Could Georgetown pay Habitat for Humanity to repair private homes in a targeted neighborhood?

Plain-English summary

In December 2019, the South Carolina Attorney General declined to decide from the request alone whether Georgetown could pay Habitat for Humanity to buy materials and repair owner-occupied homes in a redevelopment area. Spending city funds had to serve a public purpose, while expenditures primarily benefiting private owners were constitutionally problematic. The AG said neighborhood revitalization could be a public purpose, but the city had to weigh whether the proposed program chiefly benefited the neighborhood or individual homeowners.

The city also asked whether it could help identify and select applicants. The office said it could participate if Habitat was simply carrying out a city function in return for the appropriation and private benefit was incidental. Those factual determinations belonged to the city, not the AG opinion.

Currency note

This opinion was issued in 2019. 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.

Common questions

Q: Did the AG approve Georgetown's proposed payment to Habitat? A: It did not make a final factual determination. It said the city had to decide whether the program's primary benefit was public redevelopment or private home improvement.

Q: Could a nonprofit receive city money for this kind of work? A: The 2019 opinion said a city could contract with a nonprofit to perform a city function, but the spending still had to satisfy the public-purpose requirement.

Q: Could the city choose which homeowners received repairs? A: The AG said city involvement in selecting applicants was possible if Habitat was performing a city function and homeowners' benefits were incidental to the public benefit.

Background and statutory framework

Georgetown proposed to use general-fund money for exterior home repairs in its West End revitalization area. The AG compared the constitutional public-purpose rules with precedent recognizing redevelopment of blighted areas as a public benefit. It contrasted that with earlier opinions rejecting public work that primarily benefited private property owners.

Citations and references

• South Carolina Constitution, article X, sections 5 and 11: public-purpose and private-benefit restrictions quoted in the opinion.
• Wolper v. City Council of City of Charleston: state Supreme Court redevelopment authority discussed in the source.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/december-11-2019/
• Original PDF: https://www.scag.gov/wp-content/uploads/2019/12/CrosbyE-OS-10426-FINAL-Opinion-12-11-2019-MILLING-02161249xD2C78-02163621xD2C78.pdf

Original opinion text

Alan Wilson
Attorney General

December 11, 2019

Ms. Elise F. Crosby
City Attorney
City of Georgetown
P.O. Box 939

Georgetown, South Carolina 29442

Dear Ms. Crosby:

We received your letter requesting an opinion of this Office concerning a proposed publicprivate partnership between the City of Georgetown (the "City") and Habitat for Humanity. In your letter, you state: In August 2019, Habitat for Humanity of Georgetown County,created a pilot project "Habitat Georgetown Repairs and Revitalizes" to facilitate making repairs to existing owner-occupied homes in the West End neighborhood whose owners are unable to make the repairs and are eligible under Habitat's requirements.... The City Council expects to consider participation in the program through a public-private partnership with Habitat for Humanity by voting at its regular meeting December 19, 2019, on a contract proposal for the payment of up to
$35,000 to Habitat for program implementation. Terms the City would include in a contract include provisions that city monies used for work on private property would be used for purchase of materials to be used for exterior revitalization projects visible to the public .... The funding for the program would come from the City's General Fund, included in the Department of Housing and Community Development's budget designated to address dilapidated housing. Based on this information, you ask
[m]ay the City Council authorize payment of public funds budgeted from the General Fund for the Department of Housing and Community Development to be paid to Habitat for Humanity to fund Habitat's purchase of materials for r<£MBERT C.Dennis Building o Post Office Box 11549 » CoLUiMBiA.SC 29211-1549 . Telephone 803-734-3970 » Facsimile 803-253-6283

Ms. Elise F. Crosby
Page 2
December 11, 2019

improvements and repairs to private homes in an area the City has designated for revitalization?

If so, what if any role may the City take in identifying or selecting applicants? Law/Analvsis

As you mentioned in your letter, section 5 of article X of the South Carolina Constitution (2009) provides: "No tax, subsidy or charge shall be established, fixed, laid or levied, under any pretext whatsoever, without the consent of the people or their representatives lawfully assembled. Any tax which shall be levied shall distinctly state the public purpose to which the proceeds of the tax shall be applied."

Accordingly, any expenditure made by the City must made for a public

purpose. In Anderson v. Baehr. 265 S.C. 153, 162, 217 S.E.2d 43, 47 (1975), our Supreme Court

described "public purpose" as follows:
The courts have, as a rule, been reluctant to attempt to define public purpose as contrasted with a private purpose, but have generally left each case to be

determined on its own peculiar circumstances.

As a general rule a public

purpose has for its objective the promotion of the public health, safety, morals, general welfare, security, prosperity, and contentment of all the

inhabitants or residents, or at least a substantial part thereof. Legislation does

not have to benefit all of the people in order to serve a public purpose. At the same time legislation is not for a private purpose as contrasted with a public purpose merely because some individual makes a profit as a result of the enactment.

In addition, section 1 1 of article X of the South Carolina Constitution (2009) provides "[t]he

credit of neither the State nor of any of its political subdivisions shall be pledged or loaned for the benefit of any individual, company, association, corporation, or any religious or other private education institution except as permitted by Section 3, Article XI of this Constitution."

This

Section has been interpreted to prohibit the expenditure of public funds or resources for the primary benefit of private parties.

See State ex rel. McLeod v. Rilev. 276 S.C. 323, 329, 278

5.E.2d 612, 615 (1981), overruled on other grounds bv WDW Prop, v. City of Sumter. 342 S.C. 6, 535S.E.2d631 (2000). As we stated in several opinions, the determination of whether a specific expenditure is for a public purpose is a question of fact. Op. Att'v Gen.. 1997 WL 569010 (S.C.A.G. July 16, 1997); Op. Att'v Gen.. 1995 WL 803662 (S.C.A.G. May 19, 1995).

This Office cannot make factual

determinations in a legal opinion. Op. Att'v Gen.. 1995 WL 803662 (S.C.A.G. May 19, 1995). However, as stated by Supreme Court:

"It is uniformly held by courts throughout the land that

the determination of public purpose is one for the legislative branch. This has been made manifest in a long line of decisions of this Court." Nichols v. S.C. Research Auth.. 290 S.C. 415, 426, 351 S.E.2d 155, 161 (1986). Accordingly, the City must decide whether providing funds to

Ms. Elise F. Crosby
Page 3

December 1 1, 2019

Habitat for Humanity ("Habitat") serves a public purpose considering both sections 5 and 1 1 of article X. Under the circumstances presented in your letter, the City is considering contracting with Habitat to purchase materials and to perform the repairs on private residences located in an area targeted for revitalization. In a prior opinion, we considered whether a city could contract with a private

entity to provide recreation programs for city residents.

Acknowledging the constitutional

provisions cited above, we noted:
Courts in other jurisdictions have permitted appropriations to private entities which use funds to perform a proper "function for the state." Defenbacher.

128 N.E.2d 59 (Ohio

Dickman v.

1955); Bedford County Hospital v.

Browning. 225 S.W.2d 41 (Tenn. 1949); People v. Green. 47 N.E.2d 465 (111.

1943k Hager v. Kentucky Children's Home Society. 83 S.W.2d 605 (Ky. 1904). In such cases, the direct appropriation of public funds to these private

entities is, in effect, an exchange of value which results in the performance by those entities of a public function for the State. Op. Att'v Gen.. 1997 WL 87873 (S.C.A.G. Jan. 8, 1997). Finding "recreation is an appropriate

function for the expenditure of public funds," we opined that "public funds may ordinarily be expended for recreation." Id Accordingly, the City may appropriate funds to a nonprofit, such as Habitat, so long as those

funds are used to perform a function of the City. Thus, we must consider whether the City may purchase materials and repair private homes.

In other opinions, this Office opined that public

equipment and labor cannot be used on private property.

In a 1978 opinion, we advised that

installing water service lines on private property owned and used by an eleemosynary

corporation is precluded because it "cannot be construed as serving a public purpose." Op. Atf v Gen.. 1978 WL 34976 (S.C.A.G. July 11, 1978).

Similarly, in 2015, we advised that public

funds and equipment could not be used to perform work on private property to repair driveways damaged as a result of a flood. Op. Atf v Gen.. 2015 WL 7573851 (S.C.A.G. Nov. 2, 2015). In each of these opinions, we based our opinions on the fact that the private parties would primarily benefit from these efforts.

In your letter, you mention the City enacted a nuisance abatement ordinance to address

dilapidated houses unfit for human habitation. You state the City Council could "make a finding
. . . that improving exterior conditions would prevent further deterioration that could render the homes unfit to habilitate." You also state that in 2003, City Council approved the West End Redevelopment Plan aimed at revitalizing the neighborhood the Habitat project targets. You indicate the partnership could encourage redevelopment furthering the aims of the Redevelopment Plan. Lastly, you informed us that the City's Comprehensive Plan states the City needs to address the challenges associated with its aging housing stock and provides "As home values are not solely dependent upon an individual property, but are more dependent on the

Ms. Elise F. Crosby
Page 4
December 1 1, 2019

neighborhood in which a home is located, concentration should be given on the neighborhood

level to address the needs of . . . Property maintenance, rehabilitation, and dilapidated housing removal."

In Wolper v. City Council of City of Charleston. 287 S.C. 209, 336 S.E.2d 871 (1985) our Supreme Court considered whether redevelopment of blighted areas serves a public purpose. The Court concluded: "The elimination of decaying and unhealthy areas within a city directly benefits the public." Id at 216, 336 S.E.2d at 875. In addition, while discussing the benefit to a developer of the blighted area, the Court continued on to state "an incidental benefit to private individuals is not fatal to a finding of public purpose." Id.

Based on the authority cited above, an argument can be made that appropriating funds to Habitat

furthers redevelopment, which is a recognized public purpose by our Supreme Court. However, because the proposed appropriation would directly benefit private property owners, we caution the City to carefully weigh whether the primary benefit is to the property owners or the City as a whole.

In addition to asking us about the efficacy of an appropriation to Habitat, you also inquire as whether the City may participate in identifying or selecting applicants for the program. As we

mentioned above, the City must consider whether it is appropriating funds to Habitat for a City function. If the City is simply paying Habitat to purchase materials and make repairs the City could perform directly, then we do not find any reason why the City could not be involved in identifying and selecting applicants to receive the repairs. Moreover, the City's involvement in the selection of applications could help to insure the applications selected are ones that will provide the greatest benefit the City. Conclusion

The determination of whether a particular expenditure of City funds satisfies a public rather than a private purpose involves a determination of the facts. This Office has no jurisdiction or authority to determine facts. Op. Att'v Gen.. 2005 WL 2250209 (S.C.A.G. Aug. 31, 2005) ("[A]n opinion of the Attorney General cannot investigate or determine facts."). Only the City, after considering all of the relevant facts and circumstances, can determine whether to expend public funds. However, we note the City must consider the public purpose for which the expenditure is made and whether in this case, it primarily benefits the homeowners or the City as

a whole. If the City determines Habitat is simply performing a function of the City in exchange for the appropriation and the benefit received by the homeowners is incidental to that received by

the City, we believe the City could be involved in the selection of applicants to receive the repairs in order to insure the greatest benefit for the City.

Ms. Elise F. Crosby
Page 5
December 1 1, 2019

Sincerely,

Cydndy Milli
Assistant Attorney General

REVIEWED AND APPROVED BY:

Robert D. Cook
Solicitor General