Transcript Document

Scott W. Ruby, Attorney
Gust Rosenfeld, P.L.C.
www.gustlaw.com
Introduction.
Bond elections are the
foundation that bond counsel
relies upon to issue an
unqualified opinion that the
bonds have been duly and
validly issued.
I. Definitions
1. What is the Budget Law = the law
applicable to all political subdivisions that
prohibits expenditures for purposes not
included in the budget and prohibits
incurring any debt, obligation or liability
in excess of the amount specified in the
budget. “Pay as you go.”
a) To avoid the budget law express statutory
authority is needed.
I. Definitions
(cont’d)
2. What is a Debt = any financial obligation
that extends beyond the current fiscal
year. “Pay in future years.”
a) Payable only from ad valorem taxes?
b) Normally, debts must be voter approved.
c) Unsecured promise to pay not subject to
annual appropriation is a debt.
I. Definitions
(cont’d)
3. What is a Bond = an interest bearing
certificate issued by a government and
corporations to pay a sum of money on a
date that extends beyond a budget year.
a) Bonds are often secured by a pledge of
collateral.
•
•
•
Taxes
Revenue stream, such as utility revenues
Facilities
b) Alternatives to Bonds.
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Obligations, often an undivided interest in
a trust that holds an agreement to pay
money.
Certificates of Participation, often an
undivided interest in a lease, leasepurchase or purchase agreement.
c) Bonds are a form of debt.
II. Why an Election?
1.
Constitution Requires (Debt Limitations).
a)
Article 7, Section 13 - Questions upon bond
issues or special assessments shall be
submitted to the vote of the real property
tax payers.
•
Bonds secured by ad valorem taxes or
pledges money from a fund that has ad
valorem tax receipts.
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Article 7, Section 13 not only governs
approval of a bond debt, but also a bond’s
purpose.
II. Why an Election?
b)
(cont’d)
Article 9, Section 8 - No political subdivision
shall become indebted in an amount greater
than 6% of the taxable property within the
political subdivision without the assent of a
majority of the property taxpayers voting at
the election.
II. Why an Election?
2.
(cont’d)
Statutes Requires (Budget Limitations).
a)
Title 42, Chapter 17, Article 3 - the budget
law requires political subdivisions to “pay
as you go” for each fiscal year unless
expressly authorized by statue or case law
to enter into a financial obligation that
extends beyond the fiscal year.
•
Examples of authority to extend beyond a
budget year: 1) bonds; 2) lawful long term
obligations; 3) tort judgments; 4) expenses
fixed by law; and 5) ad valorem taxes are
not the source of repayment.
III. Type of Elections
1.
Bond election processes contemplated by
the Constitution and statutory exceptions
to the budget law:
a)
b)
c)
General Obligation Bonds (Title 35)
Revenue (Utility) Bonds (Title 9)
Street and Highway Bonds (Title 48)
III. Type of Elections
2.
(cont’d)
Bonds not requiring an election:
a)
b)
Sales tax bonds (Phoenix Convention
Center Case)
Assessment bonds
III. Type of Elections
3.
(cont’d)
Is a bond election an initiative or
referendum under Title 19, Article 4?
a)
Title 19 provides a manner to refer to the
people of a city or town a legislative
measure or item often called
“propositions.” Bonds are legislative
measures, but the general statute is
supplanted by the specific statutes.
III. Type of Elections
4.
(cont’d)
General Obligation Bond Election –
secured by ad valorem taxes:
a)
b)
c)
d)
e)
f)
Order of the election by council or by
petition signed by 15% of the qualified
electors.
No publication required, but see A.R.S.
Section 9-812.
Election held at the regular voting places
on 1st Tuesday after the 1st Monday in
November.
Voter informational pamphlet required.
Ballot language must include “tax
increase” language.
Authorization does not expire.
III. Type of Elections
5.
(cont’d)
Revenue Bonds – secured by utility
revenues:
a)
b)
c)
d)
e)
f)
Utility bond election for acquisition – 9%
rate limit (A.R.S. Section 9-512).
General utility bond election (A.R.S.
Section 9-522) ordered by council.
Order and call of election must be
published.
No VIP unless tax secured.
Ballot language must state “For/Against
the bonds.”
Authorization does not expire.
III. Type of Elections
6.
(cont’d)
HURF Bonds – secured by highway user
revenues and gas taxes:
a)
b)
c)
d)
e)
Order of the election by council.
Publication of the resolution calling the
election is required (A.R.S. Section 48683).
No VIP.
Ballot language must state “For/Against
the bonds.”
Authorization does not expire.
IV. Preparing the Ballot Question
1.
Scope of Questions - the law prohibits
“log rolling.” Typically, there is no log
rolling if there is a common nexus among
the items presented and the law has not
divided the issues in other contexts.
Preparing the Ballot Question
a)
b)
c)
(cont’d)
Purposes vs. Projects.
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Must be broad enough in scope to cover
all expenditures expected to be made.
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Need enough specificity so the voter
can’t claim “fraud in the inducement.”
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Examples, construct vs. improve;
expand vs. renovate; equipment;
financial costs; lease and acquire.
Dollar sizing.
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Construction estimate.
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Inflation.
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Incidentals.
Amount authorized may exceed the
current debt capacity.
V. Voter Informational Pamphlet
1.
Legal Statues of the Voter Informational
Pamphlet (“VIP”).
a)
A.R.S. Section 35-454 requires that the
purposes be listed in the VIP and limits
the use of bond proceeds to the purposes
stated. The purposes set out in the VIP
may be different than the language in the
ballot.
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Whose purposes are controlling, the ballot
or the VIP?
Voter Informational Pamphlet
b)
c)
(cont’d)
Unless treated as a “contract with the
voters,” the VIP must not be so
inaccurate to constitute fraud in the
inducement.
Recent Cave Creek U.S.D. case held the
specific pamphlet and ballot purposes
were not allowed to be changed.
Voter Informational Pamphlet
2.
(cont’d)
Requirements.
a)
A.R.S. Section 35-454. Not less than 35
days before the election, mail to every
household with a registered voter.
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Sherman v. Tempe – before the election
means before early voting begins.
Voter Informational Pamphlet
b)
(cont’d)
Thirteen Substantive Content
Requirements
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Pro/Con Arguments.
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Must set deadlines to submit at a public
meeting.
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Publish deadline (doesn’t say how to
publish, so use the standard found in
A.R.S. §39-204).
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Governing Body’s argument should be
approved by the governing body (AG
Opinion I08-005).
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Political subdivision may charge a fee for
arguments if it has some statutory
authority to do so (initiative statutes).
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Gratuitous additions in the VIP, such as
“Purpose” or “Why this Election was
called” must be carefully reviewed.
Voter Informational Pamphlet
(cont’d)
c)
Within 30 days after election, submit copy
of the VIP to the Department of Revenue.
d)
All written voter information must state
the tax rate necessary to support the
bonds.
VI. Justice Department Submittal
1. Arizona is covered by Section 5 of the
Voting Rights Act due to past voter
qualification practices.
Justice Department Submittal
(cont’d)
2. Section 5 requires approval of all changes
in standards, practices or procedures
from those used in the last approved
election of the political subdivision.
a) Submit any change affecting voting, even
though it appears minor or indirect or if it
is a return to a prior practice.
Justice Department Submittal
(cont’d)
b) Examples: Changes in qualification or
eligibility to vote; changes concerning
registration, balloting, counting, publicity
or assistance; annexation, district
boundaries, referendum, etc.
Justice Department Submittal
(cont’d)
c) Change in language other than English
(web sites not in Spanish).
d) 60 days for approval will often be after
the election, since the pamphlet needs to
be submitted.
3. Failure to submit and receive approval
could void the election.
VII. Government Resources Influencing
the Outcome of an Election
1.
Objective test, not based on the subjective
state of mind of the actor.
a)
b)
The prohibition applies before a measure
qualifies for the ballot.
The legal test is to do the activities
unambiguously urge a person to vote in a
particular manner.
Government Resources Influencing the
Outcome of an Election (cont’d)
c)
d)
Impartial, content neutral information has
been allowed, but the courts will look to
the style, tenor and timing of the activity.
Normal non-partisan “get out to vote or
register” activities are permitted.
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2000 and 2004 Attorney General Opinion
allows the answering of frequently asked
questions and an analysis of the financial
impact of the ballot measure.
Can’t have pictures of town’s police cars,
etc. - in vote yes campaign material.
Government Resources Influencing the
Outcome of an Election (cont’d)
2.
State and federal prosecution possible
if government funds are used. Federal
case - wire fraud theft is a result of using
program funds from a program receiving
federal funds.
VIII. Bond Committees
1.
Pre-Calling of the Bond Election.
a)
If appointed by the political subdivision
then all their activities are subject to the
same laws as the political subdivision
Council appointed.
VIII. Bond Committees
2.
(cont’d)
Post-Calling of the Bond Election.
a)
Formally disband any Bond Committee.
•
b)
Justice Department will link to the political
subdivision.
Political Action Committees must operate
independent of the political subdivision.
Thank You.
Scott W. Ruby, Esq.
Scott focuses his practice on governmental law. He is bond counsel to more than
50 municipal and school district entities and has served as bond counsel in
connection with the issuance of billions of dollars of bonds. He provides general
legal services to governmental entities and focuses in matters relating to municipal
finance, contract negotiations, development agreements, real estate, budgets and
elections. Mr. Ruby's practice involves community facilities districts, sales tax
reimbursement agreements, development agreements and improvement districts.
He has been recognized in the Public Finance and Corporate Law categories of
The Best Lawyers in America and has been listed in Southwest Super Lawyers
magazine for Bonds/Government Finance.
Scott W. Ruby
Gust Rosenfeld, P.L.C.
One E. Washington Street, Suite 1600
Phoenix, AZ 85004-2553
(602) 257-7432
[email protected]