Reherman v. Oklahoma Water Resources Bd.

• Decision Date: 05 April 1984
• Docket Number: No. 61890,61890
• Parties: Carl F. REHERMAN, Charles L. Goodwin, Richard L. Weathers, Robert W. Swanagon, and Paul B. Allee, Petitioners, v. OKLAHOMA WATER RESOURCES BOARD, Respondent.
• Court: Oklahoma Supreme Court

Page 1296

679 P.2d 1296

1984 OK 12

Carl F. REHERMAN, Charles L. Goodwin, Richard L. Weathers, Robert W. Swanagon, and Paul B. Allee, Petitioners, v. OKLAHOMA WATER RESOURCES BOARD, Respondent.

No. 61890.

Supreme Court of Oklahoma.

April 5, 1984.

Rehearing Denied May 8, 1984.

Application to assume original jurisdiction pursuant to 82 O.S.Supp.1982, § 1085.37, and Petition for Writ of Prohibition.

JURISDICTION ASSUMED; WRIT OF PROHIBITION GRANTED.

Paul Johanning, Bryan Neal, Oklahoma City, for petitioners.

Michael C. Turpen, Atty. Gen., George R. Barr, Jr., Asst. Atty. Gen., R. Thomas Lay, Gen. Counsel, Dean A. Couch, Oklahoma Water Resources Bd., Oklahoma City, for respondent.

Alma D. WILSON, Justice.

This cause is an original action brought before this Court pursuant to 82 O.S.Supp.1982, § 1085.37, which vests the Supreme Court with exclusive jurisdiction over any litigation involving the validity of any investment certificates issued by the Oklahoma Water Resources Board under 82 O.S.Supp.1982, § 1085.33. Original jurisdiction is assumed.

On January 31, 1984, the respondent, Oklahoma Water Resources Board, passed resolutions accepting bids and authorizing the issuance and sale of investment certificates in the principal amount of $50 million. The investment certificates were denominated "State Loan Program Revenue Bonds, Series 1984." The petitioners challenge the legality and constitutionality of the sale, arguing that the financing proposed by this bond issue is forbidden by Okla.Const., Art. X, §§ 14 and 15.

The statutory scheme authorizing the Water Resources Board to issue investment certificates is found at 82 O.S.1981, §§ 1085.31, et seq., as amended. Proceeds from the investment certificates, which are in the nature of bond revenues, are to be used to provide funds for the development of statewide and local plans for the use and control of water in Oklahoma.

The Legislature's declared public purposes of this Act are:

... to provide or assist in providing for the acquisition, development and utilization of storage and control facilities of the waters and sewage of this state for the use and benefit of the public, and for the conservation and distribution of water for beneficial purposes in or from reservoirs or other storage facilities constructed, or hereafter constructed, modified or enlarged, within Oklahoma....

Section 1085.31, supra. To achieve these purposes, the Legislature authorized the Board to issue by public sale its investment certificates and to use proceeds from these to make loans to eligible public entities ¹ for qualified water projects. 82 O.S.Supp.1982, §§ 1085.33, 1085.36.

Under the terms of Section 1085.33, the investment certificates issued "shall not be an indebtedness of the State or general obligations of the Board, but shall be special obligations payable solely from the revenues derived from the project or such other revenues as may be pledged by the applicant for such purposes...." Section 1085.36 of the same title authorizes the Board to lend to eligible entities sufficient funds to acquire or construct projects.

A revolving fund, continuing and not subject to fiscal year limitations, designated as the "Statewide Water Development Revolving Fund" was created under 82 O.S.Supp.1982, § 1085.40. To establish this fund the Legislature made a one-time appropriation of $25 million of general revenue funds to be used and expended by the Board to accomplish authorized purposes of the Act. See, 1982 Okl.Sess.Laws, Ch. 374, § 34. Additionally, Section 1085.41 authorizes the Board to use monies placed in the revolving fund for security and collateral for investment certificates issued by the Board. ²

According to the official statement of the Water Resources Board relating to the loan program, ³ of the $25 million appropriated to the revolving fund, $7.5 million is to be used to provide a reserve, designated as the Debt Service Reserve Fund, for payment of the principal of and interests on the bonds. The Bond Resolution itself requires that the minimum required balance of the Debt Service Reserve Fund shall not be less than $7.5 million. Provision is made in the Bond Resolution to replenish this reserve fund from monies available in the Revolving Fund. Section 5.09 of the Bond Resolution sets forth details of the Debt Service Reserve Fund and states in part:

There is hereby created and established with the Trustee the Debt Service Reserve Fund. Pursuant to and in accordance with Section 5.04 of this Resolution there shall be deposited immediately upon delivery of and payment for the Bonds from the Statewide Water Development Revolving Fund held by the State Treasurer an amount equal to the Reserve Fund Requirement which shall be the minimum required balance of such Fund. The monies in such Reserve Fund shall be first utilized to create a reserve in the amount of the outstanding principal balance of Local Loans originated to Eligible Entities not rated by Standard & Poor's Corporation. Any monies in excess of the total amount of the outstanding balance of loans originated to Eligible Entities not rated by Standard & Poor's Corporation may be utilized, if required, to pay the principal of loans to eligible Entities rated by Standard & Poor's Corporation following an Event of Default by such rated Eligible Entities. In the event monies are transferred from the Debt Service Reserve Fund to the Debt Service Fund to cover any deficiencies occurring therein, the Trustee shall request the Board to direct the State Treasurer, to the extent monies are available and not encumbered, to transfer from the Statewide Water Development Revolving Fund that amount necessary to cause the sum of the transfer and the balance of the Debt Service Reserve Fund to equal the Reserve Fund Requirement. In the event a depletion of such Fund shall have occurred, as a result of a default in the payment of the debt service requirements of a Local Loan, the Local Bonds Payments of the Eligible Entity causing such depletion shall be adjusted so as to replenish the Fund within twenty-four months of such depletion. Income earned on investment of the monies in such Fund shall be transferred to the Loan Account of the Loan Fund until the total amount deposited in such Loan Account shall equal the original amount of the Bonds, and after such amount has been achieved, then such income shall be transferred to the Board to be deposited into the Grant Account of the Revolving Fund held by the State Treasurer on behalf of the Board unless there shall be a deficiency in the Local Bonds Payments and/or a depletion in the Debt Service Reserve Fund, in either case such investment income shall be utilized to make up such deficiency. The monies in such Fund shall be transferred to the Principal Account and/or the Interest Account of the Debt Service Fund to prevent a default in the payment of principal of and interest on the Bonds as the same becomes due and payable....

Focus of the petitioners' argument is the provision which would allow the Board, in the event of a default of a local entity, to transfer monies from the Debt Service Reserve Fund to the Debt Service Fund to pay the principal of the loan of a defaulting local entity to cover any deficiencies occurring in the Debt Service Fund. The petitioners characterize this transfer, along with the statutory authorization for using all monies in the Revolving Fund as security and collateral for the investment certificates, as a guarantee by the State of the loans to the local entities and an assumption by the State of debts of political subdivisions. The petitioners urge that provisions of both Sections 14 and 15 of Article X of the State Constitution would thereby be violated. We confine today's discussion to the narrow issue of whether the pledging of collateral or security by the Board is violative of Sections 14 and 15.

Section 14 of Article X provides in part:

Except as required by the Enabling Act, the State shall not assume the debt of any county, municipal corporation, or political subdivision of the State, unless such debt shall have been contracted to defend itself in time of war, to repel invasion, or to suppress insurrection.

The relevant portion of Section 15 states:

The credit of the State shall not be given, pledged or loaned to any individual, company, corporation, or association, municipality, or political subdivision of the state....

In deciding the constitutionality of statutes, a legislative act is presumed to be constitutional and will be upheld unless it is clearly, palpably and plainly inconsistent with the Constitution. Whenever possible, statutes should be construed so as to uphold their constitutionality. Kimery v. Public Service Co. of Oklahoma, 622 P.2d 1066 (Okl.1980); Earnest, Inc. v. LeGrand, 621 P.2d 1148 (Okl.1980).

In ascertaining the constitutionality of a legislative act, we do not look to the Constitution to determine whether the Legislature is authorized to do an act but rather to see whether it is prohibited. Draper v. State, 621 P.2d 1142, 1146 (Okl.1980). As we stated in Draper, supra, at 1146:

If there is any doubt as to the Legislature's power to act in any given situation, the doubt should be resolved in favor of the validity of the action taken by the Legislature. Restrictions and limitations upon legislative power are to be construed strictly, and are not to be extended to include matters not covered or implied by the language used. (footnote omitted )

With these rules in mind we turn to the petitioner's constitutional challenges.

Ideally the bond revenue program would be self-liquidating from proceeds and revenues derived from the projects financed. However, the event of default by a local entity on its loan payment to the Board may necessitate the transfer of the appropriated funds to cover deficiencies in the Debt Service Fund. This would allow the Board to avoid being placed in a defaulting posture...