Source: https://oregon.lexroll.com/dept-of-rev-v-bear-creek-valley-san-author-7-otr-520-1978/
Timestamp: 2019-04-23 15:53:27+00:00

Document:
1. ORS 280.100 provides, in effect, that if the directors of a subdivision wish to carry out one of the programs envisioned in ORS 280.050 without a vote of the electors, they may do so by resolution if the project can be financed with funds available to the subdivision within the restrictions of Art XI, § 11 of the Oregon Constitution.
2. The word “financing,” as used in ORS 280.050, involves more than the sequestration of a gift or grant into a fund, and connotes more than simply the face amount of a loan.
3. “Financing,” as used in ORS 280.050, includes an interest rate, term, rate of repayment, and other necessary provisions and conditions of a loan; it involves the creation of a security interest; and it means a loan on terms the borrower can repay.
to manage moneys received under a federal water grant, is not a recognized purpose under ORS 280.050 because the purpose does not involve the “financing” (as that term is used in ORS 280.050) of the cost and the service which the subdivision has the lawful power to perform.
Argument on demurrer held October 18, 1978, in the courtroom of Oregon Tax Court, Salem. Decision on demurrer for plaintiff rendered October 26, 1978.
Ira W. Jones, Senior Assistant Attorney General, Salem, represented plaintiff.
Manville M. Heisel, Medford, represented defendant.
The plaintiff, acting under ORS 294.495 and 310.070 (relating to plaintiff’s supervisory authority with respect to the Local Budget Law, ORS 294.305 to 294.520) has appealed to the Oregon Tax Court pursuant to ORS 294.485(2), seeking a determination that the defendant’s tax levy for the 1978-1979 year, in respect of the tax proposed to be levied for the Bear Creek Valley Sanitary Authority interceptor general obligation bonds, is void because of defendant’s failure to use all budget resources available to it in lieu of a levy of additional taxes. Plaintiff argues that the defendant is seeking, by indirection, to do an act which, under Local Budget Law, it is forbidden to do directly. The factual background can be found in the decision in Bashaw et al v. Bear Creek Valley San. Author., 7 OTR 196 (1977) (appeal pending in the Oregon Supreme Court).
In Bashaw, the court noted that while the defendant’s board of directors has the power and the duty to adopt and administer fiscal policies, the wisdom of such policies is not the question before the court if the Local Budget Law requires a budget and levy procedure contrary to the policy.
Plaintiff has argued that ORS chapter 280 is not applicable under the facts in this case and that the determination of the court for the defendant’s 1977-1978 fiscal year is equally applicable to the 1978-1979 year.
[1.] The novel aspect of Or Laws 1945, ch 453 (now codified as ORS 280.040 to 280.140), which includes ORS 280.100, is the creation of the ten-year serial levy, on vote of the electors, which results in a levy “outside” the restrictions of the Oregon Constitution, Art XI, § 11. Most of the sections within ORS 280.040 to 280.140 relate to the serial levy and the necessary procedures relating to it. And then, in contrast to the use of a serial levy, the legislature inserted a section 5 (now codified as ORS 280.100) which says, in effect, that if the directors of the subdivision wish to carry out one of the programs envisioned in section 3 (ORS 280.050) without a vote of the electors, they may do so under ORS 280.100 by resolution if the project can be financed with funds available to the subdivision within the restrictions of Art XI, § 11. It appears to the court that this election is not available to the defendant under the facts of this suit.
finance an interceptor sewer system. However, the word “financing” (the most significant word used in ORS 280.050 for the purposes of this suit) involves more than the sequestration of a gift or grant into a reserve fund. It connotes more than simply the face amount of a loan and includes an interest rate, the term, the rate of repayment and other necessary provisions and conditions and means a loan on terms that a borrower can repay. Reese v. Walker, 151 N.E.2d 605, 608 (Munic Ct. of Cincinnati, Ohio 1958). It involves the creation of a security interest. Shelton v. Erwin, 472 F.2d 1118, 1120 (8th Cir 1973). Defendant’s financing of the Bear Creek Sewer Interceptor System was accomplished through a vote of the interested electors and the issuance of general obligation bonds (referred to as “BCI bonds”). Because there was a complete financial structure initiated and approved in respect to the project, utilizing a statute separate and apart from ORS 280.100, it follows that the subsequent use of ORS 280.100, invoked by the defendant, must have some other purpose or reason. And, indeed it does. As shown by its language, Resolution No. 78-10 (which relies for its validity on ORS 280.100) has a purpose which does not involve the financing of the Bear Creek Sewer Interceptor System, but is an attempt to sequester grant funds received under the Federal Water Quality Administration Grant No. WPC-ORE-279 and to use these funds for the redemption of the BCI bond issue of February 1, 1970, under the policy of the defendant’s board as expressed in Bashaw, supra. The board’s policy is to redeem bonds and pay off principal and interest under a particular time scheme, not required by the terms of the Federal Water Quality Administration Grant. The board of directors seeks to levy a tax in 1978-1979 which could be paid fully from the “resource” of the granted funds held in reserve, in contravention of the Local Budget Law.
may be used for establishing the financial reserve or special fund permitted by ORS 280.100. As counsel for defendant has pointed out in defendant’s memorandum, at 3, none of the tax levies of the sanitary authority for payment in whole or in part of the principal and interest on the 1970 general obligation bond issue is subject to the Oregon Constitution, Art XI, § 11 (i.e., they lie “outside” the constitutional restrictions). Defendant’s counsel further notes (Memo, 3) that no issue has been raised by the pleading in this matter as to whether the funds as transferred to the BCI bond redemption fund were within the limitation imposed by the constitution and then stipulates: “The purpose of the fund creation was expressly to enable the second phase of financing the interceptor sewer project.” In the court’s view, “the second phase of financing” is strictly a concept of the board of directors of the defendant and does not come within the meaning of the word “financing” as used in ORS 280.050.
IT IS FURTHER ORDERED that the following parts of defendant’s Amended Answer are stricken: page 1, lines 20-26; all of pages 2 and 3; page 4, lines 1-11.

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