Opinion
No. 101659
Decided: June 14, 2005
ORIGINAL PROCEEDING TO DETERMINE VALIDITY OF PROPOSED STATE FACILITIES REVENUE BONDS
¶ 0 The Oklahoma Capitol Improvement Authority resolved to issue state facilities revenue bonds in the amount of $5 million, pursuant to 73 O.S.Supp. 2004, § 306[ 73-306], enacted in the second regular session of the 49th Oklahoma Legislature in 2004. The Authority filed an application in this Court seeking approval of the proposed bonds, asserting that the Legislature authorized issuance of the bonds to pay for the Oklahoma State Capitol Dome project and that the bonds, when issued, will constitute a self-liquidating obligation.
APPLICATION FOR APPROVAL OF $5,000,000.00 OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY STATE FACILITIES REVENUE BONDS, SERIES 2005 GRANTED.W.A. Drew Edmondson, Attorney General for the State of Oklahoma, Lynn C. Rogers, Assistant Attorney General, Gary M. Bush, FAGIN, BROWN, BUSH, TINNEY KISER, Oklahoma City, Oklahoma, N. Martin Stringer, Keith D. Tracy, McKINNEY STRINGER, Oklahoma City, Oklahoma, for applicant.
Robert T. Keel, Oklahoma City, Oklahoma, for protestant, Jerry R. Fent.
Protestant, Edwin Kessler, pro se, Norman, Oklahoma.
Protestant, Fannie Bates, pro se, Oklahoma City, Oklahoma.
¶ 1 The Oklahoma Capitol Improvement Authority (the Authority), pursuant to 20 O.S. 2001, § 14.1[ 20-14.1], applies to this Court for approval to issue state facilities revenue bonds in the amount of $5 million, pursuant to 73 O.S.Supp. 2004, § 306[ 73-306], enacted in the second regular session of the 49th Oklahoma Legislature in 2004. The bonds are to reimburse the Oklahoma Centennial Commemoration Fund, Inc., a nonprofit 501(c)(3) corporation authorized by 73 O.S. 2001, § 98.4[ 73-98.4], for costs advanced to pay for the dome construction on the State Capitol Building, which was completed in 2002.
Title 73 O.S.Supp. 2004, § 306[ 73-306] provides:
"A. In addition to any other authorization provided by law, the Oklahoma Capitol Improvement Authority is authorized to issue obligations to provide funding for construction costs associated with the dome for the State Capitol building in a total amount not to exceed Five Million Dollars ($5,000,000.00).
"B. The Authority may hold title to the property and improvements until such time as any obligations issued for this purpose are retired or defeased and may lease the property and improvements to the Oklahoma Capitol Complex and Centennial Commemoration Commission. Upon final redemption or defeasance of the obligations created pursuant to this section, title to the property and improvements shall be transferred from the Oklahoma Capitol Improvement Authority, to the Oklahoma Capitol Complex and Centennial Commemoration Commission.
"C. For the purpose of paying the costs for construction of the real property and improvements, and providing funding for the project authorized in subsection A of this section, and for the purpose authorized in subsection D of this section, the Authority is hereby authorized to borrow monies on the credit of the income and revenues to be derived from the leasing of such property and improvements and, in anticipation of the collection of such income and revenues, to issue negotiable obligations in a total amount not to exceed Five Million Dollars ($5,000,000.00) whether issued in one or more series. The Authority is authorized to capitalize interest on the obligations issued pursuant to this section for a period of not to exceed one year from the date of issuance. For subsequent fiscal years, it is the intent of the Legislature to appropriate to the Oklahoma Capitol Complex and Centennial Commemoration Commission sufficient monies to make rental payments for the purpose of retiring the obligations created pursuant to this section. To the extent funds are available from the proceeds of the borrowing authorized by this subsection, the Oklahoma Capitol Improvement Authority shall provide for the payment of professional fees and associated costs related to the project authorized in subsection A of this section.
"D. The Authority may issue obligations in one or more series and in conjunction with other issues of the Authority. The Authority is authorized to hire bond counsel, financial consultants, and such other professionals as it may deem necessary to provide for the efficient sale of the obligations and may utilize a portion of the proceeds of any borrowing to create such reserves as may be deemed necessary and to pay costs associated with the issuance and administration of such obligations.
"E. The obligations authorized under this section may be sold at either competitive or negotiated sale, as determined by the Authority, and in such form and at such prices as may be authorized by the Authority. The Authority may enter into agreements with such credit enhancers and liquidity providers as may be determined necessary to efficiently market the obligations. The obligations may mature and have such provisions for redemption as shall be determined by the Authority, but in no event shall the final maturity of such obligations occur later than thirty (30) years from the first principal maturity date.
"F. Any interest earnings on funds or accounts created for the purposes of this section may be utilized as partial payment of the annual debt service or for the purposes directed by the Authority.
"G. The obligations issued under this section, the transfer thereof and the interest earned on such obligations, including any profit derived from the sale thereof, shall not be subject to taxation of any kind by the State of Oklahoma, or by any county, municipality or political subdivision therein.
"H. The Authority may direct the investment of all monies in any funds or accounts created in connection with the offering of the obligations authorized under this section. Such investments shall be made in a manner consistent with the investment guidelines of the State Treasurer. The Authority may place additional restrictions on the investment of such monies if necessary to enhance the marketability of the obligations.
"I. Insofar as they are not in conflict with the provisions of this section, the provisions of Section 151 et seq. of Title 73 of the Oklahoma Statutes shall apply to this section."
"J. No obligations may be issued pursuant to this section until such obligations have been approved by the Supreme Court pursuant to Section 14.1 of Title 20 of the Oklahoma Statutes.
¶ 2 The 2004 Legislature authorized the Authority to provide permanent financing for the balance due on the Dome Project of $5 million. In 2003, the same $5 million proposal was included in an application for approval of $175 million in bonds. The Court disapproved the bonds because the purpose-of-borrowing requirement of Okla. Const. art. 10, § 16 was not satisfied. In the Matter of the Application of the Oklahoma Capitol Improvement Authority, 2003 OK 59, 80 P.3d 109.
¶ 3 Three protestants challenge the Authority's current application for approval of the bonds. The Authority asserts that the bonds have been properly authorized, are self-liquidating, will not create a debt prohibited under Okla. Const. art. 10, §§ 23, 24 and 25, and that the proceeds are dedicated to a specific public purpose.
¶ 4 Title 73 O.S.Supp. 2004, § 306[ 73-306] provides that the Authority will issue the bonds to provide funding for the construction costs associated with the dome for the State Capitol Building in a total amount, not to exceed $5 million. The Authority will hold title to the property and improvements and will lease the property to the Oklahoma Capitol Complex and Centennial Commemoration Commission (Commission). After final redemption or defeasance of the obligations, title to the property will be transferred to the Commission. The Legislature's stated intention is to appropriate to the Commission sufficient funds to make the rental payments for the purpose of retiring the obligations. In its brief, the Authority asserts that neither appropriations, taxes of any kind nor any other funds or revenues of the State or the Commission are pledged under the lease agreement or otherwise pledged to the payment of the bonds. The Authority continues that the bonds are self-liquidating revenue obligations of the Authority payable solely from the payments to be made under the lease agreement by the Commission and earnings on any accounts created under the bond resolution. The face of the bonds state that the bond is not an indebtedness of the State of Oklahoma, nor an obligation of the State, and that neither the faith and credit nor the taxing power of the State or any political subdivision is pledged or may hereafter be pledged to the payment of the principal or interest on the bonds. (Abstract of Record Exhibit "C")
¶ 5 Pursuant to 20 O.S. 2001, § 14.1[ 20-14.1], this Court examines the obligations to determine if they have been properly authorized in accordance with the law and that when issued, they will constitute valid obligations in accordance with their terms. The issues presented to this Court concerning these bonds are similar, if not identical, to issues the Court has previously examined and decided.
I. CONSTITUTIONALITY
¶ 6 The protestants raise the issue of the constitutionality of using this particular financing plan to pay the debt on the dome. Using lease payments by state agencies to repay bonds financing a state building, which payments are made over a number of years, is not new. In Application of Oklahoma Capitol Improvement Authority, 1960 OK 207, 355 P.2d 1028, the Court found this very financing plan to be constitutional. Repeating the reasoning in that case is unnecessary. This issue was decided forty-five years ago, and no compelling reason has been presented to overrule it. In that period of time, the people of this State have had opportunity to revise the State's Constitution, or enact new statutes prohibiting the practice, either through their representatives in the Legislature or through the powers of initiative and referendum. Okla. Const. art. 5, § 1. They have not done so, and this Court will not overrule this long-standing decision.
II. OKLAHOMA CAPITOL COMPLEX AND CENTENNIAL COMMEMORATION COMMISSION
¶ 7 Protestant Fent argues that the Oklahoma Capitol Complex and Centennial Commemoration Commission is unconstitutional pursuant to Okla. Const. art. 4, § 1 and art. 5, § 23 because legislators sit on its board. The issue before us is not the constitutionality of the Commission. It is the validity of the bond issue. Fent cited In the Matter of the Application of the Oklahoma Dept. of Transportation, 2002 OK 74, 64 P.3d 546, which invalidated bonds because of a violation of the state constitutional separation of powers provision. In that case the Legislative Bond Oversight Commission (LBOC) and the Contingency Review Board (CRB) were part of the note-approval process. The Court held that, in what should have been an executive function, the power wielded by the six legislative members of the LBOC, and the President Pro Tempore of the Senate and the Speaker of the House in the CRB was potentially coercive over the executive branch of government.
¶ 8 In the case now before this Court, the Commission leases the property and in the future may receive title to it. Fent does not show this Court how that affects the validity of the issuance of the bonds. He does not show how the Commission has any part in the bond approval process. He does not reference the four criteria set out in the Department of Transportation case used to decide separation of powers issues. In the Matter of the Application of the Oklahoma Dept. of Transportation, 2002 OK 74, ¶ 13, 64 P.3d at 549. We need not consider propositions of error unsupported by convincing argument or authority, unless it is apparent without further research that they are well taken. S.W. v. Duncan, 2001 OK 39, ¶ 31, 24 P.3d 846, 857.
¶ 9 Fent also argues that the Commission lacks authority for any of the bond transactions proposed. Once again, the Commission will be making lease payments pursuant to 73 O.S.Supp. 2004, § 306[ 73-306]. He fails to cite legal authority showing how this alleged lack of statutory authority affects the validity of the bonds.
III. THE $5 MILLION EXISTING DOME DEBT
¶ 10 Fent states that the $5 million bond issue is to repay an existing debt. He argues that repayment of an existing debt is illegal and unconstitutional. He claims that the bond issue was not previously approved by the Council of Bond Oversight and that it must be pursuant to 62 O.S. 2001, § 695.1[ 62-695.1] and this Court's holding in In Re Oklahoma Dept. of Transportation, 2002 OK 74, 64 P.3d 546. He asserts that the proceeds raised by the bond issue will repay a loan from a private corporation, the Oklahoma Centennial Commemorative Fund, Inc., and that such a loan and repayment of the loan is illegal.
¶ 11 The Authority specifically states that the proceeds of the bonds will be used by the Commission to reimburse the Oklahoma Centennial Commemoration Fund, Inc., (the Foundation) a nonprofit 501(c)(3) corporation authorized by 73 O.S. 2001, § 98.4[ 73-98.4]. The debt already exists. The issue is whether the bonds may be used to repay the Foundation for the previously existing debt. The Authority's brief claims that the Foundation advanced $5 million to the Oklahoma Department of Central Services (DCS) in 2002 for the Dome Project. The Foundation and the Commission raised substantial additional funds from private donations for the Dome Project. A portion of the donations was pledged to and used to pay permanent financing bonds and a portion was used directly for construction costs. All of the funds for the Dome Project were made available to DCS and used for dome construction costs. The Authority argues that the fact that it might appear that a private entity may receive benefits from a transaction does not nullify the public purpose of the project, citing Way v. Grand Lake Association, 1981 OK 70, 365 P.2d 1010, 1016, and Application of Oklahoma Capitol Improvement Authority, 1960 OK 207, 355 P.2d 1028, 1032.
73 O.S. 2001, § 98.4[ 73-98.4] provides:
"A. There is hereby authorized the creation of a not-for-profit corporation to raise funds and to assist in the implementation of the master plan relating to the centennial commemoration of Oklahoma's statehood in 1907.
"B. The board of directors of the corporation authorized in subsection A of this section is authorized to select a name for the corporation. The board shall choose its own chairperson.
"C. After proper incorporation, the not-for-profit corporation is authorized and directed to apply for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code ( 26 U.S.C., Section 501(c)(3)).
"D. In addition to funds received from the general public or other public and private sources, the not-for-profit corporation may receive funds from state agencies at such times and in such amounts as may be appropriated by the Legislature for the Oklahoma centennial or made available to the corporation from state agencies from their sources of revenue.
"E. Costs to underwrite activities related to the commemoration of the Oklahoma centennial may be borne from revenues of the not-for-profit corporation.
"F. Upon the incorporation, the not-for-profit corporation shall be authorized to hire staff and name advisory groups or steering committees as necessary to assist in the centennial commemoration pursuant to the Oklahoma Centennial Act."
¶ 12 The fact that the Dome Project serves a public purpose cannot be questioned. It sits on top of the State's Capitol Building. Public benefits flowing to the State are sufficient to satisfy constitutional provisions that prohibit benefiting private corporations. In Re: Oklahoma Capitol Improvement, 1998 OK 25, ¶ 51, 958 P.2d 759, 775. As the Authority correctly claims, reimbursement of a third party for costs advanced in construction of a public project has previously been approved by the Court. Application of Oklahoma Turnpike Authority, 1950 OK 208, ¶¶ 48, 49, 221 P.2d 795, 807. Fent's attempts to distinguish this case are unpersuasive. He cites cases where the initial debts were illegal, or where the bonds issued were used to pay defaulted debts owed to private creditors.
In re Town of Afton, 1914 OK 537, 144 P. 184 and Excise Board Of Carter County v. Chicago, R.I. P. Ry. Co., 1931 OK 583, 3 P.2d 1037.
Rollow v. City of Ada, 1990 OK 59, 794 P.2d 1211 and State ex rel. Hettel v. Security Nat. Bank Trust Co. in Duncan, 1996 OK 53, 922 P.2d 600.
IV. DUAL OFFICE HOLDING OF J. BLAKE WADE
¶ 13 Fent alleges that the dual office holding of J. Blake Wade with both the Commission and the Foundation may create a conflict of interest and make all transactions null and void. Fent's assertions are based on mere speculation and are therefore insufficient to invalidate the bond issue.
V. MISCELLANEOUS ALLEGATIONS
¶ 14 Other allegations to invalidate the bond issue have been made by the protestants that are irrelevant to validity of the bonds in the case before us or unsupported by convincing argument or authority. S.W. v. Duncan, 2001 OK 39, ¶ 31, 24 P.3d 846, 857.
Complaints include: that the Dome Project was completed outside the Competitive Bidding Act, even though a more recent statute, 74 O.S. 2001, § 4109[ 74-4109], eff. Nov. 1, 1997, authorizes the exemption; and that names inscribed inside the Capitol Dome constitute a violation of the privileges and immunities clause of the State Const. art. 5, § 51, and that those names contain no minority individuals or minority-owned companies; that the Dome will impair homeland security; and that it requires Oklahomans to pay for a frivolity.
VI. CONCLUSION
¶ 15 The proposed bond issue is consistent with Fent v. Oklahoma Capitol Improvement Authority, 1999 OK 64, 984 P.2d 200, and has avoided the objectionable lack of specificity that led to the denial of the bond issue in In Re: Application of Oklahoma Capitol Improvement Authority, 2003 OK 59, 80 P.3d 109. The protestants have advanced no legally or factually supportable reasons to disapprove the application. Accordingly, the application is granted.
Title 20 O.S. 2001, § 14.1[ 20-14.1] provides that this Court shall fix the time for rehearing. Rehearing shall follow Okla.Sup.Ct.R.1.13.
APPLICATION FOR APPROVAL OF $5,000,000.00 OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY STATE FACILITIES REVENUE BONDS, SERIES 2005 GRANTED.
CONCUR: WATT, C.J., WINCHESTER, V.C.J., KAUGER, EDMONDSON, TAYLOR, COLBERT, JJ.
DISSENT: LAVENDER (JOINS OPALA, J.), HARGRAVE, OPALA, JJ.
¶ 1 The court's opinion approves the bond issue proposed by the Oklahoma Capitol Improvement Authority. The indebtedness to be incurred will be used for repayment of funds previously advanced by the Centennial Commemoration Fund, Inc., to defray the costs of constructing a dome upon the Capitol building in Oklahoma City. I am unable to join either in today's decision or in the court's pronouncement of the legal norms that govern this borrowing-of-money transaction.
¶ 2 The State stands absolutely prohibited from accepting money lent without prior authorization through a vote of the electorate. Art. 10 § 25, Okl. Const. A lone court-carved exception of long standing allows state government to dispense with a vote to borrow money for repayment from self-liquidating projects. Application of Oklahoma Capitol Improvement Authority, 1960 OK 207, 355 P.2d 1028.
¶ 3 There was here no antecedent referendum that approved the loan. The bonded indebtedness now before the court will not pass muster under the narrowly circumscribed judicial exception. The dome's use does not generate money. The funds pledged for the debt's repayment (from rental receipts) will be derived solely from anticipated legislative appropriations. The interposition of lease rentals in an effort to insulate the real source of repayment from anticipated legislative appropriations will not erase from the bonded indebtedness the taint that fatally clouds its status as a permissible loan of money. It was neither approved by the electorate, nor does it qualify as a loan to be repaid from funds generated by the project's own revenue stream that stands dedicated to liquidation of an incurred obligation. Art. 10 § 25, Okl. Const.; Application of Oklahoma Capitol Imp.Auth., 1998 OK 25, 958 P.2d 759, 779, 780-781 (Opala, J., dissenting).
¶ 4 I hence recede from today's decision that approves the bond issue and from the court's pronouncement of the law that governs the loan transaction in suit.