Sessa v. Macomb County, Docket No. 192569

CourtCourt of Appeal of Michigan (US)
Writing for the CourtSAAD; WAHLS; MARKMAN
Citation559 N.W.2d 70,220 Mich.App. 279
PartiesMichael SESSA, Taxpayer and Chairman of Macomb County Taxpayers Association, Eric Landers, Walter Graves, Ron Keine and Norman Brillhart, Plaintiffs, v. COUNTY OF MACOMB and Macomb County Building Authority, Defendants.
Decision Date26 November 1996
Docket NumberDocket No. 192569

Page 70

559 N.W.2d 70
220 Mich.App. 279
Michael SESSA, Taxpayer and Chairman of Macomb County
Taxpayers Association, Eric Landers, Walter
Graves, Ron Keine and Norman Brillhart, Plaintiffs,
v.
COUNTY OF MACOMB and Macomb County Building Authority, Defendants.
Docket No. 192569.
Court of Appeals of Michigan.
Submitted July 1, 1996, at Detroit.
Decided Nov. 26, 1996, at 9:30 a.m.
Released for Publication Feb. 25, 1997.

Page 71

[220 Mich.App. 281] Ronald Chapman, Troy, for plaintiffs.

Pollard & Albertson, P.C. by Dennis R. Pollard and Mark K. Schwartz, Bloomfield Hills, for defendants.

Before SAAD, P.J., and WAHLS and MARKMAN, JJ.

SAAD, Presiding Judge.

Plaintiffs are Macomb County taxpayers 1 who invoke this Court's original jurisdiction pursuant [220 Mich.App. 282] to Const.1963, art. 9, § 32, and challenge the action of defendants in issuing limited tax obligation bonds to finance construction of a court and administrative complex for Macomb County at its county seat in Mt. Clemens.

FACTS

Over the past eight years, the Macomb County Board of Commissioners planned for the construction of a court and administrative complex to be located in downtown Mt. Clemens. The land for the project was acquired, and demolition of certain structures was completed by 1994. On the basis of the space needed, the board of commissioners concluded that the actual construction costs should be financed by the issuance of bonds.

Pursuant to Const.1963, art. 9, § 6, the approved level of ad valorem taxes in Macomb County for all purposes is fifteen mills. Pursuant to the allocation made by the Macomb County Tax Allocation Board under M.C.L. § 211.211; M.S.A. § 7.71, the county's share of the 15 mills is 5.19 mills. However, because property values have increased faster than general inflation, the "General Price Index" clause of the Headlee Amendment, Const.1963, art. 9, § 31, has meant a rollback in the authorized tax rate to 4.7431 mills. M.C.L. § 211.34d; M.S.A. § 7.52(4). Of its authorized 4.7431 mill tax rate, the board of commissioners has elected to levy 4.2 mills for general operating purposes.

[220 Mich.App. 283] On the basis of general economic and population growth in Macomb County, the board of commissioners projected that, by borrowing the money to construct the planned judicial and administrative complex, the cost of construction could be fully amortized over a ten-year period without increasing the tax levy above the current 4.2 mills. Accordingly, the board of commissioners adopted a resolution of intent to bond on March 23, 1995, and announced its intent to have the Macomb County Building Authority actually undertake construction of the project, lease the complex to the county, and sell bonds to finance the construction and furnishing of the complex. The bonds would be backed by the full faith and credit of the county, with the specified limitation that the revenue to pay the bondholders would come from a combination of lease payments received from the county and allocations from the county's general fund budget within its authorized 4.2-mill limitation.

The statutorily required notice of intent was published in The Macomb Daily, a newspaper of general circulation in Macomb County, on May 10, 1995. M.C.L. *72s 123.958b; M.S.A. § 5.301(8b). This notice advised Macomb County citizens of their right to petition for a referendum concerning the question whether this means of financing should be undertaken. The county clerk received no petitions calling for a referendum within the statutorily allowed forty-five-day period for presenting such a challenge. M.C.L. § 123.958b(3); M.S.A. § 5.301(8b)(3).

On October 6, 1995, the building authority adopted a resolution authorizing the sale of the bonds to finance the project. The amount of the bonds authorized was fixed not to exceed $16.425 million. Bids for [220 Mich.App. 284] the bonds were received and opened on January 23, 1996; the building authority made its award to the successful bidder on January 25, 1996. On February 5, 1996, the transaction was closed by delivering the bonds in the amount of $12,000,000 in exchange for receipt of the loan proceeds.

After the underwriters paid cash equivalents for the bonds and the bonds were sold on the open market, this action was filed on February 9, 1996.

ANALYSIS

The bonds, on their face, are designated as "limited tax obligation bonds." As compared with the numerous other forms of public obligation bonds recognized in Michigan jurisprudence, including general obligation bonds, revenue bonds, and tax increment financing bonds, Advisory Opinion on Constitutionality of 1986 PA 281, 430 Mich. 93, 422 N.W.2d 186 (1988), limited tax obligation bonds are structured such that the source of repayment is limited to the general fund revenues of the issuing public authority, including ad valorem taxes and other unrestricted revenue sources. See Advisory Opinion on Constitutionality of 1976 PA 295, 1976 PA 297, 401 Mich. 686, 710-711, 259 N.W.2d 129 (1977). Significant to plaintiffs' constitutional challenge to the issuance of bonds to finance this building, the pledge of the county's "full faith and credit" in this context, imposes no obligation on the county to levy additional taxes, beyond the rates or amounts authorized by law, in order to fulfill the repayment obligation to the bondholders. In this regard, a bond is a contract, State Hwy. Comm'r v. Detroit City Controller, 331 Mich. 337, 49 N.W.2d 318 (1951), and in this contract the county has limited its [220 Mich.App. 285] undertaking with respect to the obligation of repayment. This contrasts with general obligation or special assessment bonds backed by the full faith and credit of a municipality, which signify an undertaking to "levy a tax on all taxable property in the [municipality] for the payment of principal and interest on the bonds without limitation as to rate or amount and in addition to all the other taxes which the [municipality] may be authorized to levy." M.C.L. § 41.735; M.S.A. § 5.2770(65). Pleasant Ridge v. Royal Oak Twp., 328 Mich. 672, 44 N.W.2d 333 (1950).

Because the bonds that were issued were limited tax obligation bonds, we may dispose of the frivolous contention made by plaintiffs that such limitation is ineffectual by virtue of § 6097(1) of the Revised Judicature Act, M.C.L. § 600.6097(1); M.S.A. § 27A.6097(1). RJA § 6097(1) provides generally that if a judgment is rendered against any municipality (as after a suit by bondholders following a default), the legislative body of that municipality may issue certificates of indebtedness or bonds of that municipality for the purpose of raising money to pay the judgment. This argument fails for two reasons. One, if such bonds would cause the municipality to exceed its authorized rate of taxation, Const.1963, art. 9, § 31 would preclude issuance of such bonds without prior approval by the electorate. Indeed, RJA § 6097, as amended by 1984 P.A. 393, effectively incorporates this constitutional limitation by explicitly stating that such authorization grants permission to issue such bonds "unless otherwise provided."

With regard to plaintiffs' constitutional challenge, a bond is a contract between the bondholder and the issuing public authority, and a bondholder, as obligee, [220 Mich.App. 286] cannot demand any remedy or enforcement mechanism for fulfillment of the obligation greater than the undertaking of the contract itself. Keefe v. Clark, 322 U.S. 393, 64 S.Ct. 1072, 88 L.Ed. 1346 (1944). Accordingly, plaintiffs' argument that the limitation of the county's repayment obligation to existing general revenues is illusory is incorrect, and, for this

Page 73

reason, its challenge must fail under art. 9, § 32.

This is an original action brought pursuant to Const.1963, art. 9, § 32, which invokes this Court's jurisdiction as of...

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3 practice notes
  • Bylinski v. City of Allen Park, No. Civ.A. 98-71289.
    • United States
    • U.S. District Court — Eastern District of Michigan
    • 9 d2 Junho d2 1998
    ...the context of the time available for adjudication" and without delay, courts may refuse to hear the cases); Sessa v. Macomb County, 220 Mich.App. 279, 286-88, 559 N.W.2d 70 (1996) (stating that even though plaintiffs brought suit within an applicable one year statute of limitations pursuan......
  • Bolt v. City of Lansing, Docket No. 192944
    • United States
    • Court of Appeal of Michigan (US)
    • 13 d1 Janeiro d1 1997
    ...to devise increasingly creative means of circumventing constitutional constraints on public spending. See also, Sessa v. Macomb Co., 220 Mich.App. 279, 559 N.W.2d 70 (1996). It is not coincidental that the incidence of the imposition of various "fees"--as opposed to "taxes"--has soared in M......
  • Davis v. Detroit Pub. Sch. Cmty. Dist., Case No. 17-cv-12100
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • 24 d1 Julho d1 2017
    ...contemplated whether the plaintiffs' delay precluded the "orderly process of adjudication" of the case.6 See also Sessa v. Macomb Cnty., 559 N.W.2d 70, 73 (Mich. Ct. App. 1996) ("[The suit in Bigger] was deemed untimely because it was not commenced until soon before the planned date of issu......
3 cases
  • Bylinski v. City of Allen Park, No. Civ.A. 98-71289.
    • United States
    • U.S. District Court — Eastern District of Michigan
    • 9 d2 Junho d2 1998
    ...the context of the time available for adjudication" and without delay, courts may refuse to hear the cases); Sessa v. Macomb County, 220 Mich.App. 279, 286-88, 559 N.W.2d 70 (1996) (stating that even though plaintiffs brought suit within an applicable one year statute of limitations pursuan......
  • Bolt v. City of Lansing, Docket No. 192944
    • United States
    • Court of Appeal of Michigan (US)
    • 13 d1 Janeiro d1 1997
    ...to devise increasingly creative means of circumventing constitutional constraints on public spending. See also, Sessa v. Macomb Co., 220 Mich.App. 279, 559 N.W.2d 70 (1996). It is not coincidental that the incidence of the imposition of various "fees"--as opposed to "taxes"--has soared in M......
  • Davis v. Detroit Pub. Sch. Cmty. Dist., Case No. 17-cv-12100
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • 24 d1 Julho d1 2017
    ...contemplated whether the plaintiffs' delay precluded the "orderly process of adjudication" of the case.6 See also Sessa v. Macomb Cnty., 559 N.W.2d 70, 73 (Mich. Ct. App. 1996) ("[The suit in Bigger] was deemed untimely because it was not commenced until soon before the planned date of issu......

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