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A steady supply of legal challenges to the prohibition on public expenditures for private purposes continued after the 1908 constitution was ratified. The first concerned a local municipality’s ability to rebuild structures destroyed by fire and it reached the Michigan Supreme Court in 1911. In this case, the city of Petoskey had paid a corporation to rebuild a factory that had burned down. City residents filed suit, and the court held that the payment “was an attempt to use public moneys in furtherance of a private enterprise, which agreement the [city] council could not lawfully make.”[63]
The next challenge occurred in 1915 and tested the prohibition in a new way. At question was whether the Legislature and the city of Detroit could appropriate money and issue construction bonds to the Detroit Museum of Art, which was organized as a private, nonprofit corporation.[64] Apparently, the Legislature attempted to bolster the public purpose of the institution by passing a bill that required one-fourth of its governing board to be held by Detroiters.[65] The court held that museum was a private entity and could not be aided by public expenditures:
The same rule of construction should apply in this case that has been applied to the many attempts made by municipalities in this state to aid railroad and industrial projects. … The case at bar does not differ in principle, but only in degree, from the cases cited. The act creating this corporation was very cleverly devised to diminish the objections which were raised in those cases, and which might be raised under this constitutional provision [Mich Const 1908, Art X, § 12], but the fact still remains that it is a private corporation.[66]
A unique arrangement in Grand Rapids was the next case to challenge the 1908 constitution. The city allowed taxpayers to work off their tax debts. One individual sought to lower his debt by working on various properties owned by a bank. He contracted with the city to do this and then hired labor. When a worker got hurt, the question arose whether this arrangement was proper. Since the beneficiary of this labor was a private bank and public funds (or debt) was involved, the Michigan Supreme Court stated: “Contracts which involve an attempt to use public money for the furtherance of a private enterprise are void.”[67]
