IN RE APPLICATION OF OKL. DEPT. OF TRANSP.

• Decision Date: 09 December 2003
• Docket Number: No. 99,224.,99,224.
• Citation: 2003 OK 105,82 P.3d 1000
• Parties: In the Matter of the APPLICATION OF THE OKLAHOMA DEPARTMENT OF TRANSPORTATION for Approval of Not to Exceed $100 Million Oklahoma Department of Transportation Grant Anticipation Notes, Series 2003.
• Court: Oklahoma Supreme Court

82 P.3d 1000

2003 OK 105

In the Matter of the APPLICATION OF THE OKLAHOMA DEPARTMENT OF TRANSPORTATION for Approval of Not to Exceed $100 Million Oklahoma Department of Transportation Grant Anticipation Notes, Series 2003.

No. 99,224.

Supreme Court of Oklahoma.

December 9, 2003.

Lynne C. Rogers, Assistant Attorney General, Norman N. Hill, General Counsel, Oklahoma Department of Transportation, Gary M. Bush, Oklahoma City, OK, and Thomas G. Hilborne, Jr., Tulsa, OK, for applicant.

Protestant Jerry R. Fent, pro se, Oklahoma City, OK.

Protestant Edwin Kessler, pro se, Norman, OK.

BOUDREAU, Justice.

¶ 1 In 2000, the Legislature authorized the Oklahoma Department of Transportation (ODOT) to issue grant anticipation notes for projects of economic significance.¹ It did so by adding two sentences to 69 O.S.Supp.1997, § 2001(E)(2), which read as follows, "The Department of Transportation may issue Grant Anticipation Notes for projects of economic significance. Such bond issue or issues shall be subject to the unanimous approval of the Contingency Review Board."

¶ 2 In 2002, ODOT proposed to issue a series of grant anticipation notes not to exceed $100 million and sought this Court's approval of the notes. In that original proceeding, we struck down the sentence requiring Contingency Review Board approval in § 2001(E)(2) as contrary to the constitutional separation of powers provision, severed that sentence from the statute and refused to approve issuance of the notes. Application of the Oklahoma Department of Transportation, 2002 OK 74, 64 P.3d 546.

¶ 3 In 2003, ODOT again applied to this Court for approval of proposed grant anticipation notes in an amount not to exceed $100 million.² In support of its application, ODOT asserted that 1) 69 O.S.2001, § 2001(E)(2) authorizes the issuance of the proposed grant anticipation notes; 2) grant anticipation notes are a financing device to fund a federal highway project before the federal highway aid for the project becomes available for expenditure; 3) the principal, interest and costs of the proposed notes will be retired with future receipts of federal highway aid funds; 4) the proposed notes are self-liquidating in that they will be paid from the Note Payment Fund that will be established for the deposit of Federal Transportation Funds; and, 5) the proposed notes will not be backed by the full faith and credit of the State of Oklahoma nor will they constitute a debt of the state.

¶ 4 Two protestants challenged ODOT's application for approval of the proposed notes. Ed Kessler, Common Cause of Oklahoma, and Jerry Fent, an Oklahoma citizen, argued that the proposed notes should not be issued without an antecedent approval by a vote of the people in compliance with Okla. Const., art. 10, §§ 23 and 25. Fent also argued that 1) legislative appointment of two of the members of the Council of Bond Oversight violates the constitutional separation of powers provision and renders the statutory note-approval process invalid; and 2) ODOT plans to secure the notes with financial guaranty insurance which will obligate the state to reimburse the insurer if it is required to pay.³

¶ 5 The parties' contentions present two decisive constitutional issues. The first issue is whether the statutorily-prescribed method of appointment of members to the Council of Bond Oversight contravenes the separation of powers provision in the Okla. Const., art. 4, § 1. The second issue is whether the proposed notes will create a state debt subject to antecedent voter approval pursuant to the Okla. Const., art. 10, §§ 23 and 25.⁴

¶ 6 This proceeding invokes our original jurisdiction.⁵ In original proceedings we examine the record before us to ascertain whether all the critical facts are established. Our exercise of original jurisdiction over issues of fact and law is plenary and non-deferential.⁶

I. Background

¶ 7 On October 7, 2002, the Oklahoma Transportation Commission authorized ODOT to issue grant anticipation notes in an amount not to exceed $100 million.⁷ The Commission resolved that the proposed obligations would be paid with anticipated future federal highway aid funds.⁸ On October 9, 2002, the Council on Bond Oversight approved ODOT's proposal to issue the grant anticipation notes.⁹ On September 25, 2003, the Council on Bond Oversight again approved issuance of the notes.¹⁰ Neither protestant challenged the legality of the procedures of the meetings of the Transportation Commission and the Council on Bond Oversight wherein the issuance of the proposed notes was authorized and approved.

II. Council of Bond Oversight

¶ 8 Pursuant to 62 O.S.2001, § 695.9 of the Oklahoma Bond Oversight and Reform Act, 62 O.S.2001, §§ 695.1, et seq., any obligation proposed to be issued by a state governmental entity must be approved by the Executive Bond Oversight Commission and the Legislative Bond Oversight Commission. However, in Application of the Oklahoma Department of Transportation, 2002 OK 74, 64 P.3d 546, we considered whether legislator/membership of the Legislative Bond Oversight Commission is repugnant to the state constitution. We determined that the legislator/membership of the Legislative Bond Oversight Commission contravened the separation of powers provision in the Okla. Const., art. 4, § 1.

¶ 9 In light of this ruling in Application of the Oklahoma Department of Transportation, supra., the Council of Bond Oversight was established and the power and duties of the Executive and Legislative Bond Oversight Commissions devolved upon the Council pursuant to 62 O.S.2001, § 695.11A. The duties of the Council of Bond Oversight include reviewing obligations proposed to be issued by state entities for compliance with applicable laws and determining whether the purposes of the obligations are for the furtherance and accomplishment of authorized and proper public functions. 62 O.S.2001, § 695.8. The Council of Bond Oversight consists of five nonlegislative members. 62 O.S.2001, § 695.11A. The Director of State Finance is a member.¹¹ Of the other four members, one is appointed by the President Pro Tempore of the Oklahoma Senate; one is appointed by the Speaker of the Oklahoma House of Representatives; and two are appointed by the Governor with the advice and consent of the Oklahoma Senate.

¶ 10 Protestant Jerry Fent challenges the authority of the President Pro Tempore of the Senate and the Speaker of the House of Representatives to make appointments to the Council of Bond Oversight. Fent argues that the Council fulfills an executive function and appointment of its members, even nonlegislative persons, by legislators encroaches upon the executive department of government. Fent's challenge is directed to the appointment authority and not the qualifications of the sitting members of the Council of Bond Oversight.

III. 62 O.S.2001, § 695.11A, on its face, does not violate the separation of powers provision in Okla. Const., art. 4, § 1, by authorizing the President Pro Tempore of the Oklahoma Senate and the Speaker of the Oklahoma House of Representatives to make appointments of nonlegislative persons to the Council of Bond Oversight.

¶ 11 Although the statute authorizing ODOT to issue grant anticipation notes, 69 O.S.2001, § 2001(E)(2), does not mention the Council of Bond Oversight, the Council's approval of the proposed notes is required by the Oklahoma Bond Oversight and Reform Act, supra. Consequently, we must consider Fent's constitutional challenge to the appointment authority prescribed in 62 O.S. 2001, § 695.11A.

¶ 12 Fent's primary argument is that legislative appointments to the Council of Bond Oversight are contrary to the express provisions in our state constitution that the three departments of government shall be separate and distinct and neither shall exercise the power belonging to the other.¹² In determining whether legislative appointments violate our state constitutional separation of powers provision we look to see if the executive department is being subjected, directly or indirectly, to the coercive influence of the legislative department and if there is a significant interference by the legislative department with the executive department. Application of the Oklahoma Department of Transportation, supra. The analysis involves four questions, only three of which are applicable in this matter.¹³

¶ 13 The first question considers whether the power vested in the Council on Bond Oversight is executive or legislative or a blend of the two. This question requires us to evaluate the duties of the Council with respect to obligations of a state entity. Title 62 O.S.2001, §§ 695.8 and 695.9 impose upon the Council the duty to approve proposed obligations after 1) reviewing the obligations for compliance with applicable laws, and 2) determining whether the purpose of the obligations is a proper public function or purpose. In approving proposed obligations, the Council undoubtedly exercises enforcement power, the dominant aspect of which is executive or administrative. However, in its oversight of state indebtedness, the Council exercises a power that has a clear legislative aspect. The Council's exercise of power over state obligations may properly be viewed as a blend of executive and legislative power.

¶ 14 The second question requires us to evaluate the degree of control the Legislature is attempting to exercise by authorizing two legislative appointments to the Council of Bond Oversight. We note that the statute does not permit sitting legislators to be appointed to serve on the Council as was the case in the earlier Application of the Oklahoma Department of Transportation, supra. Accordingly, there is an absence of direct legislative control of the Council. Of course, it may be argued that the President Pro Tempore of the Senate and the Speaker of the House can exert control over the nonlegislative persons they appoint as members of the Council and thus indirectly over the ...