the Project Engineers deem appropriate. * * * “ * * * “In the event the Project Engineers are unable to agree upon the proper course of action to be taken in any matter relating to the acquisition and construction of the Special Purpose Facilities, they shall consult with the designated representative of Bechtel or such other nationally recognized engineering firm as the Authority and Tenant may select.

The course of action determined by a majority of the representatives of the Authority, Tenant, and Bechtel or such other selected engineering firm shall be followed by the Project Engineers.” In this connection, see the following language in the Manatee County case: “From its inception, this arrangement appears to be one to use public funds to assist and enhance private enterprise. As we interpret the lease, it is a grant to the railroads of exclusive use of the facilities at public cost.

This thought is emphasized by certain provisions with reference to supervision by the lessees of even preliminary steps in the financing as well as eventual construction of the facility.

For example, it is provided in the lease that if the lessees shall ‘in good faith fail to approve of any proposed sale of such Bonds, either the Port Authority or the Lessees may cancel this lease and both * * * shall be released from all claims for damages resulting directly or indirectly from such cancellation.’ Furthermore, it is stipulated that the ‘Lessees shall have the right to approve the terms of the sale of the Bonds * * * to finance the construction costs of the Leased Premises’ and if they fail in good faith to give their approval they may cancel the lease and be released of all damages flowing from the cancellation.

And finally the lessees are given the right to audit the records of the Authority ‘concerning all elements of the Construction Costs * * ” . “ * * * The dominant and paramount purpose is to lend the credit of the county to a private corporation to finance a private enterprise for private profit which will be under the exclusive control and in the exclusive possession of such enterprise for more than twenty-five years. The only possible public purpose which it serves is to promote the general development of the area by furnishing employment to the residents of Clay County.

This is the factor which prompted the project. If we approve the issuance of bonds by the public authorities of this State to build and finance private enterprises and put such enterprises in the exclusive possession and control of such leases as is proposed to be done here, in order to alleviate unemployment and to promote the economic development of the area, then there is no limit to the extent to which the credit of the State and its authorities may be extended to private interests. In such event the constitutional provision above quoted will become meaningless.” State v.

Clay County Development Authority, Fla., 140 So.2d 576, 580. Also see State v. Suwannee County Development Authority, Fla., 122 So.2d 190, and State v. Washington County Development Authority, Fla., 178 So.2d 573, 574, where we said: “Laudable as is the effort of the people to lift their locality to a more prosperous condition by their own bootstraps, so to speak, we do not think it can be done within the framework of our laws. Sec. 10, Art. IX, seems completely to bar the way.” . Press release of Florida Development Commission issued May 18, 1967.