## Facts

- Utah enacted the Utah Housing Finance Agency Act (1975) to address a shortage of decent, safe, sanitary housing for low- and moderate-income residents by increasing mortgage funding.
- The Act created the Utah Housing Finance Agency as a state-created corporate body governed by specified officials and appointees.
- The Agency was authorized to finance its program primarily through issuing notes and bonds; the obligations and related income and property were exempt from taxation.
- Program tools included low-interest lending through qualified mortgage lenders, a rehabilitation loan fund, loans to local housing authorities, and purchasing mortgages with requirements to recycle funds into qualifying mortgages.
- The legislature appropriated $200,000 for an operating fund and $300,000 for a capital reserve fund to start operations and support initial financing activity.
- The Director of Finance and State Auditor refused to disburse the appropriated sums absent a judicial ruling that the Act was constitutional.
- The Agency sought declaratory and coercive relief to confirm the Act’s constitutionality and compel disbursement; the trial court ruled for the Agency, and the officials appealed.

## Issues

1. Whether the Act serves a constitutionally sufficient public purpose to justify appropriations and tax exemptions connected to the Agency’s housing-finance program.
2. Whether authorizing the Agency to issue bonds and notes, and funding related reserves, creates unconstitutional state debt or an unlawful lending of the state’s credit.
3. Whether the appropriations for operating and capital reserve funds constitute an unconstitutional gift or subsidy to private parties due to incidental benefits to lenders, developers, or borrowers.

## Decision

- The Utah Supreme Court affirmed the judgment upholding the Act’s constitutionality and requiring disbursement of appropriated funds.
- The Court held the Act serves a public purpose by addressing an existing housing shortage affecting public health, safety, and welfare.
- The Court held private benefits flowing to participants in the housing market were incidental to the statute’s primary public objective and did not invalidate the program.
- The Court held the Agency’s obligations did not constitute unconstitutional state debt or a lending of state credit because the bonds were obligations of the Agency rather than general obligations backed by the state’s full faith and credit.
- The Court held the appropriations to the Agency’s operating and capital reserve funds were permissible expenditures in furtherance of the public purpose and were not unconstitutional subsidies to private interests.

## Legal Principles

- Legislative programs directed at alleviating an actual, existing social problem affecting public health, safety, or welfare may satisfy the public-purpose requirement even if private parties receive incidental benefits.
- Incidental private benefit does not defeat constitutionality where the statute’s primary objective and design are public and the private gains are secondary to that objective.
- Bonds issued by a separate public corporation or agency do not create unconstitutional state debt or a prohibited lending of state credit when repayment is limited to the agency’s revenues and the state’s general taxing power and full faith and credit are not pledged.
- Appropriations to fund the start-up and reserve needs of a state-created agency can be constitutional when tied to a public-purpose program and not structured as direct gifts to private persons.

## Conclusion

The Utah Supreme Court upheld the Utah Housing Finance Agency Act and the related appropriations, ruling that the housing-finance program served a valid public purpose, that any private benefits were incidental, and that the Agency’s bond financing did not create unconstitutional state debt or an unlawful pledge of state credit.


Utah Hous. Fin. Agency v. Smart, 561 P.2d 1052 (Utah 1977)