State ex rel. School Bldg. Authority of West Virginia v. Marockie

• Decision Date: 13 December 1996
• Docket Number: No. 23675,23675
• Citation: 198 W.Va. 424,481 S.E.2d 730
• Court: West Virginia Supreme Court
• Parties: , 116 Ed. Law Rep. 471 STATE of West Virginia ex rel. SCHOOL BUILDING AUTHORITY OF WEST VIRGINIA, Relator v. Dr. Henry R. MAROCKIE, President, School Building Authority of West Virginia, Respondent.

Page 730

481 S.E.2d 730

198 W.Va. 424, 116 Ed. Law Rep. 471

STATE of West Virginia ex rel. SCHOOL BUILDING AUTHORITY OF WEST VIRGINIA, Relator v. Dr. Henry R. MAROCKIE, President, School Building Authority of West Virginia, Respondent.

No. 23675.

Supreme Court of Appeals of West Virginia.

Submitted Nov. 19, 1996.

Decided Dec. 13, 1996.

[198 W.Va. 426] Syllabus by the Court

1. "Because the previous issue of State of West Virginia School Building Authority bonds is not invalid under principles of retroactivity and because we also have determined that the refunding of bonds does not create new debt, the State of West Virginia School Building Authority is authorized to issue refunding bonds from the Capital Improvement and Revenue and Refunding Bonds, Series 1993, to replace existing bonds at a lower interest rate." Syl. pt. 10, Winkler v. State School Building Authority, 189 W.Va. 748, 434 S.E.2d 420 (1993).

2. A writ of mandamus is a proper method of testing the legality of a bond issue before the bonds are actually issued where the issue presented is one for which there has been a tradition of judicial accessibility and where immediate judicial access would play a significant and positive role in the resolution of the particular constitutional problem in question.

3. In light of ever-changing market and economic conditions, the School Building Authority of West Virginia may decide to refund bonds different from those specifically designated for refunding in Winkler v. State School Building Authority, 189 W.Va. 748, 434 S.E.2d 420 (1993), in order to receive the greatest benefit from lower interest rates applicable to the refunding bonds.

4. The School Building Authority of West Virginia may issue refunding bonds in a principal amount larger than the principal amount of bonds to be refunded that were issued prior to Winkler v. State School Building Authority, 189 W.Va. 748, 434 S.E.2d 420 (1993), in order to establish an escrow account for the repayment of those pre-Winkler bonds that are not presently due and payable. However, the School Building Authority of West Virginia may issue such additional refunding bonds only in the amount required to establish and maintain the escrow account, and the revenue generated by the excess refunding bonds should be no greater than that amount needed to secure the repayment of the higher interest pre-Winkler bonds to be refunded.

5. The School Building Authority of West Virginia may not issue bonds alleged to James K. Brown, Christopher L. Callas, Jackson & Kelly, Charleston, for Relator.

[198 W.Va. 427] be refunding bonds for the redemption of obligations created before Winkler v. State School Building Authority, 189 W.Va. 748, 434 S.E.2d 420 (1993), which have the practical effect of generating cash at closing in order to make immediately available to the School Building Authority of West Virginia the anticipated debt service savings from the so-called refunding bonds. Rather, the authority of the School Building Authority of West Virginia to issue refunding bonds to redeem pre-Winkler obligations is specifically limited to encompass only those bonds, the proceeds of which the School Building Authority will use to discharge its pre-existing obligations.

Silas B. Taylor, Managing Deputy Attorney General, Dawn E. Warfield, Deputy Attorney General, Charleston, for Respondent.

CLECKLEY, Justice:

In this original mandamus proceeding, the relator, the School Building Authority of West Virginia [hereinafter SBA], requests this Court to determine the SBA's authority to issue refunding bonds to discharge those SBA bonds issued prior to this Court's decision in Winkler v. State School Building Authority, 189 W.Va. 748, 434 S.E.2d 420 (1993). The respondent, Dr. Henry R. Marockie, State Superintendent of Schools and President of the SBA, see W.Va.Code, 18-9D-1 (1990), asserts that the proposed bond issuance, which would generate approximately $5.66 million cash at the time the bonds are issued, violates certain provisions of the West Virginia Constitution and this Court's holding in Winkler. We issued a rule to show cause and now grant the writ of mandamus as moulded. ¹

I. FACTUAL AND PROCEDURAL HISTORY

In 1988, the West Virginia Legislature created the School Building Authority of West Virginia (SBA) in order "to facilitate and provide state funds for the construction and maintenance of school facilities so as to meet the educational needs of the people of this state in an efficient and economical manner." W.Va.Code, 18-9D-15(a) (1989). ² The Legislature also authorized the SBA to issue revenue bonds to finance its statutory purpose of improving the educational facilities in this State. See W. Va.Code, 18-9D-4 (1988). See also W. Va.Code, 18-9D-1 to -18 (collectively referred to as the "School Building Authority Act"). It seems apparent that the Legislature, in establishing the SBA's bond-issuing authority, intended to redeem any bonds issued by the SBA from the State's general revenue funds, without pledging the State's credit. W. Va.Code, 18-9D-6 (1988); ³ 18-9D-13 (1988); 18-9D-14 (1988). See also W. Va.Code, 11-15-30 (1994). In accordance with this statutory authority, the SBA issued Capital Improvement and Revenue and Refunding Bonds, Series 1993, in the amount of $338,145,000. ⁴

Disagreement concerning the constitutionality of the SBA's 1993 bond issuance with respect to Section 4 of Article X of the West Virginia Constitution resulted in our review of the SBA's bond-issuing authority in Winkler. We determined that "the [statutory] requirement of maintaining [a] sinking fund in order to service the bonds [issued by the SBA] and provide for their redemption indicates a financial commitment by the Legislature." 189 W.Va. at 763, 434 S.E.2d at 435. Accordingly, we held that the "[r]evenue bonds authorized under the School Building Authority Act,W. Va.Code, 18-9D-1, et seq., constitute an indebtedness of the State in violation of Section 4 of Article X of the West Virginia Constitution." Syl. pt. 7, in part, Winkler. However, we limited this holding "[b]ased upon our general principles of retroactivity of judicial decisions," and recognized that the "revenue bonds issued by the State of West Virginia School Building Authority pursuant to W. Va.Code, 18-9D-1, et seq., prior to the date of this opinion [July 22, 1993] are not invalid." ⁵ Syl. pt. 9,Winkler. Similarly, we concluded that "[b]ecause the previous issue of State of West Virginia School Building Authority bonds is not invalid under principles of retroactivity and because we also have determined that the refunding of bonds does not create new debt, the State of West Virginia School Building Authority is authorized to issue refunding bonds from the Capital Improvement and Revenue and Refunding Bonds, Series 1993, to replace existing bonds at a lower interest rate." ⁶ Syl. pt. 10, Winkler.

Presumably in response to this Court's holding in Winkler, the West Virginia Legislature amended the School Building Authority Act expressly to permit the SBA to refund pre-Winkler bonds. The relevant portion of this revision provides:

"(a) The school building authority may by resolution, in accordance with the provisions of this article, issue revenue bonds of the authority from time to time, either to finance the cost of construction projects for public schools in this state, or to refund, at the discretion of the authority, bonds issued to finance the cost of the construction projects for public schools in this state and outstanding under and pursuant to the provisions of this article as in effect prior to the twentieth day of July, one thousand nine hundred ninety-three. ⁷ The principal of, interest and redemption premium, if any, on such bonds shall be payable solely from the special fund herein provided for such payment." W. Va.Code, 18-9D-4 (1994). (Emphasis and footnote added). ⁸

The Legislature further provided that the "school building capital improvements fund" of the State treasury, originally created in1988, W. Va.Code, 18-9D-6 (1988), would serve as the source of payment for both pre-Winkler bonds and those bonds subsequently issued to refund pre-Winkler bonds. W. Va.Code, 18-9D-6(a) (1993, 1994, & 1996). ⁹ Finally, the Legislature codified the procedure for handling any surplus funds generated by the refunding of pre-Winkler bonds:

"Any aggregate savings resulting from the issuance of refunding bonds pursuant to section four [ § 18-9D-4] of this article shall be retained by the school building authority. Any savings shall be utilized solely for the construction and maintenance of schools and may not be used to fund administrative costs of the authority." W. Va.Code, 18-9D-4a (1996). (Emphasis added).

Despite this Court's acknowledgment in Winkler that the SBA could issue refunding bonds to replace pre-Winkler bonds, the SBA declined to do so until after the Legislature's enactment of W. Va.Code, 18-9D-4a, in March, 1996. ¹⁰ In response to the SBA's request for competitive bids from municipal bond underwriters, Smith Barney, Inc., developed a proposal for issuing Series 1996 refunding bonds. Smith Barney's "Proposal to Provide Underwriting Services," dated May 8, 1996, anticipated issuing $129,480,000 in new refunding bonds to discharge pre-Winkler bonds in the principal amount of $121,375,000. This proposal contemplated a savings to the State's general revenue fund of approximately $5,426,503.75, over the entire twenty-six year life of the bonds, as a result of reduced debt service. ¹¹ It appears from the record that the SBA subsequently selected Smith Barney as the underwriter for its contemplated issuance of Series 1996 refunding bonds.

In July, 1996, Smith Barney provided the SBA with a compilation of alternative financing schemes which would result primarily in either (1) a savings to the State's general revenue fund as a result of reduced debt service or (2) a sum of "cash at closing" ¹²...