IN THE MATTER OF APPLICATION OF OKLAHOMA DEVELOPMENT FINANCE …, 99803

• Decision Date: 22 June 2004
• Docket Number: No. 99803,99803
• Citation: 2004 OK 51,94 P.3d 87
• Parties: IN THE MATTER OF THE APPLICATION OF THE OKLAHOMA DEVELOPMENT FINANCE AUTHORITY FOR APPROVAL OF $2.25 MILLION THE OKLAHOMA DEVELOPMENT FINANCE AUTHORITY PUBLIC FACILITIES PROGRAM TAX APPORTIONMENT BONDS, SERIES 2003 (ARDMORE AIRPARK INCREMENT DISTRICT PROJECT).
• Court: Oklahoma Supreme Court

2004 OK 51

94 P.3d 87

IN THE MATTER OF THE APPLICATION OF THE OKLAHOMA DEVELOPMENT FINANCE AUTHORITY FOR APPROVAL OF $2.25 MILLION THE OKLAHOMA DEVELOPMENT FINANCE AUTHORITY PUBLIC FACILITIES PROGRAM TAX APPORTIONMENT BONDS, SERIES 2003 (ARDMORE AIRPARK INCREMENT DISTRICT PROJECT).

No. 99803

Supreme Court of Oklahoma

Decided: June 22, 2004

Daniel E. McMahan, Oklahoma City, Oklahoma, for Applicant Oklahoma Development Finance Authority.

Jerry R. Fent, Oklahoma City, Oklahoma, Pro Se Respondent.

Lynn C. Rogers, Assistant Attorney General, Oklahoma City, Oklahoma, as Intervenor on Behalf of the State of Oklahoma.

HARGRAVE, J.

¶1 The Oklahoma Development Finance Authority has filed an application asking this Court to assume original jurisdiction and approve $2.25 million in public facilities program tax apportionment bonds to be used for improvements in the Ardmore Airpark Increment District Project. Jerry R. Fent, a resident taxpayer of the State of Oklahoma, filed a protest to the bond issue, arguing as a preliminary matter that the bonds had not been approved by the Council of Bond Oversight, as required by 62 O.S. 2001 § 695.1. By order dated December 15, 2003, we directed the applicant to obtain the approval of the Council of Bond Oversight, and granted protester Jerry R. Fent leave to file a brief within thirty days from the date of such approval. The approval was obtained and the applicant sought and was granted permission to supplement the record to include such approval. The Attorney General was granted leave to intervene and file a brief. Briefs and responses have been filed. Protester Fent's motion to strike the applicant's response is denied.

¶2 The City of Ardmore, Oklahoma created a tax increment district pursuant to the Local Development Act, for public improvements to the Ardmore Airpark. The proposed increment district was eligible for designation as a tax increment district because the project area within which it is located was approved by the Oklahoma Department of Commerce as an enterprise zone pursuant to 62 O.S. § 690.3 et seq., and is therefore an "enterprise area" under the Local Development Act, 62 O.S. 2001 § 853 et seq. Applicant's brief states that the project will be financed from public sources, including apportionment of ad valorem tax increments within the proposed district. The ad valorem taxes to be apportioned are those generated as the result of increases in ad valorem tax revenue occurring with the development of the increment district. Those taxes will be segregated and apportioned to pay public costs associated with the project.¹

¶3 The City Commission of the City of Ardmore, Oklahoma, by Ordinance No. 2637 approved and adopted the Ardmore Tax Increment Finance Project Plan on February 22, 2000. The ordinance authorized the Ardmore Development Authority (ADA), a public trust, to administer the project plan. The ordinance established the Tax Apportionment Fund, declared the apportionment funds to be funds of the ADA, and authorized the ADA to assist in carrying out the project plan. Section 9 of the ordinance provided for the apportionment of ad valorem taxes in the district:

"Section 9: The increment of ad valorem taxes, as defined by the Local Development Act, 62 O.S. Supp. 1992 § 851, et seq. from Increment District Number One, City of Ardmore, Oklahoma, in excess of ad valorem taxes generated by the base assessed value of the increment district, as most recently determined by the County Assessor prior to the effective date of this ordinance, shall be apportioned and the Project Plan (sic) for a period not to exceed 25 years from the effective date of the approval of the Project Plan, or the period required for the payment of the project costs authorized pursuant to Section VIII of the Project Plan, whichever is less." (emphasis added)

¶4 After Ordinance No. 2637 was adopted, this Court handed down its opinion in Oklahoma City Urban Renewal Authority v. Medical Technology and Research Authority of Oklahoma, et al. 2000 OK 23, 4 P.3d 677, which interpreted the Local Development Act and held that an ordinance passed by the City of Oklahoma City, which contained language similar to the above, created a prohibited debt within the meaning of article 10 § 26 of the Oklahoma Constitution. In response to Urban Renewal, the legislature amended the Local Development Act. The post-Urban Renewal amendments to the Local Development Act were enacted by Laws 2000, c.351 § 5.² Title 62 O.S. 2001 § 856(C) specifically provides that it is the intention of the Legislature, in adopting the Act, that no long-term contractual obligation be created by the mere adoption of an ordinance or resolution establishing an increment district, and that an ordinance or resolution establishing an increment district shall constitute a legislative act and may be repealed, modified or amended at any time during the term of the district, by subsequent action of the governing body.³

¶5 In order to comply with Okla. City Urban Renewal and the amended Local Development Act, the City of Ardmore amended Ordinance No. 2637 by the adoption of Ordinance 2700 on December 27, 2001. Ordinance No. 2700 renamed the district the Ardmore Airpark Increment District. Section 9 of the ordinance was amended in its entirety. The previous section had provided that taxes "shall be apportioned" for a period of twenty-five years — the same language that was rejected in Okla. City Urban Renewal. The new section 9 provides:

"Section 9. In accordance with the provisions of the Local Development Act, 62 O.S. Supp. 1999 §850 et seq.⁴ (the "Local Development Act"), increments of ad valorem taxes generated within the Ardmore Airpark Increment District, as such increments are determined and defined by the Local Development Act, are hereby apportioned and set aside from all other ad valorem taxes levied within the Ardmore Airpark Increment District, to be used exclusively for:

i. the payment of "project costs" (as defined in the Local Development Act) incurred in connection with the development, acquisition or construction of those projects listed in the "Ardmore Tax Increment Finance Project Plan" herein the "Project Plan", and

ii. The reimbursement of the City, or any agency thereof which has paid "project costs" from funds which were not increments derived from the Ardmore Airpark Increment District, but only to the extent that sums were actually paid;

and

iii. The payment of principal, interest and premium, if any, on any "tax apportionment bonds or notes: issued pursuant to Section 863 of the Local Development Act and this Ordinance, the proceeds of which are to be used in accordance with clauses (i) or (ii) above.

The apportionment of ad valorem taxes pursuant to this section shall terminate upon the final payment of, or reimbursement for, all "project costs" incurred . . . and the payment of all outstanding principal, accrued interest and premium due on any tax apportionment bonds or notes issued hereunder; provided, however, that in no case shall the apportionment of revenues pursuant to this Ordinance extend beyond fifteen (15) years from the original effective date of this Ordinance, unless such period is modified by subsequent action of the City Commission. In determining this fifteen (15) year period, it is the intention of the City Commission that the Ardmore Airpark Increment District shall not terminate until the increments apportioned during the fifteenth year are actually received by the apportionment Fund . . ." (emphasis added)

¶6 Section 10 of the ordinance was amended to provide:

"During the period of apportionment, and subject to the City's right to subsequently repeal, modify or amend this Ordinance, the increments apportioned hereunder shall be transferred by the respective taxing authorities to the [Fund], which fund shall be held by and be the property of, the Ardmore Development Authority. . . No portion of such increments and no portion of the apportionment Fund shall constitute a part of the general fund of the City of Ardmore."

¶7 Section 12 of the ordinance provides, among other things: ". . . . .In authorizing the irrevocable pledging of such increments [by the ADA], it is the express intention of the City Commission that the Ardmore Airpark Increment District will remain in place until all of the outstanding principal, accrued interest and premium, if any, on such tax apportionment bonds or notes have been paid in full. Notwithstanding such intention, the City, by these provisions, does not waive any right which it has now or in the future, to repeal, modify or amend this Ordinance . . . as provided in Section 856(C) of the Local Development Act. In adopting this Ordinance, the City does not purport to create any contractual obligation extending beyond the City's current or any subsequent fiscal year with regard to the establishment or maintenance of the [District]; or the apportionment of ad valorem tax increments. All tax apportionment bonds or notes issued pursuant to this section shall state that such bond or note is not a debt, general or special, liability or obligation of the City of Ardmore, the State of Oklahoma or any other agency or authority of either, other than the [ADA]. . . . (emphasis added)

¶8 The trustees of the Ardmore Development Authority (ADA) adopted, on January 28, 2002, a resolution authorizing the ADA to issue a tax apportionment note in an amount not to exceed $2,250,000.00 and waiving competitive bidding on the sale of the note. The note was authorized to be sold on a negotiated basis at par to the Oklahoma Development Finance Authority. The Resolution provides that "the Note shall not constitute an obligation of the City of Ardmore, the State of Oklahoma or any political subdivision or agency there, or a personal obligation of the Authority or its trustees. The note shall be a limited obligation of the ADA, payable solely from and secured by the Trust Estate...