Fent v. OKLAHOMA CAPITOL IMPROVE. AUTH., 92,390.

• Decision Date: 13 July 1999
• Docket Number: No. 92,390.,92,390.
• Citation: 984 P.2d 219,1999 OK 64
• Parties: Jerry R. FENT and Margaret B. Fent, husband and wife, as resident taxpayers and voters of the State of Oklahoma, Petitioners, v. OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY, a body corporate and politic of the State of Oklahoma, Respondent.
• Court: Oklahoma Supreme Court

984 P.2d 219

1999 OK 64

Jerry R. FENT and Margaret B. Fent, husband and wife, as resident taxpayers and voters of the State of Oklahoma, Petitioners, v. OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY, a body corporate and politic of the State of Oklahoma, Respondent.

No. 92,390.

Supreme Court of Oklahoma.

July 13, 1999.

ORDER

¶ 1 The opinion in the above styled and numbered cause was promulgated on June 28, 1999. The petitioners, Jerry R. Fent and Margaret B. Fent (collectively, Fent/petitioners), filed a petition for rehearing on July 2, 1999. Upon consideration of the arguments presented by the petitioners, THE COURT FINDS that the petition for rehearing should be denied.

¶ 2 DONE BY ORDER OF THE SUPREME COURT IN CONFERENCE THIS 13th DAY OF JULY, 1999.

¶ 3 HARGRAVE, V.C.J., HODGES, SIMMS, KAUGER, WATT, JJ. concur.

¶ 4 LAVENDER, OPALA, ALMA WILSON, JJ. dissent.

ALMA WILSON, J., with whom OPALA, J., joins, dissenting to denial of rehearing:

¶ 1 On rehearing, petitioners seek full consideration of the proposed financial guaranty insurance policy to be purchased by the Oklahoma Capitol Improvement Authority in order to enhance the credit of the proposed bonds. Petitioners earlier urged the invalidity of such an insurance policy. The per curiam opinion herein noted the challenge, concluding that such an insurance policy would not violate our constitutional balanced-budget provisions "so long as no term of the policy creates a binding future obligation upon the State, such as agreeing to reimburse the bond insurance company for payments made by it to some or all of the bondholders because of default . . . by virtue of a lack of legislative appropriations."¹ The footnote in the per curiam opinion simply does not resolve the issue created by the proposed credit enhancement insurance policy B its effect upon the entire bond proposal B for which the petitioners seek rehearing.

¶ 2 To enhance the credit of the 1998 series highway bonds approved in Application of Oklahoma Capitol Improvement Authority, 1998 OK 25, 958 P.2d 759, the Oklahoma Capitol Improvement Authority paid a $454,000.00 premium for a financial guaranty insurance policy issued by MBIA Insurance Corporation.² According to the "Tax Certificate" issued by MBIA Insurance Corporation to the Capitol Improvement Authority regarding the 1998 series highway bonds, the insurance company assumed an unconditional obligation to pay bondholders with the expectation that it would not be called upon to make any payment under the policy and, if it did, with the expectation that it would secure reimbursement through legal remedies.³ Under general rules of contract law, the terms of this "Tax Certificate" may be considered as part of the entire agreement relating to the transaction.⁴

¶ 3 In Application of Oklahoma Capitol Improvement Authority, 1998 OK 25, 958 P.2d at 775, the majority of this Court explained that the proposed highway bonds would not be legally enforceable debts of the State because the bondholders would have nothing to recover if future legislative appropriations are not made and therefore the Authority does not have the monies to retire the bonds. The financial guaranty insurance policy might drastically alter this conclusion. The bondholders will have recovery under the unconditional promise of the insurer, and, the insurer expects to have the right to seek reimbursement from the State. It appears that the financial guaranty insurance policy transfers the bondholders' appropriation risk to the State by virtue of the expectation of the insurer of the 1998 series highway bonds that the burden to repay the long-term debt created by the bonds will ultimately fall on the State of Oklahoma. The transfer of the appropriation risk from the bondholders to the State was not contemplated by this Court's approval of the proposed 1998 series highway bond issue.

¶ 4 The state constitution prohibits the creation of debts that are enforceable in the future against the state unless the electorate has given its prior approval of such long-term indebtedness.⁵ The identity of the party B bondholder or insurer B entitled to future enforcement of the debt against the state is without constitutional import. Accordingly, rehearing should be granted for further consideration of the entire bond proposal to determine whether the credit enhancement will in fact place the future appropriation risk of the bonds squarely upon the State of Oklahoma.

¶ 5 The 1998 Annual Report by the Oklahoma State Bond Advisor⁶ lists the State Highway Capitol Improvement Revenue Bonds, along with General Obligation Bonds, as "State of Oklahoma Tax-Supported Bonds" but categorizes the highway bonds as "Contractual Obligation Debts."⁷ The Bond Advisor reports that the State of Oklahoma's Capitol...