The Georgia Supreme Court has issued its ruling in a case involving the issuance of bonds to fund construction of the county’s now-completed Porter Sanford III Performing Arts and Community Center (click for information about this facility) near I-20.
The result is a big win for DeKalb taxpayers. You can read more about it in the Atlanta Business Chronicle and on Jim Walls’ Atlanta Unfiltered blog (click for links).
I brought a legal challenge to the issuance of these bonds because it would have violated a law I passed in 2007 that gave you the right to vote on a particular type of bond transaction known as a “backdoor general obligation” or “backdoor G.O.” transaction. It’s called “backdoor G.O.” because it involves the use of an independent government entity known as an “authority” to sell bonds to construct a public building (here, the Arts Center) and then lease the project back to the county, thus avoiding the county having to do a traditional “general obligation” bond issue which requires a voter referendum. You wouldn’t have the right to vote on it, but nevertheless your tax dollars would be used to pay the principal and interest on the bonds.
Rather than comply with the law and let you vote on the bonds, the DeKalb Development Authority decided to challenge the constitutionality of the law by attempting to conduct a “backdoor G.O.” bond issue for the Arts Center without a referendum. This forced me to stand up for your right to vote by challenging the bond issue in court.
Chief Justice Carol Hunstein wrote for a unanimous Supreme Court finding that the referendum requirement complies with the Georgia Constitution and should have been followed. Here are links to PDF copies of the full Supreme Court opinion and my brief that was filed in the case. The Supreme Court affirmed a well-written trial court ruling by DeKalb Superior Court Judge Dan Coursey.
One interesting point suggested by Chief Justice Hunstein in the first footnote on pages 3 and 4 of the Supreme Court opinion is that the referendum requirement could apply not only to the “backdoor G.O.” bond transactions of the Development Authority, but also to the run-of-the-mill private bond transactions of the Development Authority. Think “Town Brookhaven” and the various proposals for the shuttered Doraville GM plant. Even the Sembler tax abatement that was rushed through at the end of 2008 might have required a referendum and could have been challenged.
That was never my intent for the referendum requirement, but the law the General Assembly passed in 2007 was worded very broadly because we never anticipated that the Development Authority, which is intended to help fund private projects, would be abused by the county to build a plain old public building like a performing arts center. In fact, there is an unrelated Georgia Supreme Court case (Haney v. Development Authority of Bremen, for you lawyers out there) that says development authorities can’t be used to build plain-vanilla public facilities.
During this year’s legislative session, I noticed the problem that the referendum requirement could apply to the Development Authority’s private bond deals and tried to fix it with new legislation, House Bill 203 (click for more information). However, the Development Authority and a small handful of DeKalb legislators worked to block HB 203 in the hopes that the Supreme Court would later strike down the entire statute. The bill languished in committee, but still remains available for consideration during the 2010 legislative session. As it turns out, its detractors threw a Hail Mary pass that the other team intercepted and ran back for a touchdown (and I promise that’s my last sports analogy in this article).
In light of recent overreaching with respect to Development Authority tax abatements (click for news article), I’m not as convinced that the broad sweep of the 2007 law is as problematic as I once thought it was. We probably should amend the 2007 law to make it narrower, while keeping the referendum requirement for “backdoor G.O.” bond deals. However, I also believe this is an excellent opportunity to require that elected officials accountable to the voters make the final decision on the Development Authority’s tax abatement deals. On this point, I’d like to hear your thoughts.
I donated more than two weeks of legal work writing briefs in the Supreme Court and the trial court in the Arts Center bond case. The county, the Development Authority, and its lawyers from a large Atlanta law firm spent a lot of time, and sadly, your tax dollars, on the case. Next time, here’s hoping the county will just follow the law and save both of us the effort.
