Court Opinion

ID: 9627355
Source: CourtListenerOpinion
Date Created: 2023-08-22 08:42:37.562002+00
Date Added: 2024-06-11T18:06:45.041250
License: Public Domain

OP ALA, Justice,
with whom LAVENDER, ALMA WILSON, and WATT, JJ., join, dissenting.
¶ 1 This case is not about the lenders’ willingness to advance money to the State for a loan that may not be enforceable on default as a “debt”. Rather, it is about the State’s constitutional authority to accept — sans an antecedent approval by a vote of the people — the proceeds of a loan that will not pass muster as a “self-liquidating” project’s obligation. while today’s pronouncement gives a green light to the proposed bonded indebtedness, I would declare that the transaction is fraught with a fatal constitutional infirmity.
I.
THE CONSTITUTION OF THE STATE OF OKLAHOMA COMMANDS THAT THE STATE SHALL NOT BORROW WITHOUT AN ANTECEDENT VOTE OF THE PEOPLE.
¶2 The Legislature has authority over the fiscal affairs of the State to the extent its power is exercised within the bounds set by fundamental law. The Constitution of the State of Oklahoma prohibits the State (its agencies and institutions) from borrowing or contracting debts1 without a vote of the people, regardless of whether the duty to repay constitutes merely a moral or a legally' enforceable obligation.
¶ 3 The State cannot contract debts, other than those necessary to repel invasion2, without a vote of the people.3 To contract a debt does not mean necessarily to create (against the State) a legally enforceable obligation. The fundamental law’s concern is not with legally enforceable debts stricto sen-su. In the constitutional sense, “to contract a debt” means simply to make an agreement for borrowing money.4
*780II.
THE PROPOSED OBLIGATION MAY NOT BE HELD TO BE SELF-LIQUIDATING BECAUSE THE BONDS ARE TO BE RETIRED SOLELY FROM LEGISLATIVE APPROPRIATIONS OF STATE REVENUE.
¶4 This court has approved bonds that provide funds — sans an antecedent vote — for acquisition or construction of self-liquidating projects. That kind of obligation, the court held, does not create a debt because the bonds so issued are to be retired solely from revenues derived from the project itself See Application of Bd. of Regents of Univ. of Okla., 195 Okl. 641, 161 P.2d 447 (1945); Application of Bd. of Regents for Okla. Agric. & Mechanical Colleges, 196 Okl. 622, 167 P.2d 883; Baker v. Carter, 165 Okl. 116, 25 P.2d 747 (dormitory bonds to be retired from rents and fees paid by student users); Application of Okla. Turnpike Auth., 203 Okl. 335, 221 P.2d 795 (toll road bonds to be retired from tolls and fees paid by motorist users); Application of Okla. Capitol Improvement Auth., 1960 OK 207, 355 P.2d 1028 (office building bonds to be retired from rents paid by office renters); Application of Okla. Capitol Improvement Auth., 1966 OK 6, 410 P.2d 46 (building bonds to be retired from rents paid by space lessees).
¶ 5 In order for there to be a self-liquidating obligation, four basic criteria must be met. First, all proceeds from the sale of bonds must go toward a defined project. Second, the project must generate funds dedicated solely toward retirement of the bonded indebtedness. Third, the funds must be created by the terms of the obligation, and not from preexisting revenue. Finally, the stream generated by project funds must be placed beyond legislative control and dedicated to the retirement of bonds.5
¶ 6 None of the money to be realized through the sale of the bonds in contest here would be used to acquire or constrict property that is capable of generating funds for retirement of the bonds. The loan to be incurred is not for a true self-liquidating project. The bonds in suit are to be retired solely from legislative appropriations which are to be made from available revenues of the State.6 Unlike toll roads, office buildings, and dormitories, highways dedicated to free public use can neither be leased nor rented unless originally built by, or otherwise placed tinder the charge of, the Oklahoma Turnpike Authority.
¶ 7 The bond obligation proposed here for the court’s approval closely resembles the transaction considered in Application of Okla. Educ. Television Auth., 1954 OK 219, 272 P.2d 1027. There, the bonds tendered were to fund the construction and operation of educational television facilities. They were to be retired with the use of legislative appropriations made from revenue accruing to the Public Building Fund.7 The proposed transaction was held violative of Art. 10 § 23, Okl. Const., because it created a debt against the Public Building Fund of Oklahoma.8
¶ 8 Neither in Application of Okla. Educ. Television Auth. nor in the case at bar did the people vote on the proposed transaction. In both cases (1) the bonds to be approved are to be repaid solely from funds accruing to existing permanent funds of the State, and (2) no funds would be derived from the project itself.
¶ 9 The revenue funds to be used for repayment of the obligation proposed here are already in existence. In a true self-liquidating scenario, the fund source and the stream feeding money for repayment would not have been in existence at all but for the project-generated revenue.
*781¶ 10 The undeniable fact in the scheme used here for repayment is that there is total reliance on legislative appropriations. The project cannot generate any tangible revenue of its own. There is no possibility of repayment without dependence on annual legislative appropriations. This alone prevents the proposed transaction from qualifying as a “self-liquidating” project’s obligation.
¶ 11 In short, the project itself will not generate revenue that would be sufficient to repay the bonds to be issued. For the obligation’s repayment there is nothing more than reliance on legislative appropriations to be made from existing streams of State revenue. Nothing has been specifically committed toward repayment of the obligation to be incurred. The revenue stream designed for this case differs markedly from the criteria critical to the birth of a self-liquidating obligation. The latter model must create a purely circular fund flow — from loan proceeds to construction or acquisition and from project-generated revenue to the obligation’s repayment — with absolutely no need for legislative intervention or for infusion of funds from dehors the project.9
SUMMARY
¶ 12 The proposed transaction is more than a “modern method of financing.” By the provisions of 73 O.S. Supp.1997 § 168.6, the State has indeed been authorized to “contract debt” without an antecedent vote by the people. The commands of Art. 10, §§ 23, 24, and 25, Okl. Const., which prohibit the State from borrowing money for repayment — sans an approval of the electorate — are clearly offended.
¶ 13 The Constitution recognizes but two methods for the State to borrow money: (1) where there has been an antecedent vote of approval by the electorate or (2) where the transaction creates a “self-liquidating” obligation. Neither of these has been employed for this bond issue. I hence dissent from the court’s mischaracterization of the transaction in contest as a constitutionally authorized loan of money.
APPENDIX

REVENUE STREAM

TYPICAL SELF-LIQUIDATING OBLIGATION

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*782
PROPOSED TRANSACTION

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To be used for repayment are available sources other than those generated by the project itself; the quantum of legislative appropriations is uncertain; there is nothing in the authorizing statute that commits some definite percentage of total revenue to the repayment of the bonds. 73 O.S. Supp.1997 § 168.6(E), (G) & (H).

. Art. 10 § 23, Okl. Const., prohibits the State , from creating or authorizing the creation of any debt or obligation, "regardless of its form or the source of money from which it is to be paid”, except as provided in §§ 23, 24, and 25.

. Art. 10 § 24, Okl. Const., authorizes the State to “contract debts to repel invasion, suppress insurrection or to defend the State in war.”

. Art. 10 § 25, Okl. Const., provides that no law authorizing a debt to be contracted shall take effect until the proposed obligation shall "have been submitted to the people and have received a majority of all the votes cast for and against it at such election.” (Emphasis supplied)

.A contract is defined as an agreement to do or not to do a certain thing. 15 O.S.1991 §§ 1-2. Neither the presence of personal liability nor of a legally enforceable obligation is included as a sine qua non of this definition. In explaining the State’s authority to contract debts, the court in State ex. rel. Troy v. Yelle, 36 Wash.2d 192, 217 P.2d 337 (1950), relied on In re Application of State to Issue Bonds to Fund Indebtedness, 33 Okla. 797, 127 P. 1065 (1912). Troy viewed a ‘debt,, in its constitutional sense, as “borrowed money.” Just as it was explained in Troy, so also here, the constitutional provision which limits the State’s power to contract debts is to be treated as a prohibition against entering into an agreement to borrow money.

. See Application of Okla. Capitol Improvement Auth., 1960 OK 207, 355 P.2d 1028, 1031; Application of Okla. Educ. Television Auth., 1954 OK 219, 272 P.2d 1027, 1031.

. See the provisions of 73 O.S. Supp.1997 § 168(E), (H), & (G) (referring to payment from the State highway construction and maintenance fund and from the State transportation fond).

. Application of Okla. Educ. Television Auth., 1954 OK 219, 272 P.2d 1027, 1028.

. Application of Okla. Educ. Television Auth., 1954 OK 219, 272 P.2d 1027, 1035.

. See attached Appendix.