North Carolina Department of Justice
North Carolina Department of Justice
North Carolina Department of Justice
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December 13, 1999

The Honorable Marc Basnight Room 2007, Legislative Building Raleigh, North Carolina 27603

The Honorable James B. Black Room 2304, Legislative Building Raleigh, North Carolina 27603

Re: Proposed Disaster Relief Programs; Constitutionality With Respect to the Public

Purpose and Exclusive Emolument Clauses; North Carolina Constitution, Article

I, Sec. 32 and Article V, Sec. 2(1)

Dear Senator Basnight and Speaker Black:

You seek our opinion regarding the constitutionality of a series of proposed measures for providing relief to citizens from the ravages of Hurricane Floyd. The exact contours of these programs have not been fully developed. However, we understand that some of these programs would include direct grants to individuals for housing repair and assistance and low interest loans to farmers and the owners of small businesses. We further understand that the General Assembly believes, and will find as a part of this legislation, that in view of the magnitude and scope of the damage these direct grants and low interest loans are for the common good and constitute a public purpose. In essence, these findings would declare the legislature’s conclusion that restoration of the communities devastated by the hurricane through grants and low interest loans to the citizens and small businesses which make up those communities is primarily for the public good.

Whether a particular legislative program is for a public purpose within the meaning of Article V, Section 2(1) of the Constitution is a question of law which can only finally be resolved by the courts. In making that decision, the courts defer to, but are not bound by, the legislature’s findings regarding the need for and benefits of the program. Redevelopment Commission v. Brock, 252 N.C. 575 (1940). Public purpose, as the courts have acknowledged, is an evolving, difficult-to-define concept. Id. In general though, a program will be found to be for a public purpose if it is reasonably connected to a legitimate aim of government and if the ultimate benefit of the program accrues to the benefit of the public generally and not to special interests or The Honorable Marc Basnight The Honorable James B. Black December 10, 1999 Page 2

persons. See Madison Cablevision v. City of Morganton, 325 N.C. 634 (1989).

These principles were most recently applied in Maready v. City of Winston-Salem, 342

N.C. 608 (1996). There the Court was persuaded that a program of incentive grants to private corporations for economic development purposes was for a public purpose in part because the grant program had significantly increased the local tax base and boosted the local economy.

On earlier occasions, our courts have held that using public funds to provide subsidized housing for families who could not otherwise obtain housing was for a public purpose. Martin v.

N.C. Housing Corp., 277 N.C. 29, 50 (1970) (“Nothing could contribute more to the stability of our institutions than the acquisition of homes by an ever-increasing proportion of our people”). More recently, the Court held that extending these low-interest loans for housing to moderate income families was likewise for a public purpose. In Re Denial of Approval of Bonds, 307 N.C. 52 (1982). See also, State Education Assistance Authority v. Bank of Statesville, 276 N.C. 576, 587 (1970) (“Loans to meritorious North Carolinians of slender means [in order to] minimize the number of qualified persons whose education is interrupted or abandoned for lack of funds” is for a public purpose).

Although our courts have not examined the scope of the public purpose doctrine in the context of disaster recovery programs, there seems little doubt that our courts would hold that disaster programs generally are for a public purpose. Indeed, our Constitution at Article XI, Section 4 states: “Beneficent provision for the . . . unfortunate . . . is one of the first duties of a civilized and a Christian State.” Moreover, the courts of other states have upheld disaster relief programs which included direct assistance to homeowners. In Suber v. Alaska State Bond Committee, 414 P.2d 546 (1966), the Alaska Supreme Court held that direct grants to homeowners to assist them with the “crushing financial burden” placed on them as a consequence of earthquakes was for a public purpose. In this regard, the Court observed:

Relief and support of the poor has long been recognized as an obligation of government and a public purpose. It is no less a public purpose to extend public moneys to relieve economic distress by aiding those persons who have suffered a substantial financial burden as a result of a national disaster.

Suber, 414 P.2d at 550. See also, State of New Mexico v. Hannah, 314 P.2d 714 (1957).

Based on the principles set forth in these cases, it is our opinion that our courts would likely hold that disaster relief programs which encompass direct grants to individuals and low interest loans to farmers and small businesses serve a public purpose within the meaning of Article V, Section 2(1) of the Constitution so long as the legislation is reasonably tailored to address the emergency situation presently existing in eastern North Carolina and to assure that private interests do not predominate over the public purpose. For example, the General Assembly should limit direct grants and low-interest loans to persons (1) who reside within the The Honorable Marc Basnight The Honorable James B. Black December 10, 1999 Page 3

disaster zone (2) whose home, farm or business suffered substantial damage as a consequence of the disaster and (3) who have not otherwise been fully compensated for that damage.

Article I, Section 32 of the Constitution must also be considered. That provision forbids “exclusive or separate emoluments or privileges from the community but in consideration of public service.” The test for determining violations of this section of the Constitution is very similar to the test for determining violations of the public purpose clause of Article V, Section 2(1) of the Constitution. A statute that benefits a particular group of persons is not an exclusive emolument or privilege if it “is intended to promote the general welfare rather than the benefit of the individual” and if “there is a reasonable basis for the legislature to conclude that the granting of the [benefit] serves the public interest.” Town of Emerald Isle v. State, 320 N.C. 640, 654 (1987). Applying this test, the courts have held that programs providing loans to veterans to purchase homes, Hinton v. State Treasurer, 193 N.C. 496 (1927), and for hospital care for needy citizens, Martin v. Raleigh, 208 N.C. 369 (1935), do not confer exclusive emoluments or privileges on the citizens benefiting from those programs.

Grants and low interest loans to individuals or business that are not directly related to the accomplishment of a legitimate public purpose would be constitutionally suspect as exclusive emolument. In this instance, however, the grants and low interest loans are part and parcel of programs designed to restore communities devastated by a major natural disaster. Based on the principles set forth in the foregoing cases and the provisions of Article XI, Section 4 of the Constitution (“one of the first duties of a civilized and Christian state” is to make “beneficial provision for the unfortunate”), we are of the opinion that our courts would likely hold that disaster relief programs which encompass direct grants to individuals and low interest loans to farmers and small businesses would not be considered exclusive emoluments or privileges within the meaning of Article I, Section 32 so long as the direct grants and low interest loans are reasonably tailored to assure that private interests do not predominate over the public purpose.

Please let us know if we can provide other assistance with your flood relief efforts.

Sincerely,

Edwin M. Speas, Jr. Chief Deputy Attorney General

EMSjr/spw

cc: Jack Jenkins