Ward v. Com., Dept. of Community Affairs

• Decision Date: 21 November 1996
• Citation: 685 A.2d 1061
• Parties: Jeffrey Adams WARD, Petitioner, v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF COMMUNITY AFFAIRS, Respondent.
• Court: Pennsylvania Commonwealth Court

Page 1061

685 A.2d 1061

Jeffrey Adams WARD, Petitioner, v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF COMMUNITY AFFAIRS, Respondent.

Commonwealth Court of Pennsylvania.

Argued Oct. 7, 1996.

Decided Nov. 21, 1996.

Jeffrey L. Pettit, Philadelphia, for Petitioner.

Barry H. Boise, Philadelphia, for Intervenors, Borough of Kennett Square and Kennett Square Borough Council.

Before PELLEGRINI and LEADBETTER, JJ., and MIRARCHI, Jr., Senior Judge.

MIRARCHI, Jr., Senior Judge.

Jeffrey Adams Ward petitions for review of an order of the Department of Community Affairs (DCA) granting the motion of the Borough of Kennett Square (Borough) and the Kennett Square Borough Council (Borough Council) to dismiss Ward's complaint.

On November 29, 1995, the Borough filed an application with DCA, pursuant to Section 411 of the Local Government Unit Debt Act (Debt Act), ¹ for approval of guaranteed revenue bonds in the amount of $4,525,000. The bonds were to be issued to finance the construction of a parking garage in the Borough. As part of the application, the Borough filed a debt statement listing, inter alia, the gross indebtedness of the Borough. ² Included in the category entitled "General Obligation Notes, Non-electoral" was a bond issuance of 1993 in the amount of $10,000,000. The 1993 issuance was listed with a representation that "there has been no increase or decrease in the amount on non-electoral debt originally excluded as self-liquidating debt by any change of circumstances other than decreases resulting from the payment of the DVRFA [Delaware Valley Regional Finance Authority] Debt referred to above."

Ward filed a complaint with DCA pursuant to Section 901 of the Debt Act, 53 P.S. § 6780-401, challenging the validity of the proposed bond issue. Ward alleged the following: (1) that there was improper notification of a public meeting on the bond issue; (2) that a meeting was held to discuss financing of the parking garage in violation of the Sunshine Act; (3) that the parking garage will benefit private enterprise; (4) the copy of the debt statement obtained from Borough Council contains different figures than the debt statement obtained from the attorneys representing the underwriters of the bonds for the parking garage; (5) the debt statement represents that there was no change in circumstances while there was in fact a change; (6) taxpayers will ultimately be held responsible for the debt incurred in the event of a default; and (7) the construction of a parking garage is not provided for in the Borough's comprehensive plan. The Borough and the Borough Council filed a motion to dismiss Ward's complaint.

A presiding officer was appointed and oral argument was heard on the motion to dismiss. The presiding officer issued a report in which he found that several allegations in the complaint were not within the jurisdiction of DCA. The remaining allegations in the complaint were reduced to three basic objections: (1) the project lacks a public purpose; (2) the project's cost was underestimated by at least $800,000; and (3) the Borough's certification as to the status of previous exclusions for self-liquidating debt was improper.

The presiding officer found that even if a private company would gain by the construction of the parking garage, that fact alone would not serve to change the character of the garage as having a basic public purpose. The presiding officer found that the pleadings provided no indication that the Borough in any way acted outside of the discretion granted to it in proposing the project.

In regard to Ward's second argument that the project's cost was underestimated, the presiding officer, cited this Court's decision in Borough of Brentwood v. Department of Community Affairs, 657 A.2d 1025 (Pa.Cmwlth.1995), which held that uncertainty about specific details cannot be considered proof that the cost estimates were unrealistic and that such unrealistic estimates constituted fraud.

In regard to the final argument, the presiding officer found that under Section 206(b) of the Debt Act, 53 P.S. § 6780-56(b), exclusions are protected during the period of a project's construction and for a reasonable period thereafter. The presiding officer recommended that Ward's complaint be dismissed and the bond issue of the Borough be approved. On January 3, 1996, DCA granted the motion and dismissed Ward's complaint. Ward now appeals to this Court.

On appeal, Ward contends that (1) the incurrence of new debt triggers the duty of DCA to review its prior approval to exclude debt as self-liquidating even when the project financed through the self-liquidating debt is under construction and (2) the obvious private nature of the parking garage, the discrepancy in the costs of the parking garage and conflicting statements of Borough officials raises genuine issues of fact sufficient to preclude the Borough's motion to dismiss.

Section 901 of the Debt Act provides a means by which taxpayers and other interested parties may challenge the validity of the proceedings in which a local government unit incurs bonded debt. 53 P.S. § 6780-401. However, this challenge is very narrowly circumscribed, restricting inquiry into procedural and substantive matters arising from the proceedings of the local government unit taken pursuant to the Debt Act and involving only: (1) the regularity of the proceedings; (2) the validity of the bonds, and (3) the legality of the purpose for which the bonds are issued. Simonetti v. Department of Community Affairs, 651 A.2d 626 (Pa.Cmwlth.1994), petition for allowance of appeal denied, 540 Pa. 652, 659 A.2d 990 (1995). In an appeal from a DCA action under the Debt Act, our scope of review is restricted to determining whether constitutional rights were violated, whether an error of law was committed, or whether necessary findings of fact are supported by substantial evidence. Id.

Ward's first argument concerns the $10,000,000 general obligation note issued by the Borough in 1993 to finance a spray irrigation project. The note was approved by DCA as self-liquidating. Ward contends that the scope of the project has changed substantially and that the original financial projections, that revenues would pay the debt service, are no longer valid. Ward further contends that if a portion of the sewer bonds was deemed not to be self-liquidating, then the added debt for construction of the parking garage would cause the Borough to exceed its debt limit of $7,735,043.

Ward argues that DCA erred in interpreting Section 206(b) as precluding inquiry into a previously approved bond issue during the period of the project's construction. Ward contends that the event which terminates the exclusion of the self-liquidating debt is the point at which new electoral, nonelectoral or lease rental debt is to be incurred.

Section 206(b) of the Debt Act provides as follows:

If the department shall approve the exclusion of the principal amount of bonds, notes or obligations or bonds or notes of an authority or another local government unit secured by an instrument evidencing lease rental debt stated in such report as being self-liquidating debt, as being in accordance with law, it shall endorse its approval upon a duplicate original of the proceedings and return the same to the local government unit. Upon receipt of such approval by such local government unit, such principal amount of bonds, notes or obligations shall be excluded from nonelectoral debt or net lease rental debt, as the case may be, during the period of construction and thereafter until new electoral, nonelectoral or lease rental debt is to be incurred, at which time, if such principal is to be excluded, a certification of no decrease, other than decreases resulting from the payment of bonds or notes, in the amount to be excluded shall be included in the debt statement to be filed pursuant to section 410 of this act. If there is a decrease, or if more of such debt is desired to be excluded as self-liquidating, a new certification shall be filed

53 P.S. § 6780-56(b) (emphasis added).

A plain reading of Section 206(b) indicates that self-liquidating debt is excluded during the period of construction and for the period thereafter until new debt is to be incurred. ³ Ward's interpretation of Section 206(b), that the exclusion terminates when new debt is to be incurred, reads out of the statute the phrase "and thereafter." It is well settled that the legislature is presumed not to have intended provisions in its laws as mere surplusage; courts must construe a statute, if possible so as to give effect to every word, sentence or provision thereof. ...