Questions have been raised, regarding the legality of political subdivisions, namely cities, counties, special service districts and boards, providing money, property, tax relief and so forth, to private agencies or persons, for both non-profit and profit undertakings. Such action in the last few years has been increased by a number of cities and the county of our valley.
Examples would be, selling property for less than fair market value to a private business. Providing tax relief, and/or providing tax dollars, in the form of grants or outright gifts and so on.
The budgets that have been proposed by the various agencies, and in many cases accepted, show funding set aside for many causes, supported by the tax dollars paid by citizens.
There are many worthy causes in our valley. Some are very dear to the heart, but regardless of the feelings, the process of granting the wishes of the selected few, seems to have violated the laws of the State of Utah and its Constitution.
Midway City has injected itself in the process of working with a retail business. This was a concept accepted by the elected officials of Midway that on the surface might provide for tax revenues and employment for the people. A worthy cause, but it seems a number of laws were broken. Providing property to this business to have adequate parking was questionable and in light of the Constitution seems illegal. Effort was made to reduce the tax load for a number of years for this new business. The County became involved; the School District, the Sewer District and others, participated in one form or another to reduce taxes or costs, so this business could open.
Regardless of the feelings of those involved, what took place, seemed to violate the laws of the State of Utah and placed all those involved, in aiding and abetting an illegal transaction.
Heber City has loaned money to those that asked. They sold property to a local business for less than market value and in the current budget; there is a special fund for use by the City to accommodate groups or organizations that may ask for some assistance financially.
The funding is once again supplied by taxpayers.
Wasatch County has also placed them in this problem and has supplied loans and money to various groups and businesses, using tax dollars as the source for the gifts.
Whatever you believe concerning the issues and the providing of money or gifts to certain private concerns, according to the State Constitution and rulings of the Utah Supreme Court, these actions have run afoul of the law.
The question is how is the problem solved? Is there a need to ask for the resignations of those involved? Can there be a demand for repayment from those who voted to give? Is ignorance an excuse and would such a defense be justifiable?
Citizens need to understand, that failure to observe the law, requires some type of penalty. Penalties are extracted for those that run red lights, speed or the failure to license themselves or their vehicles.
Those who fain ignorance of a law, is not allowed using this excuse to satisfy justice.
Citizens now need to let officials know of their feelings. To get satisfaction, is there a need to resort to court battles for restitution or are there other methods to provide a penalty for failure to observe the law?
Here is the exact wording from the Constitution of the State of Utah.
Article VI, Section 29. [Lending public credit and subscribing to stock or bonds forbidden -- Exception.]
(1) Neither the State nor any county, city, town, school district, or other political subdivision of the State may lend its credit or, except as provided in Subsection (2), subscribe to stock or bonds in aid of any private individual or corporate enterprise or undertaking.
(2) Except as otherwise provided by statute, the State or a public institution of post-secondary education may acquire an equity interest in a private business entity as consideration for the sale, license, or other transfer to the private business entity of intellectual property developed in whole or in part by the State or the public institution of post-secondary education, and may hold or dispose of the equity interest.
The Supreme Court of the State of Utah, in a case involving the Salt Lake County Commission, versus, Douglas Short, Salt County Attorney, case number 980074, addressed one of many issues in this opinion of the court, that seemed to be tied to contributions made by the County Commission of Salt Lake City to a number of private groups, they believed would further certain public needs. In the court’s response, they made the following findings on gifts, the use of tax dollars and the selling of property.
The last issue on appeal concerns three specific charitable contributions made by the Commission. They were to the Christmas in April program, the Good Samaritan Program, and the Utah Issues Poverty Conference. The Commission cites to the following statutes, which it claims imposes a duty on it to expend funds to effectuate its duties: Utah Code Ann. §§ 17-5-244, -251, -253 to 55, -271, (1995). While it is true that these statutes give the County the authority to provide welfare and social services, there is no express grant of authority in them that authorizes the disbursal of funds directly to outside organizations or individuals who will, in turn, accomplish those goals. While the Commission claims that these disbursements will flow directly to people in need, technically the funds will flow from the County to these organizations, not to members of the public. Therefore, we must turn to statutory and case law to determine if these disbursements were proper
Section 17-4-4 of the Code states: "No County shall in any manner give or lend its credit to or in aid of any person or corporation, or appropriate money in aid of any private enterprise." Utah Code Ann. § 17-4-4 (1995). The statute does not differentiate between non-profit and for-profit organizations. The three organizations in question are private enterprises and, because money is being spent, this provision appears to apply. The policy of this section is a strong one, echoed in the Utah Constitution. See Utah Const. art. VI, § 29.(11) This policy is aimed at preventing government from in any way using public assets for private purposes. For example, we have held before that "[t]he property owned by a city is held by the city in trust for the use and benefit of its inhabitants and cannot be disposed of by gift without specific legislative authority." Sears, 533 P.2d at 119; see also Lowder, 711 P.2d at 283 ("[A] county cannot . . . dispose of public property without receiving adequate consideration."). In Sears, this court examined section 10-8-2 of the Code, which deals with the authority of municipalities to dispose of property. Lowder examined sections 17-4-3 and 17-5-48(12) of the Code, which gives the same general powers to the counties that section 10-8-2 gives to municipalities. Although there is no express provision defining the nature of the property transfer in any of these statutes, we have held that such property cannot be disposed without running afoul of this policy unless the transaction is "in good faith and for adequate consideration." Sears, 533 P.2d at 119. Even though Sears and Lowder concerned the transfer of real property, and this case involves money, their reasoning is fully applicable. The County holds all forms of property and assets in trust for the benefit of its constituents and other individuals expressly designated by statute, and the Commission can expend them only in exchange for fair value. See id. Therefore, for the contributions to avoid the statute's ban on transfers "in aid of" a private enterprise, the contributions must have been given for fair value in goods or services. Id. And we have also held that "adequate consideration" in the transfer of property must provide "present benefit that reflects the fair market value." Lowder, 711 P.2d at 282.
The trial court seemed to conclude that this standard was met when it found that "[e]ach of the payments is intended to achieve a specific result" and that the result "is a benefit to the County, the value of which may well exceed the sum expended, perhaps by a substantial amount." But a general finding that any of the contributions will provide a benefit, without specifying exactly what that benefit is, in present market value terms, is not specific enough to qualify the benefit as adequate consideration. From the facts it is clear that these contributions were not tied to any specific services to be rendered. Absent a detailed showing of the benefits to be obtained from the money given, these transactions run afoul of section 17-4-4.