Opinion ID: 1360563
Heading Depth: 1
Heading Rank: 17

Heading: lease-purchase agreements in other jurisdictions

Text: During oral argument, the State argued that the majority of jurisdictions which have considered constitutional debt limitations have upheld lease-purchase agreements which contain a non-appropriation clause. [7] CG argued that the courts in jurisdictions cited by the State approved lease-purchase agreements based on the inclusion of a non-appropriation clause and because the lease-purchase agreement was between a third party and an independent state corporation (e.g. transit authority). The State responded, arguing that the terminable nature of the obligation based on the inclusion of a non-appropriation clause, rather than the status of the parties, is the determinative factor when assessing constitutional debt restrictions in the context of lease-purchase agreements. The court finds that the independent nature of the state corporation or authority is some evidence that the State is not contracting debt in a lease-purchase agreement. However, the nature or relationship of the contracting parties alone is not the dispositive issue in determining whether an agreement violates the debt restriction in article IX, section 8. The court finds that the reasoning in the cases cited by the State is in accordance with Alaska law. In DeArmond, Walker, and Norene, the Alaska Supreme Court examined the terms of the lease or transaction to determine whether a debt obligation had been created within the constitutional definition of debt. See accord Giessel, 72 N.W.2d at 590. The lease-purchase agreement in the case at bar contains a non-appropriation clause and other terms which limit the recourse of the COP holders to the leased property. [8] The court finds that the lease-purchase agreement does not create debt based on the terms of the agreement, notwithstanding the status of the contracting parties. [9] The court upholds the lease agreement in the case at bar where the lease (1) contains a non-appropriation clause; (2) limits recourse to the leased property; and (3) does not create a long-term obligation binding future generations or Legislatures. [10]