*1 279 v Sessa Macomb Co SESSA MACOMBCOUNTY July 1, 1996, Docket No. 192569.Submitted at Detroit. Decided November 26, 1996, at 9:30 A.M. others, County taxpayers, brought Michael Sessa and all Macomb suit Appeals pursuant against in the Court of to Const County County Building Authority, Macomb and the Macomb chal- lenging issuing obliga- the action of the defendants in limited tax tion bonds to finance the construction of a court and administra- complex county. tive for the In March the Macomb adopted Board of Commissioners a resolution of an intent to issue building authority bonds and announced its intent that the should constructing sell furnishing bonds to cover the cost of budding. The bonds were to be backed the full faith and credit county of the but with the limitation that the source of funds avail- pay able to the bondholders was to be a combination of the county’s payment building authority lease for the use of the complex county’s general budget allocations from the fund generated county’s existing statutory from the 4.2-mill tax rate. The notice, including right petition notice of the of the citizens to for a concerning referendum whether the bonds should be used to project, published May petition finance the was 1995. No for a statutory forty-five-day period. referendum was filed within the On building authority adopted October a resolution author- izing bonds, eventually the sale of the which were delivered to the February 5, plaintiffs underwriters on 1996. The filed their suit in Appeals February 9, 1996, the Court seeking on to have the bonds declared void because of the absence of a vote of the electo- County authorizing rate of Macomb the issuance of the bonds. The summary disposition defendants moved for on the bases that the lawfully plaintiffs brought bonds were issued and that the had not timely their suit manner. Appeals The Court of held: obligation 1. The bonds that were issued were limited tax bonds that, pledge while issued with the full faith and credit, impose obligation on the additional taxes beyond the tax rates or amounts authorized law in order to ful- repayment obligation. fill the App 220 plaintiffs limited tax contend that these 2. The requirement § 31 that of Const are in violation of the the rate authorized in an tax rate above increase approval may imposed without the law or charter not be upon government, because affected local unit of electorate of the *2 damages any judgment that resulted in a of default of those bonds pursu- county, judgment against issue bonds the the could 27A.6097(1) 600.6097(1); that could result in the ant to MCL MSA by levying law or charter. of a tax rate above the rate authorized 6097(1) specifically § is without merit. Because That contention only by municipality possible judgment a makes issuance of bonds any judgment provided,” bonds “unless otherwise the issuance of provi- only upon satisfaction of the under that section can be made 1963, 9, 31, including § art the need for voter sions of Const pay judgment approval would if the tax rate needed to the bonds by rate law or charter. exceed the tax authorized respect repayment obligation 3. Because the with to the nature, respect with the bonds is contractual in the limitation of may repayment the of funds that be looked to for of the source illusory. contained in the bonds that were issued is not bonds only plaintiffs’ brought Although suit was not within one year year bonds, but also within one of the issuance of the bonds, adoption intent to issue the and thus of the resolution of the by one-year period 600.308a(3); not limitation of MCL is barred timely 27A.308a(3), plaintiffs’ MSA action nevertheless was not plaintiffs, being pending although aware of the sale of because the bonds, promptly, did not act but rather waited until after the sale of the bonds to act. prohibit every 9, § 31 does not issuance of 5. Const art by government approval; bonds local units of without voter rather requires approval a issue the issuance it voter of bond where by would result in a tax rate above the tax rate authorized law or 9, § art 31 took effect. Because the charter on the date Const plaintiffs obligation have not shown that these limited tax rate, existing will result in a tax rate above the authorized tax their complaint merit, is without and the defendants are entitled to a
judgment of no cause of action. Judgment of no cáuse of action for the defendants. Markman, J., concurring, although stated that the defendants are judgment these limited entitled to a of no cause action because contrary language bonds are not to the of Const contrary such to the intent of the draft- § art bonds are Amendment, § of the Headlee which added art 31 to ers Sessa Macomb Co
Michigan Constitution, contrary and are to the common under- standing adopting that amendment. Judgment — — — Municipal Corporations Approval 1. Bonds Bonds Voter — Constitutional Law. by Judgment government bonds issued a local unit of in order to sat- isfy judgment against subject provision the local unit are to the Michigan requires approval any Constitution that voter bond sale will result in an increase in the tax rate above that author- adoption ized law or charter on the date of the of the constitu- provision (Const 1963, 31; 600.6097[1]; tional 27A.6097[1]). — — Obligation — 2. Bonds Municipal Corporations Limited Tax Bonds — Approval Voter Constitutional Law. government Bonds issued a local unit of for which the source of repayment budget generated by is limited to funds available from a subject provision authorized tax rate are not Michigan requires approval Constitution that voter bond sale that will result an increase in the tax rate above that author- adoption ized law or charter on the date of the of the constitu- provision (Const 1963, 9, 31). tional — — — Promptness. 3. Bonds Actions Constitutional Law *3 brought pursuant 1963, 9, challenges A suit to Const art 32 that validity by government, of bonds issued a local unit of even if brought applicable one-year period may limitation, within the untimely plaintiff nevertheless be deemed if the does not act promptly plain- and waits until the bonds have been sold where the tiff is aware of the sale of the bonds before the date the bonds are (MCL600.308a[3]; 27A.308a[3]). sold MSA Chapman, plaintiffs. Ronald for the Pollard & Albertson, PC. (by Dennis R. Pollard and Mark K. for the Schwartz), defendants. Saad, P.J.,
Before: and Wahls and JJ. Markman, Saad, P.J. County taxpayers1 Plaintiffs are Macomb original jurisdiction pursuant who invoke this Court’s County Taxpayers Plaintiff Sessa is also chairman of the Macomb County a Association and member of the Macomb Board of Commission- ers, proper standing prosecute taxpayer; Sessa has this action as a his 220 § 32, art and the action of 1963, 9, to Const issuing defendants in limited tax bonds to of a court and administrative finance construction County complex at its seat in Mt. for Macomb Clemens.
FACTS past years, County eight the Macomb Over planned Board of Commissioners for the construction complex court administrative to be located project Mt. The land for the downtown Clemens. acquired, was of certain demolition structures completed space was 1994. On the basis of the needed, the board of commissioners concluded that the actual construction costs should be financed the issuance of bonds. approved §9,
Pursuant to Const County level of ad valorem taxes Macomb for all purposes is fifteen mills. Pursuant to the allocation made the Macomb Tax Allocation Board 211.211; under MCL MSA 7.71, the share of property the 15 mills is 5.19 However, mills. because values have inflation, increased faster than the “General Price Index” clause of the Headlee Amendment, has meant a rollback in the authorized tax rate to 4.7431 mills. 7.52(4). 211.34d; Of its authorized 4.7431 rate, mill tax the board of commissioners has elected purposes. general operating 4.2 mills for organization taxpayers *4 status as head of an would not alone confer standing ignored adjudicating this case. Grosse lie such and has been Legal Twp, App 477, 487; Committee Taxation v Grosse Ile for (1983). v Macomb Co Sessa population economic general basis of On the the board of commission- County, in Macomb growth money to con- the that, borrowing projected ers com- and administrative planned judicial struct the fully amor- could be of construction plex, the cost the period increasing without ten-year a tized over the Accordingly, 4.2 mills. the current above adopted a resolution commissioners board of announced its 23, 1995, and bond on March intent to Authority County Building have the Macomb intent to lease project, actually undertake construction to finance county, and sell bonds complex to the complex. The furnishing the construction and credit of by the full faith would be backed that the reve- specified limitation county, with from a com- would come pay nue to the bondholders county received from the payments of lease bination fund budget general and allocations from 4.2-mill limitation. within its authorized pub- was statutorily required notice of intent The a Daily, newspaper in The Macomb lished MCL County, May 10, on in Macomb circulation advised Macomb 123.958b; MSA This notice 5.301(8b). a referen- right petition citizens of their for whether this means of question dum concerning The clerk should be undertaken. financing within for a referendum petitions calling received for forty-five-day period statutorily allowed 123.958b(3); challenge. such presenting 5.301(8b)(3). authority adopted building
On October of the bonds authorizing the sale a resolution author- of the bonds project. The amount finance the $16,425 for million. Bids exceed was fixed not to ized *5 284 220 Mich 279
Opinion of the Court opened January the bonds were received and on authority building 1996; the made its award to the- January February successful bidder on 1996.On by delivering 1996, the transaction was closed exchange in bonds receipt the amount $12,000,000 in for proceeds. of the loan paid equivalents After the underwriters cash for the open bonds and the bonds were sold on the market, February this action was filed on 9, 1996.
ANALYSIS
designated
The bonds, on
face,
their
are
as “limited
obligation
compared
bonds.” As
with the numer-
public obligation
recognized
ous other forms of
Michigan jurisprudence, including general
obliga-
bonds,
tion
revenue bonds, and tax increment financ-
ing
Advisory Opinion
Constitutionality
bonds,
on
(1988),
1986 PA
93;
NW2d 186
lim-
obligation
ited tax
bonds are structured such that the
repayment
source of
is limited to the
fund
issuing public authority, including
revenues of the
ad
valorem taxes and other unrestricted revenue
Advisory Opinion
Constitutionality
sources. See
on
1976 PA
1976 PA 297, 401 Mich 686, 710-711;
(1977). Significant
plaintiffs’
to
consti-
tutional
to the issuance of bonds to finance
building,
pledge
this
“full faith and
imposes
obligation
credit” in this context,
on the
county
beyond
taxes,
additional
the rates or
amounts authorized
law, in order to fulfill repayment obligation to the bondholders. In this
regard,
Hwy
a bond is a contract, State
Comm’r v
City
Detroit
Controller,
undertaking with spe- or general obligation with ment. This contrasts full faith and bonds backed cial assessment undertaking which municipality, signify credit of a property taxable in the “levy a tax on all [munici- principal and interest on pality] payment for the limitation as to rate or amount and the bonds without which the to all the other taxes addition [munici- levy.” 41.735; may be authorized to pality] Twp, Oak Ridge Royal Pleasant 5.2770(65). *6 672; (1950). Mich that were issued were limited Because the bonds may dispose of the frivolous bonds, we obligation by such limitation is plaintiffs that contention made of the Revised Judi- by 6097(1) ineffectual virtue § RJA 27A.6097(1). MSA Act, 600.6097(1); cature MCL is judgment that if a ren- provides generally 6097(1) § by a any municipality (as after suit against dered body default), legislative a following bondholders may certificates of indebt- municipality issue of that purpose municipality or bonds of that for edness money pay argument This raising judgment. to if such bonds would cause One, fails for two reasons. exceed its authorized rate of taxa- municipality to tion, preclude 31 would issuance § by the electo- prior approval of such bonds without 1984 PA Indeed, RJA as amended § rate. this constitutional limitation effectively incorporates grants that such authorization by explicitly stating “unless issue such bonds otherwise permission to provided.” a challenge, constitutional plaintiffs’
With
regard
and the
the bondholder
bond is a contract between
bondholder,
obligee,
as
public authority, and
issuing
220 any remedy
cannot demand
or enforcement mecha-
obligation greater
nism for fulfillment
than the
undertaking of
Clark,
the contract itself.
Keefe
(1944).
393;
1072;
US
64 S Ct
This
anis
action
to Const
jurisdic-
which invokes this Court’s
right.
tion as of
It is to be noted that this action was
year
only
commenced within one
not
of the issuance
adoption
of the bonds themselves, but also of the
Accordingly,
the resolution of intent to bond.
present
one-year period
action is not barred
308a(3)
limitation established in
of the Revised
600.308a(3);
27A.308a(3).
Act,
Judicature
agree
Nonetheless, we
with defendants that the
preclusive
action is barred
a related
doctrine
Bigger
established in
v Pontiac, 390 Mich 1, 4-5; 210
(1973). Bigger
NW2d 1
dealt with a constitutional
public to the issuance of
brought
that had been
before actual issuance and sale
untimely
*7
There,
of the bonds.
the suit was deemed
because it was not commenced until soon before the
planned date of issuance of the bonds and thus would
prevented
orderly process
adjudication.
have
applicability Bigger
However, is broader than
interpreted by
Supreme
this. As
this Court and the
designed
challenges
Court, the rule is
to deal with
prevent
public improvements
that could
or frustrate
general. Eby Lansing
Light,
in
v
Bd Water &
(1983); Langs
297, 306,
n 10;
However, even if we declined to rule to bar merits, consideration of this action on its plaintiffs’ complaint we would find without merit. In part, § relevant 1963, 9, Const art 31, the constitu- provision plaintiffs rely, provides: tional on which hereby prohibited Units of Local Government are from levying any by tax not authorized law or charter when this increasing section is ratified existing or from the rate of an tax above that rate authorized law or charter when this ratified, approval majority section is without the of a qualified government voting electors of that unit of local thereon. ... apply
The limitations of this section shall not to taxes imposed payment principal for the and interest on bonds payment or other evidence of indebtedness or for the obligations anticipation assessments on contract which prior bonds are issued which were authorized effective date of this amendment. approved
The amendment was at the election pursuant on November 7, 1978, and, 1963, Const § 12, 1, became effective on December 1978. obviously being The bonds involved in this not case— “prior authorized to the effective date of this amend- subject ment”—are thus to. Const art 9, simply suggestion However, there is that County, government,” Macomb as a “unit of local has levied a tax not authorized law or charter on December or that it has increased the rate of tax above the rate authorized law or approval charter on December 1978, without of a majority qualified electors of Macomb voting Contrary plaintiffs’ assumption thereon. government may no unit of local issue bond with- approval out electorate, merely prohibits government units of local from issu- Sessa Macomb Co by Markman, J. require an increase in authorized tax bonds that
ing
repayment obligation. Nothing
*9
rates to fund
prohibits Macomb
1963, art
31§
tax rate of 4.2
existing
increasing
either
from
repay
mills
mills to
to the authorized rate of 4.7431
simply from
such bonds out
repaying
these bonds or
levies. Smith
revenues within
of
Twp,
v Scio
386;
Accordingly, action and to tax their costs. It is so of no cause of ordered. J.,
Wahls,
concurred.
(concurring).
I concur in the conclu
J.
Markman,
However,
my
in
majority.
judg
reached
sion
the limited tax
ment,
governments
use
local
contrary to the
bond is
general obligation (LTGO)
of the Headlee Amendment and
intent of the drafters
contrary
understanding
people
to the common
“grew
it.1 The Headlee Amendment
out of
adopting
place
designed
‘tax revolt’ and was
spirit
revenues.”
on state and local
specific limitations
ltgo
specifically,
regard
bond
“the evidence is overwhelm-
With
to the
loophole
supporters
ing
close the
of the amendment
intended to
that the
taxpayers
governments
obligate
and then
allowed local
approval.”
repay
without voter
on them to
the debt —and do so
taxes
(Limited
Obligation Bonds)
Minority Report
L.
of Patrick
Tax General
1994),
Anderson,
(September
Report of Headlee Blue Ribbon Commission
minority
part
p
of what were otherwise
57. While this observation was
majority disagreed
aspect
views,
with this
that the
there is no indication
observations.
of Commissioner Anderson’s
App
220 Mich
by Markman,
J.
School Dist v State Bd Ed, 98 Mich
Waterford
(1980);
658, 663;
The as to a written consti- give adopt- tution is to to the intent effect ing laws, it. In the case of all written it is the intent of the *10 law-giver that is to be enforced. But this intent is to be found in the plain instrument itself .... “Where a law is unambiguous, expressed and whether it be or terms, legislature limited should be intended to mean they plainly expressed what consequently have [sic] [Cooley, room is left for construction.” Constitutional Limi- (Little, Company, p tations Brown 1868), 55.] Because I believe that the bond, unlike the ltgo scope “full faith and credit” bond, falls outside the of plain language § of art 9, 31, I would constitutionally permissible hold that it is a fiscal separately device. At the time, same I write because I also concur with the Headlee Blue Ribbon Commis- edges Michigan sion that bonds skirt the ltgo of the Constitution:
Ltgo do, instances, bonds in most have the same or greater impact approved on the total tax burden as voter Ltgo public bonds .... bonds do inhibit awareness of the fiscal issuing situation of the unit such bonds and can v Macomb Co Sessa J. Markman, projects would to finance that
encourage units to incur debt public support. not command
[*] [*] [*] Ltgo of the Headlee inhibit the full realization bonds . . . restricting power gov- goal Amendment’s overall the concurrence of the increase taxes without ernment (Sep- [Report Blue Ribbon Commission of Headlee voters. 1994), pp tember 55-56.] Amendment Ltgo post-Headlee largely bonds are carry local governments to allow designed device basis, a “business as usual” fiscal affairs on out their of the Headlee Amend- by the constraints unimpeded “explo- has been an It no accident that there ment. is years in the immedi- use of LTGO sion” in the Headlee Amend- adoption of the ately following bonds now estimates that such ment, with current percent of both represent approximately eighty pp 53, bond sales. Id. at and amount of local number drafters, aspect the critical by its As envisioned local requirement Amendment is its that the Headlee directly obtain the assent governments a fiscal course of action embarking upon before public sector increase the involvement would private sec- the involvement of the expense at the Headlee 25, 31; Report tor. Const §§ Ltgo this pp bonds transform Commission, 22-39. the elec- effectively postponing the vote of process by pub- commitment of preceding from a time torate *11 have after such resources lic resources time sharply alter The result is to already committed. been procedure under the an essential significance people vote of the direct Headlee Amendment —the to tax increases. respect with 220 by Markman, J. In the case of the issuance of a “full faith and requires credit” bond, an express people concerning vote whether addi- public ought tional resources to be allocated for a project. straightforward bonded The vote is unambiguously presents the electorate with a clear government. choice about the direction of The LTGO pre-expenditure bond, however, obviates this vote; expenditure instead, the bond is issued and the people. Only pay- absent a vote of the later, occurs as principal ments on the due, interest become are people finally implica- confronted with the fiscal project. By juncture, tions of the bonded this there is longer outstanding decision to be made people project already pro- about the itself; it has approval. ceeded without their direct Precisely because bonds need to be issued for their financing, projects typically bonded are substantial capital projects that necessitate hard decisions about priorities. projects ordinarily fiscal Such cannot be through tinkering accommodated minor with other components budget. Either decisions about priorities point such fiscal will occur at a when the meaningful opportunity approve have a or disapprove project of the bonded or such decisions only practical options will occur when the are to substantially expenditures already reduce contained budget in the or to increase taxes. The LTGO bond point making moves the of decision from the former to the latter. In addition, the vote mandated Headlee Amendment does not then occur the con- support text whether to additional taxes for the project bonded is too late for that because the —it project already has been initiated or even com- *12 293 Sessa v Macomb Co by Markman, J.- Concurrence pleted in whether to rather it occurs the context —but support taxes for and often cru- additional police protection. public or fire services, such as cial any longer vote as There is no direct envisioned concerning spending Amendment the the Headlee actually precipitated potential that the commitment tax increase. impose an
The effect of the LTGO bond is to inexo pressure upon people to accommodate local rable public Michigan spending as if the Constitution had never been amended Amendment. Headlee expenditures, upon basing than levels of availa Rather Amendment, revenues, ble as intended the Headlee effectively the upon bond bases levels of revenues ltgo expenditures. By require vitiating actual preceding vote ment that the cast direct spending important commitment, an element of the Headlee Amendment has been eroded.2 peo- enacting Amendment,
In the Headlee “we the ple” expressed personal the view that their freedoms implicated by public high spending of were levels by abridgments taxation in the same manner as speech free and unreasonable searches and seizures. provision interpreting enforcing In judicial Amendment, the executive and Headlee government recognize should it is branches of 2 majority’s Pontiac, join Bigger I also do not in the discussion of 390 1, 4-5; compel (1973). That would be more Mich discussion ling, my judgment, point plaintiffs if it had set forth at what would have been authorized to the action of the board commissioners junc plaintiffs 32. Had filed suit at earlier under Const yet justi ture, doubtlessly argued that the suit was not it would have been premature. preceded Bigger, the Headlee Amend ciable or was which effectively express provision ment, be understood to vitiate cannot opportunity affording an individual the to sue for its vio the constitution majority only. lation. I concur with the substantive conclusions by Markman, J. respect entitled to commensurate with that owed longer-standing provisions Michigan Constitution.