697 N.E.2d 1089 (Ohio App. 12 Dist. 1997), CA97-02-036, Butler County Transp. Improvement Dist. v. Tracy
| Judge | BROGAN and FAIN, JJ., concur. |
| Parties | BUTLER COUNTY TRANSPORTATION IMPROVEMENT DISTRICT, Appellee, v. TRACY, Tax Commr., et al., Appellees; Finan et al., Appellants. [*] |
| Docket Number | CA97-02-036,CA97-02-037. |
| Citation | 697 N.E.2d 1089,120 Ohio App.3d 346 |
| Court | Ohio Court of Appeals |
| Date | 23 June 1997 |
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This case is before us as an appeal from the Common Pleas Court of Butler County, Ohio, validating the bonds proposed to be issued by the Butler County Transportation Improvement District, its proposed lease agreement with the Ohio Department of Transportation, and all proceedings in connection therewith.
The multiple defendants-appellants raise as their sole assignment of error the final decision of the trial court and present for review the following issues involved in their single assignment of error:
"1. Whether the Bonds proposed to be issued by the Butler County Transportation Improvement District to fund construction of the Butler Regional Highway create a debt by, or on behalf of, the State of Ohio in violation of Article VIII, Section 3, of the Constitution of Ohio?
"2. Whether the proposed Lease Agreement between the Butler County Transportation Improvement District and the Ohio Department of Transportation relating to the Butler Regional Highway creates a debt by the State of Ohio in violation of Article VIII, Section 3, of the Constitution of Ohio?
"3. Whether the proposed Lease Agreement between the Butler County Transportation Improvement District and the Ohio Department of Transportation relative to the Butler Regional Highway violates Article VIII, Section 5, of the Constitution of Ohio.
"4. Whether the Butler County Transportation Improvement District has the authority to issue revenue bonds because the legislation establishing the authority of a transportation improvement district to issue bonds was adopted in violation of the single-subject rule of Article II, Section 15(D), Constitution of Ohio."
The trial court resolved these issues (except the third, which it did not address) in its thorough and well-reasoned decision which was filed on January 29, 1997, prior to its final appealable order, which was entered on February 10, 1997. We cannot improve upon the reasoning and analysis presented by the Honorable [120 Ohio App.3d 349] Michael J. Sage in his decision, and we therefore adopt as our own the following relevant excerpts from that decision:
"The matter before the court is the Butler County Transportation Improvement District's (hereinafter referred to as 'TID') bond validation suit. The plaintiff desires to have this court determine the authority of the TID to issue and the validity of bonds, the source of payment for the bonds, and all proceedings in connection with the issuance of the bonds to be used for the acquisition and construction of the Butler Regional Highway. For the below stated reasons, the court believes that the plaintiff Butler County Transportation Improvement District is entitled to judgment and validation as sought in its complaint.
"I. Procedural Background
"On October 16, 1996, the Butler County Transportation Improvement District filed suit in the Butler County Court of Common Pleas pursuant to R.C. 133.70(B)(1) seeking validation for bonds in the amount of $136,620,000.00 for the purpose of financing the Butler Regional Highway.
"* * *
"The named defendants in the suit were Roger W. Tracy, Tax Commissioner for the state of Ohio, Kay Rogers, Auditor for Butler
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County, Ohio, all property owners, taxpayers and citizens of the Butler County Transportation Improvement District, and all persons affected or interested in the issuance of the TID revenue bonds by the TID.
"* * *
"On November 7, 1996 an answer was filed by seven homeowners objecting to the issuance of the TID bonds and objecting to the validity of the lease and trust agreements entered into by the TID with the Ohio Department of Transportation (hereinafter referred to as 'ODOT') and other parties. These property owners (hereinafter referred to as 'Smerillo defendants') raised multiple defenses, including challenging the constitutionality of the relevant Revised Code sections dealing with transportation improvement districts along with raising the constitutionality of the lease and trust agreements entered into in this case.
"* * *
"On November 14, 1996, pro se defendant Joseph Ebbing filed an answer and intervened as a defendant.
"On the date of the validation hearing on November 15, 1996, the Smerillo defendants were further joined by an additional thirty-three homeowners, taxpayers and citizens represented by the same attorneys.
"* * * [120 Ohio App.3d 350] "II. Statement of Facts
"The plaintiff in this case is the Butler County Transportation Improvement District. The Butler TID was created by a resolution of the Board of County Commissioners of Butler County, Ohio, through initial resolution of December 7, 1993, and reaffirmed by a subsequent commissioners' resolution dated December 14, 1995. (Plaintiff's Exhibits B and C).
"R.C. 5540.02(A) states:
" 'A transportation improvement district may be created by the board of county commissioners of a county. The board, by resolution, shall determine the structure of the board of trustees of the transportation improvement district it creates by adopting the structure contained either in division (C)(1) or (2) of this section.'
"The purpose of the Butler County TID was to initiate a number of transportation improvement projects in the Butler County area. The most significant project is the construction of the Butler Regional Highway. This highway seeks to connect the City of Hamilton with Interstate 75 by construction of a regional highway.
"Pursuant to its authority in R.C. 5540.03(A)(5) and R.C. 5540.06, the Butler County TID seeks to issue revenue bonds pursuant to R.C. 133.70(A)(1) in the amount of $136,620,000.00 for the purpose of financing a portion of the Butler Regional Highway. This suit was filed to determine the TID's authority to issue these bonds.
"The Butler TID has further entered into an agreement with ODOT in which the TID has agreed to issue and sell its transportation improvement district revenue bonds in order to provide funds to finance the regional highway (Plaintiff's Exhibit D).
"The Butler TID has further entered into a lease/purchase agreement with ODOT as authorized by R.C. 5540.04 and 5540.031 (Plaintiff's Exhibit F). Under the lease agreement, ODOT will make lease payments which the TID will use to pay the principle [sic ] and interest on the bonds.
"The Butler TID further intends to enter into a trust agreement with a corporate trustee for the purpose of administering the bonds and payment of the bonds (Plaintiff's Exhibit E). R.C. 5540.10(A). The Butler County TID has also entered into a contract with Seasongood & Mayer as the underwriter of the bonds. (Plaintiff's Exhibit H). R.C. 5540.03(A).
"Under the agreement, the Butler County TID will issue bonds which will pay for the construction of the regional highway. ODOT will in turn lease the highway from the TID with an agreement obligating it to pay the principle [sic] [120 Ohio App.3d 351] and interest for the bonds subject to the state's biennial limitation, which limits the state only to a two-year obligation for these payments. However, it is the expectation of all parties that every two years the state will continue to pay the
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principle [sic ] and interest on the bonds issued by the Butler TID.
"* * *
"B. Ohio Constitutional Rule on Debt Limitation
"The first objection raised by the Smerillo defendants opposing the validation of the bond suit is that the lease agreement between the Butler TID and ODOT unconstitutionally creates a debt of the state of Ohio not authorized by the Constitution for the payment of the bonds.
"Article VIII, Section 3 of the Ohio Constitution, provides:
" 'Except the debts above specified in Sections 1 and 2 of this Article, no debt whatever shall hereafter be created by or on behalf of the state.'
"Further, Article XII, Section 6 of the Ohio Constitution prohibits the state of Ohio from contracting any debt for purposes of internal improvement. The Smerillo defendants argue that even though the bonds will be issued by the Butler TID, the state is, in fact, creating debt and borrowing money in excess of the constitutional limit because the state has agreed in the lease agreement to make payments sufficient to pay the debt service on the bonds. After reviewing all the agreements and testimony, the court believes the issuance of the bond will not result in the state of Ohio creating a 'debt' as the term is used in Article VIII of the Ohio Constitution.
"The agreement between ODOT and Butler TID dated April 24, 1995, the trust agreement to be entered into between Butler TID and the corporate trustee administering payment, the lease agreement between ODOT and Butler TID, and the bond agreement between the Butler TID and the bond underwriters are explicit in stating that the bonds will be issued solely by the Butler TID and will be the debt of the TID. On page A-2 (Plaintiff's Exhibit E) the trust agreement specifically states in boldfaced type that the bonds are solely to be issued by the Butler TID:
" 'The Series 1996 Bond is a special obligation of the District, and does not represent or constitute a debt of the State...
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