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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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I <br /> body. However, the provisions then go on to state that such governing body has thc fight <br /> not to include the,se amounts in its final budget. <br /> <br /> Non-appropriation clauses are to be distinguished from 'no deficiency' provisions. <br />I The lauer are simply limitations on thc abLlity of the lender to recover any amounts or other <br /> security from the governmental entity other than the items leased or purchased should the <br /> contract, for any reason, not be paid. Section 160A-20 specifically requlre~ that installment <br /> I sale conUacts include no deficiency provisions. However, there is no comparable <br /> requirement to include non-appropriation clauses. <br /> <br /> I The question as to whether, after the Wayna County case, non-appropriation clauses <br /> should be in installment sale contracts is Clouded by the exact facts in that ~_ There was a <br /> provision in the Wayne County installment sale contract which stated that a failure by the <br /> I County to appropriate could.occur. In addition, the Court clearly read the conlract to <br /> contemplate a right in the County to not appropriate annually. However, there is no specific <br /> provision dealing ~'ith nos-appropriation. If it were to occur under that cor~lract, there <br /> I would be a 'default' by the County on its obligations. <br /> Some bond attorneys prior to the Wayne County decision felt ~ non-appropriation <br /> I clauses were absolutely vital to defeat the argument that the contract constituted a 'debt' <br /> under the North Carolina Constitution. Thus, we had two arrows in our quiver for the <br /> constitutional argument - one that there was not a debt at all and two, that even if there was <br /> I a debt, it was not secured by the taxing power. In the Wayne County opinion, the Court <br /> appears to say ~at the second point is enough to allow constitutional approval. Logically, <br /> this should lead to the conclusion that non-appropriation clauses are not nec-_-~_~y, at least to <br /> I the extent they would be more specific than what was in the Wayne County documents. <br /> <br /> Three points, however, argue against this which may, in the aggregate, turn out to be <br /> I to be At the least gOVernmental units installment <br /> enough <br /> persuasive. <br /> very <br /> now <br /> considering <br /> sales should not blithely assume non-appropriations clauses should not appear. First, <br /> N.C.G.S. Section 159-13(b)(15) requires that certain amounts under continuing conlracts be <br /> I included in annual budgets. The only exception to this affirmative requirement is in an <br /> amendment added to the section in 1989 which states 'unless such contract rt. serves to the <br /> i governing board the right to limit or not to malco_ such appropriation.' The question is does <br /> a provision comgarablc to wha~ was in the Wayne County documents constitute an adequate <br /> 'reservation of the right?' If it does not, the~ failure by the govemmeata~ u~it to <br /> <br /> I appropriate in any year will be illegal, not just a financing problem!-" <br /> <br />! <br /> * Noto that ~ i~ue and several other~ (such as thc legality of mortgaging a courthouse) <br /> I were not mi~l by the plaintiffs in the Wayne County ea~. Whether they, if mi.~l, would <br /> have changed the result is unknown. <br /> <br /> <br />
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