Opinion ID: 1426892
Heading Depth: 1
Heading Rank: 3

Heading: ถ 10 the bonds are self-liquidating because a pre-paid direct, dedicated tax on motor fuels, special fuels, diesel fuel, gasoline, aircraft fuel, and vehicle licenses is specifically earmarked by 73 o.s. supp.1997 ง 168.6 to retire the bonds on an annual basis.

Text: ถ 11 The Legislature has determined that the highway infrastructure in Oklahoma is vital to the health, safety, and welfare of the traveling public and to the economic development of the state. The funding for the improvements to the transportation system made through the issuance of bonds pursuant to 73 O.S. Supp.1997 ง 168.6 come from pre-paid user fees and direct taxes dedicated specifically to the State Transportation Fund and earmarked for the payment of highway bonds on an annual basis. Those taxes derive from direct taxes on motor fuels, [24] special fuels, [25] diesel fuel, [26] gasoline, [27] aircraft fuel, [28] and from vehicle license and registration fees, [29] all of which are assessed annually. The State Transportation Fund also receives a portion of the assessments levied under an environmentally-based indemnity fund. [30] Additionally, there is a newly authorized revenue stream dedicated to the funding of highway improvements โ the Constitutional Reserve Fund (Rainy Day Fund). Ch. 380, ง 1, 1997 Okla. Sess. Laws, provides for an appropriation of Fifty Million Dollars ($50,000,000.00) or so much thereof as may be necessary to perform the duties set forth in Enrolled House Bill No. 1629. [Title 73 O.S. Supp. 1997 ง 168.6 is ง 7 of H.B. 1629.] The duties referred to in Ch. 380, ง 1 are highway improvements. The bonds are, in the most elemental sense, self-liquidating. ถ 12 This combination of taxes and fees creates a revenue stream which is directly related to the construction and maintenance of highways in the self-evident sense that the creation, maintenance โ indeed the very existence โ of the State's highway system is the prerequisite for the generation of the revenue stream. The self-liquidating features of the present proposal compares most favorably with past propositions approved by this Court. ถ 13 Most notably, one's attention is drawn to Application of Oklahoma Capitol Improvement Auth., 1966 OK 6, 410 P.2d 46, and Application of Oklahoma Capitol Improvement Auth., 1960 OK 2097, 355 P.2d 1028, 1031. There, the Court characterized bonds for state office buildings as self-liquidating because the Legislature appropriated to the tenant state agencies monies sufficient to pay the rent which would amortize the bonds. Although no revenues derived from sources outside state appropriations were involved, this Court found that the bonds for state office buildings were self-liquidating. In both cases, self-liquidating entailed putting enough state dollars in one pocket to support the rental payments which had to be made from the other pocket. Contrasted with this standard of revenue generating, this proposal is far superior. Here, pre-paid direct dedicated taxes are earmarked on an annual basis to pay the bonds. Money goes directly into the state pocketbook from reliable, predictable user fees from outside sources rather than from one state entity to the other. ถ 14 In addition to the cases in which this Court has approved bond issues to build state buildings to be retired by state appropriations to state agencies, the facts here closely resemble the construction of turnpikes. In Application of Oklahoma Turnpike Auth., 1950 OK ___, 203 Okla. 335, 221 P.2d 795, 807, bonds were issued to build a toll road. The bonds were to be retired solely from user fees โ the tolls paid by travelers using the turnpike. That is akin to the situation presented here. The bonds will be retired by pre-paid direct taxes on the ultimate consumers who purchase petroleum products through funds earmarked for improvement of Oklahoma's roads. ถ 15 The financing plan presented here has been historically the standard practice, not only in this state, but in other jurisdictions as well. In a case presenting almost identical facts to those arising here, the New York Court of Appeals upheld a transportation funding law, finding that it simply did not create a state debt prohibited by its constitution. In Schulz v. State, 84 N.Y.2d 231, 616 N.Y.S.2d 343, 639 N.E.2d 1140 (N.Y. 1994), the New York court was asked to determine whether a statute authorizing a multibillion dollar bond issue for state and local transportation improvements created a debt within the meaning of constitutional provisions similar to the Okla. Const. art. 10, งง 23, 24 and 25. [31] The project was to be funded by the issuance of bonds with the improvement authority receiving revenue โ subject to annual appropriations โ from taxes and fees. Essentially, the appropriations were to be derived from user fees โ vehicle registration fees, the motor fuel tax, the petroleum and aviation fuel business tax, and miscellaneous highway use taxes. ถ 16 The bonds in Schulz were to be secured by service contracts and sale- and leaseback agreements between the improvement authority and the state. Clear statutory language provided that the bonds issued were not to constitute debts of the State of New York. The Schulz protestants also claimed that the moral obligation bonds would, as a practical matter, coerce future legislatures into making appropriations to avoid damage to the state's credit rating. The Schulz court acknowledged that according to its prior precedents multi-year moral obligation bonds did not constitute a legally enforceable debt, that future legislatures were not (and could not be) obligated to make the appropriations and required the approval of the $20 billion bond issue. Likewise, prior decisions of this Court require that we approve the highway bond proposal. [See, Matter of the Petition of University Hospitals Auth., 1997 OK 162, 953 P.2d 314; Indiana Nat'l Bank v. State Dept. of Human Services, 1993 OK 101, 857 P.2d 53, 57; U.C. Leasing, Inc. v. State ex rel. State Bd. of Public Affairs, 1987 OK 43, 737 P.2d 1191, 1195; Halstead v. McHendry, 1977 OK 131, 566 P.2d 134, 138.] ถ 17 Under Oklahoma's proposal, the Department of Transportation is directed to make payments to the Capitol Improvement Authority from the State Highway Construction and Maintenance Fund [Construction and Maintenance Fund] [32] and from the State Transportation Fund [Transportation Fund]. [33] The Construction and Maintenance Fund consists of all monies received by taxation or otherwise for use on the state highways. [34] Pursuant to 69 O.S.1991 ง 1501.1, [35] the Transportation Fund is composed of taxes on motor fuels and other revenues. The Transportation Fund is specifically earmarked for: ... the construction, repair and maintenance of state highways; for other transportation systems; and for such other transportation purposes as the Legislature may authorize. In Schulz and here, payments are to be made under leasing provisions and the repairs and improvements are to be paid from a tax on the use of state highways. In Oklahoma's case, a portion of the payment will come from a fund specifically set up for that purpose โ the Transportation Fund. Construction, maintenance, and repair of state highways and bridges will be paid for precisely by the parties who utilize them. In New York and in Oklahoma, the bond purchasers are clearly advised that: 1) retirement of the debts created depends on the decision of the Legislature to make sufficient appropriations; 2) there is no pledge of the full faith and credit of the state; and 3) the obligations do not create debts of the state.