De Kamp, 020483 CAAGO, AGO 82-509

Docket Nº:AGO 82-509
Case Date:February 04, 1983
Court:California
 
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JOHN K. VAN DE KAMP Attorney General
RONALD M. WEISKOPF Deputy Attorney General
AGO 82-509
No. 82-509
California Attorney General Opinion
Office of the Attorney General State of California
February 4, 1983
         THE CALIFORNIA EDUCATIONAL FACILITIES AUTHORITY has requested an opinion on the following question:          May the California Educational Facilities Authority issue tax-exempt bonds to loan monies from revenue raised thereby to the University of Judaism for it to refinance an existing loan that was used to build classroom and administration facilities?          CONCLUSION          Whether or not the California Educational Facilities Authority may issue tax-exempt bonds and make a loan from revenue derived therefrom to the University of Judaism to refinance an existing loan that it used to build classroom and administration facilities would depend on the Authority's determining, based on the facts presented to it, (a) whether the University requires its students to receive "instruction in the tenets" of Judaism, (b) whether the University is "pervasively sectarian," and (c) whether the monies loaned the University will be used for "sectarian purposes." An affirmative resolution of any of these inquiries would preclude the Authority from acting on the University's behalf.          ANALYSIS          Under section 94151 of the California Educational Facilities Authority Act (Stats. 1972, ch. 1432, p. 3127, § 1, as amended and recodified by Stats. 1976, ch. 1010, p. 2384, § 2; Ed. Code, pt. 59, ch. 2, § 94100 et seq.)1the California Educational Facilities Authority is authorized to "loan funds to a participating institution and to provide for the issuance of [tax exempt revenue] bonds for the purpose of refinancing projects not originally funded pursuant to [the Act]." (§ 94151; cf. §§ 94149, subd. (d), 94144-91446, 94150, 94156; 26 U.S.C.A. § 103(a)(1).) To be eligible to receive such funds however, an institution may "neither [restrict] entry on racial or religious grounds nor [require] all students . . . to receive instruction in the tenets of a particular faith" (§ 94110, participating college; see fn. 3, post) and no aid may be given in any event for a project which involves "any facility used or to be used for sectarian instruction [or] as a place for religious worship or any facility used or to be used primarily in connection with any part of the program of a school or department of divinity." (§ 94110, "project"/"educational facility"; see fn. 3, post.)          The University of Judaism—the West Coast Branch of the Jewish Theological Seminary of America (see fn. 6, post) and an institution of higher education specializing in the study of Judaism and Judaica - has applied to the Authority for a loan in the amount of $6 million in order to refinance an existing loan that it had secured in order to construct classroom and administration facilities. Because of its particular and narrow specialization, and perhaps because of its name, question has arisen as to whether the Authority is permitted to grant the application.2We have been asked by the Authority whether it may issue bonds and loan revenues derived therefrom to the University for the requested purpose.          Resolution of the issue however depends on a careful determination of intricate issues of fact, an area into which opinions of this office are not wont to venture. (See 64 Ops.Cal.Atty.Gen. 856, 859 (1981); 64 Ops.Cal. Atty.Gen. 1 (Foreword).) Nevertheless we can describe the parameters and define the setting in which those factual determinations must be made. So doing we conclude that whether or not the Authority may issue tax-exempt bonds to loan requested monies from the revenue derived therefrom to the University of Judaism would depend on its making a determination based upon a resolution of the factual issues presented to it as to: (a) whether the University requires all students to receive instruction in the tenets of Judaism; (b) whether the University is pervasively sectarian; and (c) whether the monies loaned will be used for sectarian purposes. An affirmative resolution in any of the areas of inquiry would preclude the Authority from acting on the University's behalf.          Background          Article IX, section 1, of the California Constitution directs the Legislature to "encourage by all suitable means the promotion of intellectual improvement." In response to that mandate the Legislature enacted the California Educational Facilities Authority Act, the declared purpose of which is "to give this and future generations of youth the fullest opportunity to learn and develop their intellectual and mental capacities by providing private institutions of higher education within the state an additional means by which to expand, enlarge, and establish dormitory, academic, and related facilities, to finance such facilities, and to refinance existing facilities." (§ 94100.)          The Act creates the California Educational Facilities Authority (§ 94120) and empowers it, inter alia, to issue tax-exempt revenue bonds (§§ 94140, subd. (d), 94144-94146, 94150; cf. § 94156; 26 U.S.C.A. § 103(a)(1)), and with monies so derived to make loans to "participating colleges" to undertake or to refinance permissible projects.3(§ 94151.) (See generally, California Educational Facilities Authority v. Priest, supra, 12 Cal.3d at pp. 596-597.)          In California Educational Facilities Authority v. Priest, supra, 12 Cal.3d 593, our Supreme Court unanimously upheld the constitutionality of the Act against a challenge made on various federal and state constitutional grounds as to the aid it might enable to be provided to "sectarian institutions of higher education." (12 Cal.3d at p. 598 &598, fn. 5; see 12 Cal.3d at pp. 599-606 discussing U.S. Const., amend. I; Cal. Const., art. I, § 4 (free exercise of religion without preference), art. IX, § 8 (no public money for sectarian or denominational school), art. XVI, § 5 (then art. XIII, § 24) (no grant of anything to or in aid of any church, religious sect or sectarian purpose or help to support or sustain any school, college, university controlled by any creed, church or sectarian denomination); art. XVI, § 3 (then, art. XIII, § 21) (no public money for benefit of private organization); art. XVI, § 6 (then, art. XIII, § 25) (no pledging state's credit for corporate liability); see also Hunt v. McNair (1973) 413 U.S. 734 which upheld a South Carolina statute identical in all pertinent respects to the Act.) The Court held the Act did not violate any of the constitutional proscriptions upon which challenge was made. "[A]lthough in certain subtle respects" said the Court, "the Act appears to approach state involvement with religion [citation], we cannot say that in the abstract it crosses the forbidden line." (12 Cal.3d at 606.) Nevertheless caution was given that—
"—if the Authority were to exercise its powers in aid of an institution which is pervasively sectarian within the meaning of the Hunt test, [i.e., an institution in which a substantial portion of its functions is subsumed in its religious mission] a different conclusion might be compelled. 'Individual projects can be properly evaluated if and when challenges arise with respect to particular recipients and some evidence is then presented to show that the institution does in fact possess these [disqualifying] characteristics.' (Tilton v. Richardson (1971) supra, 403 U.S. 672, 682.) (12 Cal.3d at 602, fn. 8.)
         The instant request in effect poses such a challenge for we are asked whether the Authority may exercise its powers in aid of an institution of higher learning whose general particulars, if not whose proposed specific use of the funds, might disqualify it for such aid.          As noted prefatorily, the genesis of this opinion stems from the University having applied to the Authority for a loan with more favorable terms than could be secured conventionally,4for it to refinance an outstanding indebtedness that it incurred to build classroom and administration facilities, as part of a capital expansion program designed to complete its campus. The proposed loan from the Authority involves long term takeout financing for six million dollars, to be carried over a period of 15 years at an interest rate of eight and one-half percent. Absent that financing the University will continue to be obligated under its existing loan with a commercial lender which requires the University to obtain refinancing in 1987. By obtaining financing through the Authority the University would not have to refinance in 1987 under uncertain market conditions and its monthly payments would immediately be maintained at a significantly lower level. The University asserts...

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