To his Excellency, the Governor of the Commonwealth:
The Justices of the Supreme Judicial Court respectfully submit their answers to the questions set forth in your request of January 29, 1971, transmitted to us on the same day. The questions arose in connection with St. 1970, c. 746, “An Act providing financial assistance for a water pollution abatement program for industrial wastes.”
The act provides that the Department of Commerce and Development (department) may “enter into contracts with industrial and commercial businesses ... to provide state financial assistance in the form of loans to said businesses for the construction of water pollution waste treatment facilities to be used by said businesses . . ..” The loans are to be made on such terms and conditions as the department deems advisable. As a condition precedent to making a loan, the commissioner of the department is to certify *770that the applicant for the loan is unable to construct the facility without financial assistance from the Commonwealth and that the continued operation of the applicant is necessary for the continued economic well-being of the Commonwealth or a region thereof. A second condition precedent to the making of a loan is a certification by the water resources commission that “the construction, operation and maintenance of such facility is consistent with a comprehensive plan approved by the division of water pollution control for the abatement of water pollution in the city, town or water pollution abatement district in which the business firm applying for said loan is located.” The Division of Water Pollution Control (division) has control over terms of the loan contract with respect to “planning, construction, operation, and administrative and inspection costs.” Repayment of the loan may not be required at a rate of interest higher than the rate paid by the Commonwealth when borrowing the funds from which thé loan is made.
The department is authorized to expend a sum not exceeding $25,000,000. To meet the necessary expenditures, the State Treasurer, upon the request of the Governor, shall issue and sell bonds of the Commonwealth. The department and the division have the authority to make rules and regulations for the proper administration of the act.
The request states that the commissioner of the department- is prepared to certify one or more private corporations which have applied for loans under c. 746, but before he can do so the Governor must perform certain acts, including a request for the issuance of bonds. The Governor is fully prepared to exercise his powers under the act provided he “can legally do so.”
The request concludes: “As doubts have been raised by the Department of the State Treasurer and the Comptroller’s Division, as to whether I may constitutionally exercise the powers referred to above with respect to c. 746, and as to whether the Commissioner of Commerce and Development, the Comptroller, the State Treasurer and other officers of the Commonwealth may perform the duties and exercise *771the powers assigned to them by statute in the implementation of c. 746, I respectfully request your opinion . . . .” The questions are:
“1. Would the issuance of bonds of the Commonwealth and the use of the proceeds thereof for the making of loans to private individuals and organizations in the manner provided in St. 1970, c. 746, violate Section 1 of Article LXII of the Amendments to the Constitution of the Commonwealth —
“(a) If the interest rate payable for such loans were equal to the interest rate payable by the Commonwealth to the holders of the bonds issued to finance the same?
“(b) If the interest rate payable for such loans were less than the interest rate payable by the Commonwealth to the holders of such bonds?
“2. Would the use of the proceeds of bonds of the Commonwealth for the making of loans to private individuals and organizations in the manner provided in St. 1970, c. 746, with the principal and interest on such bonds payable from funds raised by taxation, involve the expenditure of public funds for other than a public purpose?”
In response to our invitation to interested persons to file briefs not later than February 18, 1971, briefs were filed on behalf of the Attorney General and Associated Industries of Massachusetts.
1. With reference to the second question, we believe that the use of public funds under the act would not involve an expenditure of public funds for other than a public purpose. Numerous cases have discussed the distinction between a use or service which is public and therefore a proper object of governmental expenditure and one which is private and therefore an improper object to which to devote public funds. See Opinion of the Justices, 320 Mass. 773, 775. “Each case must be decided with reference to the object sought to be accomplished and to the degree and manner in *772which that object affects the public welfare. Frequently an object presents a double aspect in that it may in some respects result in conferring a benefit upon the public and in other respects it may result in conferring a benefit upon or in paying money to private individuals. In such instances the cases tend to distinguish between those results which are primary and those which are secondary or incidental and to classify the object according to its primary consequences and effects. At any rate it is plain that an expenditure is not necessarily barred because individuals as such may profit, nor is it necessarily valid because of incidental benefit to the public.” Allydonn Realty Corp. v. Holyoke Housing Authy. 304 Mass. 288, 292-293. In the instant situation it is clear that the primary purpose of St. 1970, c. 746, is the abatement of industrial water pollution. Such pollution is obviously a danger to the public health, safety and welfare; and a program for its abatement without impairment of local industrial development involves an important public purpose. See arts. 49 and 88 of the Amendments to the Massachusetts Constitution. Any benefit to recipients of loans under St. 1970, c. 746, would be “incidental” to the accomplishment of the primary purpose of that act. See Opinion of the Justices, 313 Mass. 779; Boston v. Merchants Natl. Bank, 338 Mass. 245. See also Opinion of the Justices, 337 Mass. 800, 806.
To question 2, we answer, “No.”
2. Question 1 presents a more difficult problem. Article 62, § 1, of the Amendments to the Massachusetts Constitution provides, “The credit of the commonwealth shall not in any manner be given or loaned to or in aid of any individual, or of any private association, or of any corporation which is privately owned and managed.” The debates concerning art. 62 at the Constitutional Convention of 1917-1918 indicate “that the amendment was designed solely to force State assistance to public service enterprises to be on a 'pay-as-you-go’ basis not involving any absolute or contingent debt obligation on the part of the Commonwealth.” *773Opinion of the Justices, 337 Mass. 800, 807-808. See Ayer v. Commissioner of Admn. 340 Mass. 586, 591-592.
Cases dealing with art. 62 have usually involved a clear loan of credit by the Commonwealth, such as a guaranty of the obligations of another. See the cases collected in Opinion of the Justices, 337 Mass. 800, 807. In that opinion such cases were distinguished from the purchase for cash (with funds borrowed in anticipation of assessments) of an option and of continuing railroad service.
The 1970 statute provides no guaranty, but it does authorize the Commonwealth to borrow money and to lend that money (apparently without new appropriation; cf. Singleton v. Treasurer & Recr. Gen. 340 Mass. 646, 649) to private businesses. Although the loan is to be for a public purpose, it is made to private persons and is likely to be of substantial benefit to them and to their property. A further difficulty is that § 1 of the 1970 statute provides only somewhat meager and general standards to guide the department in making loans and loan contracts.
In any event, there plainly is a direct connection between the State borrowing (which will remain outstanding) and the subsequent private loans, made under statutory restrictions which leave much to departmental discretion. The arrangement leads to the same inquiry as was made in Ayer v. Commissioner of Admn. 340 Mass. 586, 593, 597-599, where we felt bound to treat as “a State operation” the activities of an association which, as there to be employed, in effect and substance would be used to accomplish “constitutional evasion.”
The arrangement contemplated by the 1970 statute is comparable. The two steps of (a) borrowing by the State and (b) lending of the borrowed cash to a private borrower, would have essentially the same effect as a State guaranty of a loan to the ultimate borrower. Such a guaranty would be a violation of art. 62. To treat the arrangement under the 1970 statute differently would be to emphasize form rather than substance.
The Commonwealth, by making loans under the 1970 *774statute, would expedite the abatement of public pollution nuisances and would receive the public benefit of additional pollution control facilities. There would be substantial likelihood that the owner-borrower would eventually pay for the facilities by paying the loan. Nevertheless, this is not the direct State purchase of a service (and an option), as in the railroad situation discussed in Opinion of the Justices, 337 Mass. 800, 807-808. We assume that, by carefully framed statutory authorization of direct State action with- the use of appropriated funds, the Commonwealth can obtain essentially the same beneficial consequences without any evasion of art. 62. Compare the statutory provisions for the abatement and control of health nuisances. See G. L. c. Ill, §§ 122-142E, as amended. Wc, of course, do not suggest that all forms of public payments or aid to private businesses for the construction of waste treatment facilities or for other public purposes would be unconstitutional. See, for discussion of other methods of accomplishing public purposes through indirect assistance of private ventures, e.g., Massachusetts Bay Transp. Authy. v. Boston Safe Deposit & Trust Co. 348 Mass. 538; Opinion of the Justices, 354 Mass. 779; Massachusetts Housing Fin. Agency v. New England Merchants Natl. Bank, 356 Mass. 202. See also Opinion of the Justices, 337 Mass. 800; Opinion of the Justices, 347 Mass. 789, 790-791; Opinion of the Justices, 356 Mass. 775.
The relationship between the interest paid by loan recipients to the Commonwealth and the interest paid by the Commonwealth, we believe, has no bearing upon the question whether the act violates art. 62.
To question 1, we answer, “Yes.”
G. Joseph Tauro.
John V. Spalding.
R. Ammi Cutter.
Jacob J. Spiegel.
Paul C. Reardon.
Francis J. Quirico.
Robert Braticher.