Thursday, October 12, 2017

Bond Lawsuit Update: Lawsuit moves forward, a portion dismissed


Partial Dismissal

The request that the Court set aside the referendum results because the City used the term "may" instead of "shall" on the ballot as to whether property tax increases would be required to pay for the $76 million bond issue was denied.

Other Legal Challenges Move Forward

However, the Court held that the plaintiffs, Chris Peterson and Sidney Bach have the legal right to challenge the proposed $76 million bond indebtedness and the means by which the bonds are to be financed (i.e. the new property taxes imposed in June by the City Council). There remains at issue before the Court a very important financial issue that impacts the City's ability to issue and pay for the proposed bonds:

A required public notice was given by the City prior to the November 2016 referendum to the effect that a new property tax would be levied only IF the November 2016 referendum bonds are issued. Although none of the referendum bonds have been issued, the City Council nevertheless went ahead and imposed a new property tax to pay for the principal and interest on the yet-to-be issued referendum bonds. The new tax levied is also being challenged in the pending lawsuit and the Court has been asked to declare that the new tax levied is illegal based upon the City's public notice to the contrary as to whether and when new property taxes would be levied to pay for the bonds.

The financial underwriters and potential investors in municipal bonds require that the City and its legal counsel sign off on a "Certificate of Non-Litigation" which states that there is no litigation pending that could affect the bonds' validity or any tax levied for the annual interest and principle payments due on the bonds. Without such a certification, the bonds cannot be issued and marketed and as long as there are pending unresolved legal challenges to the bonds or the taxes imposed to finance them.

So, any crowing at this time by City Hall would at best be rather premature for as Yogi Berra
once famously said: "It ain't over 'til its over!"

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