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AG19910325
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AG19910325
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Last modified
3/28/2003 9:14:47 AM
Creation date
11/27/2017 12:03:10 PM
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Meeting Minutes
Doc Type
Agenda
Meeting Minutes - Date
3/25/1991
Board
Board of Commissioners
Meeting Type
Regular
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'Isn't it clear that the Constitution allows two kinds of debt - <br /> one kind secured by thc taxing power and one kind that is not? <br /> Isn't the contract in this case simply an example of the second <br /> kind of debt?' <br /> <br />Obviously, such questions are not p._rec_-,,dent or in any way controlling, but this and the <br />absenc~ of a detailed cas~ law analysis in the opinlon indica~ the Court has little doubt as to <br />the reading of the constitutional provision. Suffict to say, Wayne County won a complete <br />victory. Comparable ius~lment sale ~onUaets by other North Carolina issuers should face <br />no legal challenges. <br /> <br /> With regard to other effects of the caso, three points are worthy of discussion - 1) <br />the need for 'identification' or pledging of nontax revenues, as currently required by some <br />counsel for leaseffpurchase contracts; 2) the future use of ~-s; and :~) the need, or lack <br />there~f, for 'non-appropriafon clauses.N On the first point, it seems certain ~uch <br />ide. ntlfieation et pledging is not necessary ~d will not cor,~au¢. The pmutic~ was only <br />developed to assm'e that mx revenues were not us~l to pay such contracts and thus avoid one <br />aspect of the constitutional question. However, the Court clearly has put this problem to rest <br />and such devic~.s should not be seen again. <br /> <br /> As to con,hued use of financing l~ses under N.C.6.S. Sections 160A-19 or 153A- <br />165, current thinking is this will not occur for tl~'~ ~a.sons. Fh-st, installment sales now <br />have the blessing of the Court and leases do not. Even though the in favor <br /> legal <br /> arguments <br />of their validity are exu~emely similar, the lack of such judicial imprimatur for leases is likely <br />to l~rsuade knowledgeable issuers, their couustl and lenders to avoid them. The second <br /> is the of N.c.6.s. section 160A-20. This amended in <br /> flexib~ty <br />1989 to allow the possibility of constructiun funding for pmj~ts. The net effect is a <br />government utilizing this statute can avoid the often cuml~rsome and always irritating <br />necessity to either create a non-profit corporation to nominally construct the project or have a <br />'s~cond closing' upon completion of cons~'uction. The later option exposed the government <br />to the risk that interest ra~s will ~ prior to the time of compl~on when it has a ~ deal. <br />A third rcasoa !s fl~ S~tioa 166A-20 specificatly authorizes s~curi .ty intrusts and <br />mo~guges as .s~curity and the comparable l~aso s~atutes do not. This laok can be'worked <br />around only with difficulty and lenders usually do not end up with as much ~curity (at l~ast <br />in real property financings) in l~tse transactions as they do in sales. For these reasons, <br />~1~._~ in th~ future should be limimd to tho~e infr~que~nt ~t~a~ous where peculiar <br />ch'cumstaaces axgu~ against using installment sale <br /> <br /> The effect of the Wayne County cas~ on the utility of 'non-appropriation ~lauses' is <br />not neatly so cl~at. Non-appropriation clauses ar~ provisions in the docame~ts which <br />specifically allow the contracting governmen~ entity to exereis~ a riaht of non-appropriation <br />annually. Such provisions usually requh~ ~he ~l~ief administxative offi~r of the unit to <br />i~chid- the anticipated annual payments due under the leas~ or iustallmmt sale contra~t <br />within the next fiscal yea~ in his proposed budget for such year tendered to the governing <br /> <br /> <br />
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