Colleton County v. School Dist.
| Decision Date | 11 December 2006 |
| Docket Number | No. 26240.,26240. |
| Citation | 638 S.E.2d 685 |
| Court | South Carolina Supreme Court |
| Parties | COLLETON COUNTY TAXPAYERS ASSOCIATION, Edisto Beach Property Owners Association, Inc., South Carolina Public Interest Foundation, David Cannon, Joseph Mire, Marion Rizer, and Randy White, individually, and on behalf of all others similarly situated, Plaintiffs, v. The SCHOOL DISTRICT OF COLLETON COUNTY, Superintendent Charles W. Gale, Jr., SCAGO Educational Facilities Corporation for Colleton School District, Miles Crosby, Rachel Farris, Redell Fields, P.A. Pournelle, III, and Wayne Shider, Defendants. |
James G. Carpenter, of the Carpenter Law Firm, of Greenville, for Plaintiffs.
Francenia B. Heizer, Robert L. Widener, and Paul D. Harrill, all of McNair Law Firm, of Columbia, for Defendants.
This original jurisdiction case involves a contractual arrangement entered into by the School District of Colleton County ("the School District") and whether this arrangement is illegal in light of the South Carolina Constitution's limits on the amount of debt a public school district may incur. We hold that the arrangement complies with the relevant constitutional provisions and statutes.
In September 2006, the School District adopted a complicated resolution designed to renovate its existing public school facilities and acquire new public school facilities.1 In its simplest terms, this resolution is an agreement between the School District and the South Carolina Association of Governmental Organizations ("SCAGO").
Under the resolution, SCAGO is obligated to create a non-profit corporation ("the Corporation") which will fund the renovation and construction of the county's public schools. The resolution requires the School District to convey the existing school facilities to the Corporation and to lease the land on which these facilities sit to the Corporation.2 The Corporation will then issue corporate revenue bonds to fund the renovation of the existing facilities and the construction of new school facilities, and will also appoint the School District as the Corporation's agent to oversee the renovation and construction. The resolution further provides that the School District may purchase the renovated or newly constructed facilities by making annual installment payments to the Corporation.3
In August 2006, several Colleton County citizens and taxpayer organizations ("Plaintiffs") sued the School District and the other Defendants (collectively "Defendants") in the circuit court for Colleton County. This suit requested that the court declare that the resolution and its attendant agreements contained numerous violations of the South Carolina Consolidated Procurement Code, see S.C.Code Ann. §§ 11-35-10 to -5270 (Supp. 2005), and that the scheme constituted a "financing agreement" which would impact the amount of the School District's outstanding general obligation debt.4 The Plaintiffs contemporaneously requested a temporary restraining order to stop the School District from issuing general obligation bonds to raise cash for its first installment payment. The circuit court heard this motion the same day the Plaintiffs filed the complaint and denied the request the following day.
At the Defendants' request, this Court removed this case from the circuit court and agreed to hear the matter in the Court's original jurisdiction. Following the grant of original jurisdiction, this Court accepted additional pleadings regarding summary judgment as well as an amended complaint and a supplemental answer. Accordingly, all issues before the Court involve competing requests for declaratory judgments raised either by the unresolved motion for summary judgment or the amended complaint and answer.5
The parties present the following issues for review:
I. Do the resolution and its attendant agreements constitute a "financing agreement," and if so, has the School District exceeded its allowable amount of outstanding general obligation debt?
II. Do the resolution and its attendant agreements violate the terms of two prior referenda?
III. Is the Corporation the agent or alter-ego of the School District and thus subject to the South Carolina Constitution's outstanding general obligation debt limit?
IV. Do the resolution and its attendant agreements violate the School District's procurement code and is the School District's "professional services exception" to its procurement code valid?
V. Did the School District have a "valid public purpose" for its September issuance of general obligation bonds?6
"A suit for declaratory judgment is neither legal nor equitable, but is determined by the nature of the underlying issue." Felts v. Richland County, 303 S.C. 354, 356, 400 S.E.2d 781, 782 (1991). This case primarily involves the interpretation of statutes, which are questions of law. Charleston County Parks & Recreation Comm'n v. Somers, 319 S.C. 65, 67, 459 S.E.2d 841, 843 (1995).
The Plaintiffs argue that the resolution and its attendant agreements constitute a "financing agreement" and that the School District has exceeded its allowable amount of outstanding general obligation debt. We disagree.
S.C.Code Ann. § 11-27-110(B) (Supp.2005) provides that unless a governmental entity obtains voter approval, the entity may not enter into a "financing agreement" if the sum of the "principal balance" of the financing agreement and the amount of the entity's outstanding bonded debt at the time of execution exceeds eight percent of the assessed value of taxable property in the entity's jurisdiction.7 The Code defines a "financing agreement" in section 11-27-110(A)(6), and it is undisputed that the agreement at issue in this case does not qualify as a financing agreement under the version of the statute reproduced in the 2005 Code Supplement.8
Act No. 388 of 2006, however, substantially revised § 11-27-110(A)(6), and it is these revisions that have led to the current dispute. Under revised § 11-27-110(A)(6), a financing agreement includes:
any [contract] entered into after August 31, 2006, pursuant to which installment payments of the purchase price are to be paid by a school district or other political subdivision to a non-profit corporation, political subdivision, or any other entity, from any source other than the issuance of general obligation indebtedness by the school district, in order to finance the acquisition, construction, renovation, or repair of school buildings or other school facilities.
Part V, Section 4, Act No. 388, 2006 S.C. Acts 3133, 3166-68 (emphasis added). The Plaintiffs allege the resolution and its attendant agreements meet this definition.9
As the statute instructs, the application of the revised definition of a "financing agreement" in this case turns on the source of the funds that the School District will use to make installment payments to the Corporation. The Plaintiffs argue that although the School District manifests an intention to use constitutionally permissible amounts of general obligation debt to raise funds for the installment payments, the agreements use permissive terms that do not restrict the School District to using only general obligation debt. To counter, the School District argues that it intends to make installment payments using only funds derived from the issuance of general obligation debt, and that the permissive terms are used exclusively to protect the School District's rights (1) to opt out of making the payments at any time (an event generally referred to as "non-appropriation") and (2) to use other funds that may be appropriated by another entity for this purpose in the future.
A close examination of the scheme here at issue reveals no violations of the relevant constitutional or statutory provisions. The resolution and its attendant agreements specifically provide that the School District is not obligated to make any payments to the Corporation unless the School District appropriates funds for that purpose. Furthermore, unless and until the School District appropriates funds for an installment payment from a source other than the issuance of general obligation indebtedness, this claim is speculative and thus not ripe for judicial review. See Waters v. South Carolina Land Res. Conservation Comm'n, 321 S.C. 219, 227, 467 S.E.2d 913, 917-18 (1996) ().
The crux of the Plaintiffs claim goes to the fund raising/repayment scheme on which they allege the School District plans to embark. To make installment payments to the Corporation, the Plaintiffs allege that the School District plans to use revenues to retire a portion of its outstanding general obligation debt, and then issue new general obligation bonds to raise proceeds for the installment payments. The Plaintiffs assert that this bond retirement/re-issuance scheme will occur on an annual basis, and that this process violates § 11-27-110(A)(6)'s requirement that, to avoid classification as a "financing agreement," the installment payments must come from "the issuance of general obligation indebtedness."
While not entirely unpersuasive, this argument overlooks the inescapable fact that the scheme put in place by the resolution and its attendant agreements complies with the letter of the statute's requirements. Undoubtedly, a school district possesses the authority and ability to use revenue to retire a portion of its general obligation debt. Furthermore, the law clearly supports the proposition that a school district may incur general obligation debt provided the school district remains within the constitutional and statutory limits. We are aware of no authority permitting this Court to regulate a school district's activities of this type absent a violation of a constitutional or...
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