dissenting.
In this year, 1987, while we are celebrating the 200th anniversary of the United States Constitution, this court has, I believe, eviscerated the Kentucky Constitution. The disemboweled sections 3, 49, 50, 59, 171, and 177 lie scattered about us.
Section 177 of the Kentucky Constitution clearly provides that the credit of the Commonwealth shall not be given, pledged, or loaned to any individual, company or corporation and that the Commonwealth shall not make a donation to any company, association, or corporation.
The majority concludes that the conveyance of the Toyota building site by the Commonwealth to Toyota is not a gift or donation to a corporation because the Commonwealth will receive fair market value for the property conveyed. This is so, the majority reasons, because the construction and operation of the Toyota manufacturing plant will generate new tax revenues which the state would not receive except for the location of the Toyota plant in Kentucky. These new (or incremental) taxes are considered by the majority to constitute payment for the $35,000,000 building site.
Taxes are the price that a taxpayer pays for the benefits received from government. It is true that once Toyota has erected an $800,000,000 manufacturing plant upon the project site, the property will generate more state tax revenue than it generated before the construction of the plant. The increase in taxes, however, will do no more than pay for Toyota’s pro rata share of the police protection and other benefits of government that it will receive from the Commonwealth of Kentucky. Our constitution, § 171, requires that taxes be uniform upon each class of property subject to taxation. If the tax rate upon Toyota’s property is to be uniform with that of other taxpayers, the collection of taxes assessed against its property will only uniformly pay its pro rata share of the cost of state government. It follows, therefore, that if the taxes collected from Toyota are to be viewed as its fair share of the cost of the benefits provided by the Commonwealth to Toyota, then those same tax receipts cannot also be considered to constitute the purchase price for the Toyota building site. By the same token, if taxes paid by Toyota are to be considered as a payment for the land conveyed to it by the Commonwealth, then, in fact, Toyota will be excused from paying anything as its fair share of the cost of benefits provided to it by the state government.
To say that the taxes paid by Toyota will be counted once as its payment of its share of the cost of government and be counted a second time as its payment for the purchase price of the property conveyed to it *818by the Commonwealth, gives to Toyota a dual benefit from its taxes that is not accorded to any other taxpayer. I cannot find any place in the majority opinion which faces up to the impropriety and unconstitutionality of this double benefit from taxes. The majority opinion simply begs the question when it states:
“Under no conditions is Toyota the beneficiary of any double counting of future taxes. The taxes involved are uniform on all property of the same class subject to taxation.”
Of course the tax rate will be uniform, but that does not answer or even face up to the question as to why Toyota’s taxes can be considered as both a payment for property and as the payment of its fair share of the cost of government.
Likewise, I believe the majority engages in pure sophistry when it states:
there is no attempt to exempt any corporation from taxation but rather there is a commitment required by law to pay additional and new taxes....”
This does nothing to explain why the use of Toyota’s taxes as a purchase price for property does not in fact result in an exemption of Toyota from sharing in the cost of government. Of course, Toyota will pay additional taxes on the project site, but that is solely because Toyota will construct an $800,000,000 improvement upon the property and will receive government protection on that $800,000,000 investment.
It is true that the operation of the Toyota manufacturing plant will doubtless generate other taxes, such as the income tax to be paid by Toyota employees. Taxes paid by Toyota employees, like taxes paid by all other taxpayers, are paid to sustain the cost of government and cannot reasonably be diverted to pay for land to be owned by a private corporation. It is one thing to admit that the Toyota plant will generate tax revenue that the Commonwealth would not otherwise have received. It is quite another thing to say that the new tax revenue is not, like all other taxes, the taxpayer’s fair portion of the cost of government but instead should be credited as the purchase price of property conveyed to Toyota by the Commonwealth.
If, however, for the purposes of discussion only, it be conceded that the tax revenues to be generated by the Toyota manufacturing plant can be considered to be payment of the fair cash value of the Toyota building site, it must be noted that this payment will take place over a number of years. The thesis is that the Commonwealth will borrow $35,000,000 immediately and issue bonds therefor. The Commonwealth will then retire these bonds over a period of years by appropriations from the general fund. Meanwhile, the new taxes to be generated by Toyota which are to be considered as payment for the property will be collected over the life of the bond issue. In essence, the Commonwealth will have borrowed the money to pay for property for Toyota and thereby will have loaned its credit to Toyota.
Of course, after the taxes generated by Toyota have equaled the cost of the project site (presumably within 30 years) Toyota will continue to pay taxes at a uniform rate. Then, and only then, will Toyota begin to assume its fair share of the cost of the benefits provided by the Commonwealth.
I believe the financing agreement devised for the Toyota project is a donation of land to Toyota, pure and simple, and is in violation of § 177 of the Kentucky Constitution. I also believe that the interpretation of § 177 by the majority in such a manner as to approve the Toyota agreement, in reality, renders § 177 null and void to a significant degree.
Section 49 of the Kentucky Constitution provides:
“The General Assembly may contract debts to meet casual deficits or failures in the revenue; but such debts, direct or contingent, singly or in the aggregate, shall not at any time exceed five hundred thousand dollars, and the moneys arising from loans creating such debts shall be *819applied only to the purpose or purposes for which they were obtained, or to repay such debts: Provided, The General Assembly may contract debts to repel invasion, suppress insurrection, or, if hostilities are threatened, provide for the public defense.”
Section 50 of the Kentucky Constitution provides:
“No act of the General Assembly shall authorize any debt to be contracted on behalf of the Commonwealth except for the purposes mentioned in section 49, unless provision be made therein to levy and collect an annual tax sufficient to pay the interest stipulated, and to discharge the debt within thirty years; nor shall such act take effect until it shall have been submitted to the people at a general election, and shall have received a majority of all the votes cast for and against it: Provided, The General Assembly may contract debts by borrowing money to pay any part of the debt of the State, without submission to the people, and without making provision in the act authorizing the same for a tax to discharge the debt so contracted, or the interest thereon.”
These sections of the Kentucky Constitution were clearly designed to restrict the power of the General Assembly to obligate the revenue of the Commonwealth beyond the biennium of the Assembly. The delegates to the constitutional convention knew that a sitting legislature, with power to incur indebtedness obligating revenue in future years, could pile up such a catastrophic debt as to seriously impede the future operation of the government.
Those delegates took two measures to interdict such a potential disaster. They required first that any indebtedness in excess of $500,000 be approved by a vote of the people, and second, that the act authorizing the debt provide for the levy and collection of an annual tax sufficient to pay the interest and to discharge the debt.
Subsequent General Assemblies have considered our constitution too restrictive in its provisions concerning debt and have, so far, succeeded in evading the constitutional requirement of submitting debt issues to a vote of the people and the requirement that an annual tax be levied to pay the interest and to discharge the debt.
This has been accomplished by means of the “revenue bond,” a fiction whereby money borrowed does not constitute a debt. Revenue bonds, in the language of the statute authorizing them and as stated upon their face, do not constitute an obligation of the Commonwealth. They are to be retired solely from income realized from the project which they were issued to finance. Most often the completed project is leased to the state in two-year periods, and the bonds are retired from the lease payments made by the state.
In this case, however, the property will not be owned by a state agency but will be owned by Toyota. The state will not lease the property from Toyota, but will simply advance money out of the general treasury each biennium to retire the bonds.
In Turnpike Authority of Kentucky v. Wall, Ky., 336 S.W.2d 551 (1960), this court upheld the concept that revenue bonds did not constitute an obligation of the state, and consequently they could be issued without a vote of approval by the people and without the levy of an annual tax to retire the bonds. Wall accepted, at face value, the contention that a future General Assembly, in each biennium, would consider the merits of continuing to lease the projects financed with revenue bonds, and could, if it so desired, freely refuse to continue the lease.
As a practical matter, however, a future General Assembly will find itself nearly powerless to refuse to appropriate funds for the retirement of the Toyota revenue bond issue, just as the present and past General Assemblies have been unable to disavow the obligation to appropriate funds for the retirement of past “revenue bond” issues.
To default upon the “revenue bonds” would instantly destroy the credit of the *820Commonwealth and would be calamitous. No reasonable legislator would consider such a course.
Millions of dollars of current tax revenue which should have been subject to such use as the current General Assembly would make of it has been obligated to pay interest and principal upon “revenue bond” issues created by past legislative enactment. Those millions are simply not available for current use.
The option to disavow an issue of “revenue bonds” is scarcely a free choice. To some extent a revenue bond, if not a debt, is at least an obligation which future administrations will find difficult to disavow. To that extent, the clear intent of Constitution Sections 49 and 50 to limit the power of the General Assembly to obligate future revenue of the Commonwealth beyond a two-year period will have been circumvented.
An act which appears constitutional upon its face may nevertheless be unconstitutional in its application. I do not believe that Turnpike Authority v. Wall, supra, addresses the constitutionality of these acts in their application.
In Commonwealth v. O’Harrah, Ky., 262 S.W.2d 385, 389 (1953) we held:
“‘Constitutional provisions, whether operating by way of grant or limitation, are to be enforced according to their letter and spirit, and cannot be evaded by any legislation which, though not in terms trespassing on the letter, yet in substance and effect destroy the grant or limitation.’
“In appraising the validity of the statute we must look through the form of the statute to the substance of what it does. The courts may not countenance an evasion or even an unintentional avoidance of our fundamental law.”
This dissent is not meant to impugn the validity of bonds heretofore issued and validated under the principles announced in Turnpike Authority v. Wall, supra. I simply believe that Wall is not conclusive of all the issues presented by this case.
The majority cites Blythe v. Transportation Cabinet of the Commonwealth of Kentucky, et al., Ky., 660 S.W.2d 668 (1983) as a continuation of the line of cases which have approved revenue bonds. On the contrary, Blythe simply held, as did Wall, supra, that the statute on its face is not unconstitutional. It did not address the question of whether the statute in its application is unconstitutional. Neither did it approve the bond issue in question, but left to subsequent litigation, the determination of the validity of the bonds at issue. To my knowledge there has been no such subsequent litigation to determine the validity of those bonds, and in my judgment the state treasurer acts at his peril in paying any interest or principal of that particular revenue bond issue.
Three members of this court joined in a dissent in Blythe, supra. That dissent, together with the fact that the court refused to approve the bond issue therein, should have raised a flag of warning that in the future some consideration would be given to the practical obligation imposed upon the Commonwealth by an issue of revenue bonds and might determine that such bonds constitute an indebtedness within the meaning of § 49 and § 50 of the Constitution, despite the statutory language that they should not be considered an indebtedness of the Commonwealth.
The Toyota bonds are not revenue bonds in a true sense. They will be retired solely by appropriations from the state treasury. No agency of the Commonwealth will own the land, and so even the fiction that the state will pay rent for the use of the project cannot be indulged.
I believe it is a fiction to say that the Commonwealth will have no obligation to retire the Toyota revenue bonds in an orderly manner. There is simply no other method for the purchasers of the bonds to recover their money from any source except the state treasury. In other “revenue bond” issues there has been some asset capable of producing revenue which would give some security to bondholders in case *821of default. That is not true here. The asset will belong to Toyota, and it has no obligation to the bondholders. To hold that the Commonwealth can issue bonds and then refuse to repay them when there is no other source of security for the bondholder is to approve the commission of a fraud by the Commonwealth.
The purpose of § 49 and § 50 of the Constitution of Kentucky is to prevent a current General Assembly from obligating tax revenues of future years. In my judgment, the result of this case is a complete evasion of the letter and the spirit of those Sections.
No doubt the proponents of the Toyota agreement have been led to believe, based upon past decisions of this court, that we will wink at apparent evasions of the Constitution when they are considered to be imperative for the progress of the state and the benefit of the public. In fact, the public never benefits, in the long run, from any evasion of the Constitution. Evasion simply erodes the fabric of constitutional government.
Finally, I believe that SB 361 is special legislation in violation of the Kentucky Constitution, § 59. It creates a class of revenue bonds which are available to Toyota and perhaps to other business entities, but certainly not to all. So far as I can determine, there are no standards to measure eligibility as to beneficiaries of this class of “revenue bonds.”
The stated purpose of the act is to promote gainful employment, economic development opportunities and general welfare by creation of an authority to enable the Commonwealth to acquire and develop industrial sites for occupancy, use, lease, or conveyance to industrial corporations and other entities.
Every industrial development project can be expected to produce new taxes. In many cases, the new taxes would be sufficient to equal the cost of the project site in 30 years. It does not follow, however, that every such project would become eligible for a “revenue bond issue” to purchase property for it and to use the taxes generated by the project as payment for the property. The only criteria established in the act for eligibility is that projects may be financed by “revenue bonds” only at the request of the Commerce Department, and:
“1. The subject industrial entity agrees in writing prior to the issuance of any revenue bonds to construct and acquire in connection with the industrial development project manufacturing, processing and assembling facilities satisfactory to the commission;
“2. The commission makes a finding in writing, that, based upon diligent investigation, the aggregate incremental taxes to be received by the Commonwealth as a result of such industrial development project are reasonably expected, over the life of the revenue bond issue, to be at least equal to the principal amount of any revenue bonds issued to finance such industrial development project;
“3. The industrial development project is separately approved in writing by the governor;
“4. The industrial development project is separately approved and authorized by the general assembly; and
“5. Any revenue bond proceedings for the financing of an industrial development project provide that in the event of any disposition by an industrial entity of any such industrial development project previously conveyed to such industrial entity prior to the collection by the Commonwealth of incremental taxes in the amount specified in subparagraph 2. of this paragraph, the subject industrial entity shall pay to the Commonwealth an amount equal to the difference between the aggregate incremental taxes collected by the Commonwealth to such date of disposition and the principal amount of such revenue bonds.”
The door is thus opened wide for the Commerce Department, the Governor, and the General Assembly to bestow at will the *822benefits of this type of financial arrangement upon its friends and to deny it to others. These benefits are substantial, and to pass Constitutional muster, eligibility should be determined upon the basis of established standards or classifications so that all who meet the standards may have the benefit of the act, and all who fail to meet the standards will be denied the benefits. Eligibility should not be allowed to depend upon such nonobjective factors as approval of the Commerce Cabinet, the Governor, and the General Assembly.
STEPHENSON, J., joins in this dissent.