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Friday, January 18, 2013

Muni bond hanky-panky gets boost from Oregon Supremes

Yesterday the Oregon Supreme Court ruled that if your local government issues bonds illegally, without a required public vote, there's nothing you can do as a taxpayer or a voter to stop it, because you don't have standing to challenge the illegal action in court. The case arose in Deschutes County, and it involved a challenge to IOUs issued by the Sisters School District in 2007. The school board and its bond counsel svengalis stuck the label "certificates of participation" on the notes, and then said they weren't "bonds" that required a public vote. A resident of the area disagreed and took the school board to court, but now the suit has been tossed out without the judges even looking at whether the notes were "bonds" or not.

The decision of the Supreme Court is here. It was unanimous. It is dangerous. Maybe in the future, an aggrieved voter can figure out a way around it. We certainly hope so.

Comments (17)

So, you're saying the Oregon State Supreme Court is officially sanctioning shady government dealings and deliberate sidesteppings of the law?

"... a way around it."

Legislation conferring standing?

The Clackamas County Board voted to approve bonds for the rail just week or so before a
vote, to make it necessary to have voters decide these type of things.

The CLACKAMAS COUNTY BOARD knew for a fact if they waited for vote, the voters have the legal right to stop these boondoggles.

But the Leftist board decided to forge ahead. Not much of a surprise .

If I read this right, voters can still challenge bonds through petition process. Seems this guy just chose the wrong path to do so.

Okay Jack, I need help with this from you legal types. I can understand why as a resident of Clackamas county I would not have "standing" to litigate but a resident of Deschutes County ? The Deschutes residents taxes / income would be affected by the bonds and could be harmed. Why would the Deschutes resident not have standing?

Sorry about the definition of is is but bonds is bonds. NASD and the SEC would surely prosecute me for selling those without a bond license. Laughable

As I understand it, they didn't have 'standing' because the bonds weren't labeled 'bonds' but something else.

By that reasoning, I should be able to call a contract something else and have it not be binding.

Legislation conferring standing?

Well, sure, but that will never happen. Another thought might be to go for an injunction up front. I don't think the plaintiff did that in this case.

If I read this right, voters can still challenge bonds through petition process.

Not if the IOUs aren't "bonds." The city will just call them "certificates of participation," not "bonds." And it appears you'll never have standing to argue before a judge that they are, in fact, "bonds."

The lawyer failed to include a prayer for relief that would have a practical effect, i.e., not asking for an injunction. See bottom of page 12 of opinion. It is as simple as that.

Search this opinion
on "practical effect"

I almost always enjoy reading Landau's opinions. Even I have a chance to understand them.

I don't understand how the Court denied standing because any damages to the plaintiff were "attenuated and speculative." It would be no different were the IOU a "bond" instead of the "Certificate of Participation," would it?

Is the bottom line here that a Democratically-appointed Court is not going to risk a precedent-setting ruling against a government action that unilaterally and a bit outside convention sets spending and extends debt?

I doubt that this case would have come out differently if only the plaintiff had asked for an injunction. The court went on for page after page about how he suffered no significant harm. And you'll never get a permanent injunction quick enough to stop a bond sale. A temporary restraining order maybe, but that's an extreme longshot. And once the bonds are sold, they're contracts that probably can't be abrogated.

Mr Morgan may have suffered no harm, but that is not the case for the residents of the Sisters School District. This is the same district that for five years classified private Christian school and home school kids as part of their public school enrollment, then had to repay the State School Fund $1.2M. Mr Morgan's other complaint against that district was violations of the Oregon Public Meeting laws with the SSD Executive Sessions during Board meetings. Mr Morgan has a target rich environment in Sisters.

How about throwing the rasals out and getting a new set of rascals?

I'm still trying to understand the rational that he suffered no harm.
Will he not be repaying these illegally issued bonds with his tax dollars.
Isn't that theft ?

He should've bought some bonds, apparently.

Then there's also this, according to the SupremeO's:

Notably, plaintiff did not ask for a declaration that the certificates of participation are invalid. Nor did he request an order that the matter be put to a vote. He asked that the court prohibit the district from making any further payments on the obligations; that is, he requested that the court order the district simply to default on the obligations.

A bridge too far.

"Not if the IOUs aren't "bonds." The city will just call them "certificates of participation," not "bonds." And it appears you'll never have standing to argue before a judge that they are, in fact, "bonds.""

Aight , still looking for Free legal advice. So we are now calling IOU's Certificates of Participation? No offense but sounds like a used car salesman turned timeshare condo developer MUMBO JUMBONESS. Guess what, this Cert. of Part. looks like a Security Instrument to me and would be a regulated security. Smells like a stock to most people I would think. Can Oregon Muni districts issue stock? I do not think so but I did go to public school.

This is an unremarkable decision that is likely in line with decades of jurisprudence on "taxpayer standing."


I realize that most of those who run against incumbent justices are unqualified, but we need to send the message to qualified potential challengers that it isn't impossible.

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