Chism v. Jefferson County
| Decision Date | 16 August 2006 |
| Docket Number | 1050046. |
| Citation | 954 So.2d 1058 |
| Parties | Paul E. CHISM et al. v. JEFFERSON COUNTY and Travis A. Hulsey, as revenue director of Jefferson County. |
| Court | Alabama Supreme Court |
Sam C. Pointer, Jr., of Lightfoot, Franklin & White, LLC, Birmingham; and Henry E. Simpson and Joseph H. Johnson, Jr., of Adams & Reese/Lange Simpson, LLP, Birmingham, for appellants.
William M. Slaughter, J. Vernon Patrick, Mark E. Ezell, and Mark D. Hess of Haskell, Slaughter, Young & Rediker, LLC, Birmingham; and E.A. Strickland and Jeffrey M. Sewell of Jefferson County Law Department, for appellees Jefferson County, Travis A. Hulsey, as revenue director of Jefferson County, and Jefferson County Commission.
Carl Johnson and Whit Colvin of Bishop, Colvin, Johnson & Kent, Birmingham, for intervenor Jefferson County Board of Education.
Kenneth L. Thomas and Afrika C. Parchman of Thomas, Means, Gillis & Seay, P.C., Birmingham, for intervenor Birmingham Board of Education.
William M. Slaughter, J. Vernon Patrick, Mark E. Ezell, Mark D. Hess, and Michael K.K. Choy of Haskell, Slaughter, Young & Rediker, LLC, Birmingham; and E.A. Strickland and Jeffrey M. Sewell of Jefferson County Law Department for appellees (on rehearing) Jefferson County, Travis A. Hulsey, as revenue director of Jefferson County, and Jefferson County Commission.
Paul E. Chism, on behalf of a class of taxpayers and citizens of Jefferson County, appeals the trial court's summary judgment in favor of Jefferson County, which, in effect, validated a warrant issue and the related tax levy. We affirm.
In 2004, the Jefferson County Commission ("the Commission") determined that the Jefferson County Board of Education and the municipal school boards in Jefferson County had current capital needs in excess of $1 billion. The Commission set out to implement a plan of financing that would provide each local school board in Jefferson County with its proportionate share of $1 billion for the acquisition and construction of currently needed capital projects or the retirement of debt the board had already incurred to finance such projects. On August 24, 2004, the Commission adopted ordinance no. 1764, which levied additional county-wide taxes and pledged those taxes to fund new warrants to be issued by Jefferson County. The net proceeds from the sale of the warrants would be used for capital improvements of the public schools in Jefferson County.
On November 23, 2004, Paul E. Chism and others ("the Chism plaintiffs") sued Jefferson County and its revenue director, Travis A. Hulsey, challenging the validity of ordinance no. 1764. On December 16, 2004, the Commission repealed ordinance no. 1764 and adopted, in its place, ordinance no. 1769. Ordinance no. 1769 levied a county-wide privilege or license tax and a county-wide excise tax ("the education taxes"),2 beginning January 1, 2005, and pledged the revenues from the education taxes to fund warrants to be issued by Jefferson County, the net proceeds of which would be used for capital improvements of the public schools in Jefferson County ("the education warrants").
The County thereafter answered the Chism plaintiffs' complaint, pointing out that ordinance no. 1764 had been repealed and replaced with ordinance no. 1769. The Chism plaintiffs then amended their complaint to challenge ordinance no. 1769. The trial court ordered that the case would proceed as a class action on behalf of all taxpayers and citizens of Jefferson County.
On December 29, 2004, Jefferson County issued the first series of the education warrants, entitled "Limited Obligation School Warrants, Series 2004-A," in the aggregate principal amount of $650,000,000. The Series 2004-A warrants have maturity dates from January 2007 to January 2025 and bear fixed annual interest at rates ranging from 4.75% to 5.5%. On February 2, 2005, Jefferson County completed the issuance of the series of the education warrants by issuing "Limited Obligation School Warrants, Series 2005-A and 2005-B Warrants," in the aggregate principal amount of $400,000,000. The Series 2005-A and 2005-B warrants have maturity dates from January 2007 to January 2027 and bear interest at variable rates.3
Jefferson County has obtained the agreement of each local school board to use the proceeds of the education warrants solely for the acquisition or improvement of school buildings and/or the acquisition of capital equipment or, alternatively, for the retirement of debt previously incurred for such purposes.4 The State superintendent of education has also reviewed and approved the consents of the local school boards in connection with his approval of the issuance of the education warrants.5
To facilitate the financing plan, the Commission entered into a trust indenture with SouthTrust Bank (now Wachovia Bank). The trust indenture provides that all proceeds realized from the sale of the education warrants (less the costs of issuing the warrants) are to be deposited into a special fund ("the grant fund") pending distribution of those proceeds to the local school boards.6
By their terms, the education warrants do not represent "general obligations of the county backed by its full faith and credit," but are "limited obligations" of the County payable solely from the revenues collected under the education taxes. However, in Section 9.1 of the trust indenture, the County has pledged its full faith and credit to pay from its general fund any deficit in the event of an extraordinary mandatory redemption of the education warrants. This extraordinary mandatory redemption will occur if Jefferson County cannot certify on or before October 20, 2006, that no litigation is pending challenging the validity of the education warrants.
If, however, by October 20, 2006, Jefferson County can certify that no litigation challenging the validity of the education warrants is pending, the proceeds of the education warrants remaining in the grant fund will be paid, upon the request of an "authorized county representative," in the form of grants to the following local school boards within Jefferson County: Bessemer, Birmingham, Fairfield, Homewood, Hoover, Jefferson County, Leeds, Midfield, Mountain Brook, Tarrant, and Vestavia Hills, to be used by those boards for the construction or capital improvement of schools or to retire preexisting debt of the boards incurred for capital-improvement projects. The 11 school boards are each to receive a proportionate share of the balance in the grant fund based on the board's "Foundation Program" cost for the 2004-2005 school year, which was based on student attendance/enrollment during the fall of 2003. See Ala.Code 1975, § 16-13-230 et seq. (establishing the Foundation Program Fund).
Jefferson County purports to have authority to levy the education taxes pursuant to Ala.Code 1975, § 40-12-4, "County license tax for school purposes—Authority to levy." The education taxes have been collected since January 1, 2005, and are being deposited into a special escrow account at Wachovia Bank (as successor to SouthTrust) pending the outcome of this litigation. The Chism plaintiffs say that, if the pledge of the education taxes or the education warrants are invalidated, the funds in this escrow account will be distributed to the local school boards according to their respective annual Foundation Program costs. In that event, the County will also repeal the education taxes in their entirety. If the education warrants and the tax pledge are validated, however, the funds and future tax collections will be used to pay debt service on the education warrants.7
Both the Chism plaintiffs and Jefferson County moved for a summary judgment in their favor. The trial court entered a summary judgment in favor of Jefferson County, upholding the validity of ordinance no. 1769 and, in effect, the education warrants and the education taxes. The Chism plaintiffs moved to alter, amend, or vacate the trial court's order entering a summary judgment for Jefferson County; the trial court denied that motion. The Chism plaintiffs appeal.
The Chism plaintiffs first argue that the issuance of the education warrants and the pledge of the education taxes to their repayment constitute debt chargeable against Jefferson County's constitutional debt limit and thus that the issuance of the education warrants will cause Jefferson County to exceed its constitutionally imposed debt limit. "`A court has a duty to avoid constitutional questions unless essential to the proper disposition of the case.'" Lowe v. Fulford, 442 So.2d 29, 33 (Ala.1983) (). "`Generally courts are reluctant to reach constitutional questions, and should not do so, if the merits of the case can be settled on non-constitutional grounds.'" Lowe, 442 So.2d at 33 (). "`No matter how much the parties may desire adjudication of important questions of constitutional law, broad considerations of the appropriate exercise of judicial power prevent[] such determinations unless actually compelled by the litigation before the court.'" Lowe, 442 So.2d at 33 (). Thus, before addressing the constitutional-debt-limit issue, we will consider the two other substantive issues that the Chism plaintiffs raise: (1) whether the proceeds from the education taxes must be distributed to the local school boards based on their respective annual Foundation Program costs or whether Jefferson County...
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