Municipal Bldg. Authority of Iron County v. Lowder

• Decision Date: 27 November 1985
• Docket Number: No. 19959,19959
• Citation: 711 P.2d 273
• Parties: MUNICIPAL BUILDING AUTHORITY OF IRON COUNTY, Utah, a Utah non-profit corporation, and Iron County, a body corporate and politic, Plaintiffs and Respondents, v. Dennis LOWDER, individually and as county auditor of Iron County; and Clair Hulet, individually and as county clerk of Iron County, Defendants and Appellants.
• Court: Utah Supreme Court

Page 273

711 P.2d 273

MUNICIPAL BUILDING AUTHORITY OF IRON COUNTY, Utah, a Utah non-profit corporation, and Iron County, a body corporate and politic, Plaintiffs and Respondents, v. Dennis LOWDER, individually and as county auditor of Iron County; and Clair Hulet, individually and as county clerk of Iron County, Defendants and Appellants.

No. 19959.

Supreme Court of Utah.

Nov. 27, 1985.

D. Williams Ronnow, Cedar City, for defendants and appellants.

Scott J. Thorley, Jr., Cedar City, Phillip H. Holm, James E. Spiotto, Darrell R. Larsen, Salt Lake City, for plaintiffs and respondents.

ZIMMERMAN, Justice:

Defendants, the auditor, treasurer and clerk of Iron County, appeal from a district court decision upholding the Utah Municipal Building Authority Act ("the Act") against a variety of constitutional challenges and finding that the actions proposed by the Iron County Board of Commissioners and the Iron County Municipal Building Authority ("the Authority") to finance construction of a new jail facility under that Act are lawful. The district court also rejected a challenge to the actions of the county under the Utah Open and Public Meetings Act. We affirm the district court in all but one respect: we find unlawful the proposal that the county transfer a fee interest in the present jail facility to the Authority without adequate consideration.

This case highlights an issue of growing national importance--the difficulty of providing adequate facilities to handle those for whom society demands confinement. All citizens want the laws rigorously enforced and many would like more severe punishments imposed, but few are willing to pay the inevitable costs. These logically inconsistent positions tax to the utmost the financial creativity of responsible public officials.

Testimony before the district court indicated that the fifty-year-old Iron County jail has not met even minimum state and federal standards of habitability for some time. The physical deterioration of the facility and its outdated design, combined with continual overcrowding, have made it unsanitary and unsafe for inmates and jailers alike. Inmates have often had to be released in order to make room for those convicted of more serious crimes. A judge testifying before the district court referred to the jail as "medieval." At taxpayers' expense, Iron County has been forced to defend numerous lawsuits arising out of these appalling conditions.

Lengthy studies have underscored the need to build an entirely new jail. To finance its construction, the Iron County Commissioners proposed issuing general obligation bonds. Article XIV, section 3 of the Utah Constitution requires that such bonds be approved by the voters because they would be a long-term debt of the county. In December of 1981, a bond election was held and the proposal was defeated, leaving the county in a difficult dilemma. As a practical matter, the new facility had to be built; yet the Iron County taxpayers were unwilling to pay for the facility through the traditional means of financing major capital improvements--general obligation bonds.

The Board of Commissioners devised a plan which would permit a jail to be built without prior voter approval. Article XIV, section 3 requires voter approval of long-term indebtedness only when the indebted entity is a county or a subdivision of a county. ¹ See Lehi City v. Meiling, 87 Utah 237, 256-57, 48 P.2d 530, 539-40 (1935). The commissioners, acting under the Utah Municipal Building Authority Act, U.C.A., 1953, §§ 11-29-1 to -18 (Supp.1985), created the Iron County Building Authority, a quasi-municipal governmental entity designed not to be a "subdivision" of the county and, therefore, to be free from the voter-approval requirement of article XIV, section 3. As required by the Act, the Authority's board of trustees consists of all of the Iron County commissioners. The Authority is empowered to finance and construct a new jail facility and lease it to the county. Because the Authority, not the county, will borrow money for the construction, voter approval of its bond issue will not be necessary, yet a new jail will be made available to the county.

To implement the plan, the county and the Authority propose to enter into several related agreements. For a nominal consideration, the existing jail facility will be transferred to the Authority in fee; in effect, the present jail will be donated to the Authority. That property, now appraised at $124,000, will be traded by the Authority to a private developer for another site upon which the new jail facility will be constructed. Should there be some legal obstacle to this transfer in fee, the county proposes to lease a project site to the Authority. In either event, once the Authority has secured a site, it will issue revenue bonds with a term of twenty years to finance construction, pledging as security its interest in the project site and the facility to be constructed. As part of the same transaction, the county will lease the new jail facility from the Authority for twenty years, on a year-to-year basis. After the twenty years have passed and the bonds are paid in full, the Authority will transfer title to the new facility to the county. The agreements between the county and the Authority provide that in the event the Authority defaults on the bonds before they are paid off, the bond holders may foreclose upon the new jail facility and whatever interest the Authority has in the site, but they will have no recourse against the county or its taxpayers.

On May 10, 1982, the county commissioners authorized the payment of certain project start-up costs. The three defendants--the Iron County auditor, treasurer, and clerk--refused to perform various ministerial duties necessary to finalize the agreements between the county and the Authority and to disburse the authorized funds. They asserted that the Utah Municipal Building Authority Act and the actions the county and the Authority proposed to take pursuant to it were unconstitutional. The county and the Authority immediately filed this action, asking for declaratory relief and seeking a writ of mandamus to compel defendants to carry out their duties.

Before the district court, defendants raised several challenges to the Act and the proposed transaction under the Utah Constitution. These can be summarized as follows: that the financing plan evaded the debt limitations contained in article XIV, sections 3 and 4; that the transaction would result in a loan of the county's credit to the Authority in violation of article VI, section 29; and that the Authority is a special commission prohibited by article VI, section 28. Defendants also raised statutory challenges to the transaction, contending that the transfer of the old jail for inadequate consideration violated sections 17-5-48 and 17-4-3 of the Code, U.C.A., 1953, §§ 17-5-48, 17-4-3 (Supp.1985), and that the county did not give proper public notice of its meetings pursuant to the Utah Open and Public Meetings Act. U.C.A., 1953, §§ 52-4-1 to -9 (1981 ed.).

After an evidentiary hearing, the district court declared the Act constitutional and held that the proposed transaction was permissible. The court authorized a writ of mandamus, although none issued. This appeal followed. Defendants raise, inter alia, the issues presented to the trial court. Because this Court has never before considered a transaction authorized by the Utah Municipal Building Authority Act, extended discussion of the issues is warranted.

We first address defendants' contention that the Act allows counties to evade the constitution's debt limitations. Some background is necessary. Article XIV, section 3 of the Utah Constitution prohibits, inter alia, any county from incurring debt in excess of the current year's tax revenues without prior approval of a majority of the property taxpayers. ² A companion provision, article XIV, section 4, limits the debt a county can incur even with taxpayer approval to two percent of the assessed valuation. These two provisions demonstrate the drafters' concern in 1895 that absent limits on total debt and a requirement that any debt to be paid from future revenues be approved by taxpayers, local governmental units might be fiscally irresponsible. Members of the constitutional convention expressed strong concern about the tendency of local governments to provide present benefits to voters and to pay for them from future revenues. See Note, Constitutional Restrictions Upon Municipal Indebtedness, 1966 Utah L.Rev. 462, 463-64. Sections 3 and 4 of article XIV were a direct response to that concern. Id. at 465.

Historically, local governments, often aided and abetted by the state legislature, have tried to find ways to provide facilities needed by an increasingly urbanized society without being hobbled by the strict limitations in sections 3 and 4 of article XIV. This Court has often been receptive to such efforts. For example, the court-created "special fund doctrine" excludes certain bonds from section 3's election requirement if those bonds are repaid from revenues generated by the facilities constructed with the bond proceeds, rather than from general tax revenues. The underlying theory is that the bond holders have no recourse to the general tax revenues and, therefore, the bonds are not "debt" of the governmental entity in question. See, e.g., Utah Power & Light Co. v. Ogden City, 95 Utah 161, 170-71, 79 P.2d 61, 65 (1938).

Another means of avoiding the debt limitations is the creation of a special district. This Court has held that such a district is exempt from the limitations of sections 3 and 4 of article XIV because it is a quasi-municipal entity rather than a "city, county, town or subdivision thereof." E.g., Lehi City v. Meiling, 87 Utah 237, 256-57, 48 P.2d 530, 539-40 (1935). Despite some attempts by this Court to limit the use of such districts on varying grounds, e.g., Carter v....