Does Florida's ban on lending public credit conflict with the statute requiring cities to report economic-development incentives?

Plain-English summary

The North Port city attorney asked whether two pieces of Florida law are in conflict. One is Article VII, section 10 of the Florida Constitution, which bars the state and local governments from lending or using their taxing power or credit to aid a private corporation or person. The other is section 166.021(9)(e), a 2010 statute that requires cities above a revenue threshold to report each year the economic-development incentives over $25,000 they gave to businesses, including direct financial incentives like grants, loans, and training subsidies.

The Attorney General's office did not resolve the conflict question. Its consistent practice is to presume a duly enacted statute valid until a court of competent jurisdiction says otherwise, and it does not issue opinions that would require judging the constitutionality of an existing statute, in order to stay out of the judiciary's lane.

Instead, the office laid out the legal framework the courts use, quoting at length from the Florida Supreme Court's decision in Jackson-Shaw Co. v. Jacksonville Aviation Authority. Two ideas matter. First, "credit" under Article VII, section 10 means the government taking on a direct or indirect obligation to pay a third party's debt, or putting public property at risk; if the government has not done that, no public credit is lent. Second, even where no public credit is involved, a project must still serve a public purpose. Under the public-purpose test, it does not matter that a private party is the primary beneficiary, as long as a sufficiently strong public interest is present, but public bodies still cannot spend public funds indiscriminately for private benefit without a reasonable and adequate public interest.

Currency note

This opinion was issued in 2011. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion concluded (2011)

The office declined to opine on whether Article VII, section 10 of the Florida Constitution conflicts with section 166.021(9)(e)1.a. and b., Florida Statutes. It explained that it must presume a duly enacted statute valid until a court declares otherwise and that it will not issue an opinion requiring a determination of the constitutionality of an existing statute, to avoid intruding on the judicial branch.

To be of general assistance, the office summarized the governing case law through Jackson-Shaw Co. v. Jacksonville Aviation Authority, in which the Florida Supreme Court answered a certified question about Article VII, section 10. It recited the definition of "credit" as the imposition of a new financial liability that creates a public debt for the benefit of private enterprise (Nohrr v. Brevard County Educational Facilities Authority), and the rule that lending of credit means the public body assuming some direct or indirect obligation to pay a third party's debt, with no lending where no public funds or property are at risk (State v. Housing Finance Authority of Polk County). It then explained that, absent any lending of credit, a project must merely serve a public purpose, that a private party may be the primary beneficiary so long as the public interest is present and sufficiently strong, but that public bodies cannot appropriate funds indiscriminately for private benefit, and may not participate at all in a project lacking substantial public benefit (State v. Miami Beach Redevelopment Agency). This was an informal advisory letter.

Common questions

Q: Did the Attorney General find a conflict between the incentive-reporting statute and the constitution?
A: No. The office declined to decide that question, because it presumes statutes valid until a court rules and does not opine on the constitutionality of an existing statute.

Q: What does it mean to "lend credit" under Article VII, section 10?
A: Per the cases the office cited, it means the public body taking on a direct or indirect obligation to pay a third party's debt, or placing public property at risk. If neither happens, there is no lending of public credit.

Q: Can a city give an incentive that mainly benefits a private business?
A: The framework the office described allows it where no public credit is lent and the project serves a public purpose. The primary beneficiary may be private if the public interest is present and sufficiently strong, but funds cannot be spent indiscriminately for private benefit.

Q: What is the incentive-reporting statute about?
A: Section 166.021(9)(e), added in 2010, requires larger municipalities to report annually the economic-development incentives over $25,000 they gave to businesses, including direct financial incentives (grants, loans, equity investments, loan guarantees, training subsidies) and certain indirect incentives.

Background and statutory framework

Article VII, section 10 of the Florida Constitution prohibits the state and its political subdivisions from becoming joint owners or stockholders with, or lending or using their taxing power or credit to aid, private entities. Florida courts apply a two-step analysis: first, whether public credit has been lent (a question of whether the government assumed a debt obligation or risked public property); and second, if not, whether the expenditure serves a public purpose. Section 166.021(9)(e), enacted by Ch. 2010-147, Laws of Florida, is a transparency measure requiring municipalities above a revenue threshold to report economic-development incentives over $25,000. The office treated the asserted conflict between the two as a constitutional question for the courts and supplied the Jackson-Shaw framework rather than a ruling.

Citations and references

Statutes and constitutional provisions:

• Article VII, section 10, Florida Constitution (no lending of public credit to private entities)
• section 166.021(9)(e)1.a. and b., Florida Statutes (economic-development incentive reporting)

Cases:

• Jackson-Shaw Co. v. Jacksonville Aviation Authority, 8 So. 3d 1076 (Fla. 2008), framework for Article VII, section 10
• Nohrr v. Brevard County Educational Facilities Authority, 247 So. 2d 304 (Fla. 1971), definition of "credit"
• State v. Housing Finance Authority of Polk County, 376 So. 2d 1158 (Fla. 1979), lending of credit
• State v. Miami Beach Redevelopment Agency, 392 So. 2d 875 (Fla. 1980), substantial public benefit required

Source

• Landing page: https://www.myfloridalegal.com/ag-opinions/municipal-business-incentives-validity-of
• Original PDF: https://www.myfloridalegal.com/print/pdf/node/8166

Original opinion text

Mr. Robert K. Robinson

North Port City Attorney

2070 Ringling Boulevard

Sarasota, Florida 34237

Dear Mr. Robinson:

You ask whether there is a conflict between Article VII, section 10, Florida Constitution, and section 166.021(9)(e)1.a. and b., Florida Statutes.

Article VII, section 10, Florida Constitution, provides in part that "[n]either the state nor any county, school district, municipality, special district, or agency of any of them, shall become a joint owner with, or stockholder of, or give, lend or use its taxing power or credit to aid any corporation, association, partnership or person[.]" Section 166.021(9)(e)1.a. and b., Florida Statutes, provides:

"1. By January 15, 2011, and annually therafter, each municipality having annual revenues or expenditures greater than $250,000 shall report to the Legislative Committee on Intergovernmental Relations or its successor entity the economic development incentives in excess of $25,000 given to any business during the municipality's previous fiscal year. The Legislative Committee on Intergovernmental Relations or its successor entity shall provide the report to the Office of Tourism, Trade, and Economic Development. Economic development incentives include:

a. Direct financial incentives of monetary assistance provided to a business from the municipality or through an organization authorized by the municipality. Such incentives include, but are not limited to, grants, loans, equity investments, loan insurance and guarantees, and training subsidies.

b. Indirect incentives in the form of grants and loans provided to businesses and community organizations that provide support to businesses or promote business investment or development."

The above provisions of section 166.021(9)(e), Florida Statutes, were added by the Legislature in 2010.[1]

Initially, I must advise you that this office must presume the validity of a duly enacted statute until a court of competent jurisdiction declares otherwise.[2] As stated in this office's statement concerning Attorney General Opinions, a copy of which is enclosed, this office will not issue an opinion on questions requiring a determination of the constitutionality of an existing statute or ordinance in order not to intrude upon the constitutional prerogative of the judicial branch.

In an effort to be of assistance, however, I would generally note that the Florida Supreme Court in Jackson-Shaw Co. v. Jacksonville Aviation Authority[3] reviewed the case law relating to this constitutional provision in response to a certified question presented by the federal court[4] and stated:

"As used in article VII, section 10 of the Florida Constitution, the term credit 'implies the imposition of some new financial liability upon the State or a political subdivision which in effect results in the creation of a State or political subdivision debt for the benefit of private enterprises.' Nohrr v. Brevard County Educ. Facilities Auth., 247 So. 2d 304, 309 (Fla. 1971). This Court has also defined the lending of credit as follows:

'[T]he assumption by the public body of some degree of direct or indirect obligation to pay a debt of the third party. Where there is no direct or indirect undertaking by the public body to pay the obligation from public funds, and no public property is placed in jeopardy by a default of the third party, there is no lending of public credit.'

State v. Hous. Fin. Auth. of Polk County, 376 So.2d 1158, 1160 (Fla.1979) (citing Nohrr, 247 So.2d 304). This Court has also explained that "[i]n order to have a gift, loan or use of public credit, the public must be either directly or contingently liable to pay something to somebody." Nohrr, 247 So.2d at 309.

If the State or a political subdivision has not given, lent, or used its credit, a project must merely serve a public purpose. See State v. Osceola County, 752 So.2d 530, 536 (Fla.1999). This Court has explained that under the public purpose test 'it is immaterial that the primary beneficiary of a project be a private party, if the public interest, even though indirect, is present and sufficiently strong.' Hous. Fin. Auth. of Polk County, 376 So.2d at 1160 (citing State v. Putnam County Dev. Auth., 249 So.2d 6 (Fla.1971)). However, this Court has also cautioned that 'public bodies cannot appropriate public funds indiscriminately, or for the benefit of private parties, where there is not a reasonable and adequate public interest.' Id. Even where there is no proposed public indebtedness, neither the State nor a political subdivision 'may expend public funds for or participate at all in a project that is not of some substantial benefit to the public.' State v. Miami Beach Redevelopment Agency, 392 So.2d 875, 886 (Fla.1980)."

I trust you will understand that the duties of this office are prescribed by law. Thank you, however, for considering this office as a source of assistance.

Sincerely,

Joslyn Wilson

Assistant Attorney General

JW/tsh

[1] Section 2, Ch. 2010-147, Laws of Fla.

[2] See, e.g., Ops. Att'y Gen. Fla. 03-33 (2003). Cf. Pickerill v. Schott, 55 So. 2d 716, 719 (Fla. 1951); Belk-James, Inc. v. Nuzum, 358 So. 2d 174, 175 (Fla. 1978).

[3] 8 So. 3d 1076, 1095 (Fla. 2008).

[4] See Jackson-Shaw Co. v. Jacksonville Aviation Authority, 510 F. Supp. 2d 691 (M.D.Fla. 2007), question certified, 508 F.3d 653 (11th Cir. 2007), certified question answered, 8 So. 3d 1076, 1095 (Fla. 2008), answer to certified question conformed to, 562 F.3d 1166 (11th Cir. 2009).