Nicholl v. E-470 Public Highway Authority

• Decision Date: 15 May 1995
• Docket Number: E-470,No. 94SC307,94SC307
• Citation: 896 P.2d 859
• Parties: John J. NICHOLL, in his individual capacity as County Commissioner of the County of Arapahoe; and John J. Nicholl, a resident of the County of Arapahoe, Petitioner, v.PUBLIC HIGHWAY AUTHORITY, a body corporate and political subdivision of the State of Colorado; Margaret N. Carpenter; Nadine Caldwell; Donald Hamstra; James R. Sullivan; Harold E. Kite; Greg Lopez; and Thomas R. Eggert, in their individual official capacities as Directors of thePublic Highway Authority; and The State of Colorado, Respondents.
• Court: Colorado Supreme Court

Page 859

896 P.2d 859

John J. NICHOLL, in his individual capacity as County Commissioner of the County of Arapahoe; and John J. Nicholl, a resident of the County of Arapahoe, Petitioner, v. E-470 PUBLIC HIGHWAY AUTHORITY, a body corporate and political subdivision of the State of Colorado; Margaret N Carpenter; Nadine Caldwell; Donald Hamstra; James R Sullivan; Harold E. Kite; Greg Lopez; and Thomas R Eggert, in their individual official capacities as Directors of the E-470 Public Highway Authority; and The State of Colorado, Respondents.

No. 94SC307.

Supreme Court of Colorado En Banc.

May 15, 1995.

Tallmadge, Wallace, Hahn, Smith & Walsh, P.C., David J. Hahn, John W. Smith, III, Edward J. Walsh, Cynthia A. Calkins, Denver, Susan Broyles, Greenwood Village, for petitioner.

Ankele, Icenogle, Norton & White, P.C., Charles E. Norton, T. Edward Icenogle, Holme, Roberts & Owen, L.L.C., Jeffrey A. Chase, Mary Hurley Stuart, McKenna & Cuneo, Daniel S. Hoffman, Denver, for E-470 Public Highway Authority.

No appearance on behalf of respondents Margaret N. Carpenter, Nadine Caldwell, Donald Hamstra, James R. Sullivan, Harold E. Kite, Greg Lopez, Thomas R. Eggert.

No appearance on behalf of respondent State of Colo.

Kutak Rock, Cassandra G. Sasso, Michael R. Johnson, Craig N. Johnson, Denver, for amici curiae City and County of Denver, Colorado Ass'n of Municipal Utilities, Colorado Ass'n of School Boards, Colorado Community Revitalization Ass'n, Colorado Health Facilities Authority, Colorado Municipal League, Northglenn Urban Renewal Authority, Pueblo County, and Special Dist. Ass'n of Colorado.

Mark Hannen, Castle Rock, for amicus curiae County of Douglas.

Charles H. Richardson, Jr., Michael J. Hyman, Aurora, Becker Stowe Bowles & Lynch, P.C., Daniel C. Lynch, Denver, for amicus curiae City of Aurora.

Daniel, McCain, Brown, Wallace & Brubaker, L.L.C., Margaret R. Brubaker, Brighton, for amicus curiae City of Brighton.

Banta, Hoyt, Greene & Everall, P.C., Jane Brautigam, Englewood, for amicus curiae City of Greenwood Village.

Kevin Maggio, Margaret A. Emerich, Thornton, for amicus curiae City of Thornton.

Justice MULLARKEY delivered the Opinion of the Court.

The Board of County Commissioners of the County of Arapahoe, Colorado, John J. Nicholl, in his individual capacity as County Commissioner of Arapahoe County and as a resident and taxpayer of Arapahoe County, and Jeannie Jolly, in her individual capacity as County Commissioner of Arapahoe County and as a resident and taxpayer of Arapahoe County (collectively "the County") petitioned for certiorari review of Board of County Commissioners v. E-470 Public Highway Authority, 881 P.2d 412 (Colo.App.1994). In E-470 Public Highway Authority, the court of appeals affirmed on different grounds the trial court's judgment against the County and for the defendants. The defendants below and respondents here are the E-470 Public Highway Authority, Margaret N. Carpenter, Nadine Caldwell, Donald Hamstra, James R. Sullivan, Harold E. Kite, Greg Lopez, and Thomas R. Eggert, in their individual capacities as Directors of the E-470 Public Highway Authority, and the State of Colorado (collectively the "Authority").

The court of appeals held that the Authority is an "enterprise" rather than a "district," and therefore not subject to the election requirements of Amendment 1. Id. at 414-15. In the alternative, the court of appeals held that section 4(b) does not apply to the Authority's plan to release $570,000,000 of bond proceeds from pledged accounts to build Segments II and III of the E-470 highway and that section 7(d) does not apply to revenues and expenditures of the Authority to increases in revenue to repay that debt.

We affirm in part and reverse in part the judgment of the court of appeals. We reject the court of appeals' enterprise analysis and hold that the Authority is subject to Amendment 1. We affirm the court of appeals' holding that the debt and revenue expenditures in this case that were approved by the voters prior to the effective date of Amendment 1 are not subject to Amendment 1. However, we also hold that repayment obligations undertaken by the Authority since the effective date of Amendment 1 are subject to its voter approval requirements.

I.

On February 25, 1985, Adams County, Arapahoe County, and Douglas County entered into an agreement (the "Intergovernmental Agreement") to create an agency that would coordinate the "planning, funding and construction" of an approximately 48-mile long "limited access highway" located around the northern, eastern and southern perimeters of the Denver metropolitan area and designated as E-470 (the "E-470 highway"). ¹ On August 1, 1986, the participating governments entered into a related agreement, the E-470 Memorandum of Understanding. Under the Memorandum of Understanding the participating governments agreed among other things that, because the E-470 Agency had no express power to incur debt, Arapahoe County would issue revenue bonds to finance all or some portion of the costs of the E-470 highway. The proceeds from the sale of the bonds were to pay the initial costs of constructing the E-470 highway and to fund related reserves and insurance expenses.

On August 27, 1986, at a special meeting, the Board of County Commissioners of Arapahoe County (the "Arapahoe County Board") adopted the "Master Resolution," which authorized the issuance of the $722,010,000 Arapahoe County, Colorado, Capital Improvement Trust Fund Highway Revenue Bonds, Series 1986A through 1986M (the "Bonds"). In addition to authorizing the issuance of the Bonds, the Master Resolution provided for various funds and accounts and the terms under which the E-470 financing plan would be administered. ² On August 28, 1986, Arapahoe County issued the Bonds pursuant to the County Capital Improvement Trust Fund Financing Act, §§ 30-26-501 to -513, 12A C.R.S. (1986).

The Bonds were issued as the initial step in "setting a framework for future financing" under the Memorandum of Understanding. ³ The sales document prepared for the public offering and sale of the Bonds disclosed that because the E-470 Agency did not have the power to incur debt, the Bonds were issued by Arapahoe County to "pay the costs of acquisition, construction and improvement" of the E-470 highway; the Bonds were payable only from identified revenue sources; and the Bonds were "not in any way to be construed to be a debt or liability of the State of Colorado or any political subdivision thereof...." Until the Bond proceeds were to be disbursed, the net proceeds from the sale of the Bonds was immediately deposited into pledged accounts as set forth in the Pledged Fund Agreement between Arapahoe County and the Authority.

Under the financing scheme of the Pledged Fund Agreement, the Bonds come due at predetermined six-month periods and have a forty-year long-term maturity date. The funds in the pledged accounts are used to purchase government obligations ⁴ that mature and bear interest at rates sufficient to pay the full redemption price and all accrued interest on the Bonds when due. At the end of each six-month period, if the E-470 Agency is not in a position to use Bond proceeds for construction of the E-470 highway, the Bonds are remarketed and a similar pledged account established, thereby creating a "roll-over" of funds.

As each interest rate period for each series of Bonds expires, the remarketing agent for the County resets the interest rate and remarkets the Bonds. The interest rate of the Bonds can be set in one of two ways: the lesser of 15% per annum or a market rate computed on the remarketing date which would remain in effect only until the next six-month remarketing date; or the lesser of 15% or the market rate that would remain in effect until the maturity of the Bonds. During the period of August 1986 through March 1993, the Bonds were remarketed fifteen times. As a result of the remarketing transactions, the E-470 Agency earned approximately $55,000,000 of arbitrage profit (the difference between the interest earned on the allowable investments and the interest on the Bonds paid to bondholders).

At the end of each six-month period, if the E-470 Agency and later its successor, the Authority, were in a position to use the Bond proceeds for construction and other project costs, funds can be released from the pledged accounts if the Authority meets the requirements under the Pledged Fund Agreement. Before receiving any Bond proceeds, the original Pledged Fund Agreement required the E-470 Agency to obtain certification of project approval and to assure that certain bond repayment criteria were satisfied.

Approximately one year after the 1986 Bonds were issued, the General Assembly passed the Public Highway Authority Law. §§ 43-4-501 to -522, 17 C.R.S. (1993) (the "PHA Law"). Section 43-4-502(1)(c) of the PHA Law provides that "public highway authorities be formed to finance, construct, operate, or maintain all or a portion of a beltway or other transportation improvement in a metropolitan region." Section 43-4-506 of the PHA Law also grants certain powers to an authority including the power to issue bonds, assess and collect vehicle registration fees, impose sales and use taxes, and charge tolls for highway use.

In January of 1988, pursuant to the PHA Law, the parties to the Intergovernmental Agreement entered into the "Establishing Contract," in order to establish the current E-470 Public Highway Authority. ⁵ The Establishing Contract provided that the new Authority would be entitled to all rights and privileges, and could assume all obligations and liabilities of the original E-470 Agency, and "shall assume all obligations and liabilities" of Arapahoe County with respect to "bonds previously issued by Arapahoe County for the planning, designing, engineering, acquisition, installation, construction and reconstruction of E-470." However, each constituent...