Local bonds could become easier to issue

BOISE – A fight over a 2006 Idaho Supreme Court decision that crimped local governments’ efforts to take on debt without a public vote has spilled into the Idaho Legislature.

If a measure now in the Senate passes, voters in November will be asked to amend the Idaho Constitution to make it easier for cities, counties and publicly owned hospitals to sell bonds, as long as the debt is repaid by fees, not taxes.

Two years ago, the Supreme Court upheld Boise resident David Frazier’s lawsuit, in which he contended the city’s push to expand the Boise Airport parking garage without first securing two-thirds voter support violated the state constitution. Frazier now opposes the legislative effort to replace the requirement with a less-stringent simple-majority standard.

“In a nutshell, they’re taking a vote away from the people that we already have: The right to approve long-term debt,” Frazier said Tuesday. “There’s no need to find a cure for the problem when the solutions are already to be found in the constitution.”

In the Supreme Court case, the bonds to be sold by Boise were to be paid off with fees from rental car agencies and airport parking. The justices ruled the expansion lacked the urgency required by the constitution to waive the requirement of voter approval.

Ripples from that decision extended well beyond parking structures.

In Pocatello, for instance, a proposed $200 million expansion of the Bannock County-owned Portneuf Medical Center was thrown into disarray after the Frazier decision left the county unable to simply issue revenue bonds for construction, instead requiring two-thirds approval in a countywide vote for a general obligation bond.

Cities have howled about how it’s gotten tougher to secure tax-exempt loans for everything from snowplows to copy machines, because lending institutions are unwilling to underwrite long-term leases, citing the Frazier decision.

Last November, the city of Ketchum asked voters to approve a $1.5 million bond to buy snow-removal equipment, where in the past it would have entered into a long-term lease.

“We are a resort town. If our snowplows break down, and we can’t replace them on a regular basis, it completely shuts down our economy,” Ketchum Mayor Randy Hall said. “I don’t exactly agree with it, but our attorney says we can’t even go out and lease a fax machine anymore, or a copier. We’ve taken it down to the lowest common denominator.”

The proposed constitutional amendment, due to be considered at a hearing today in the Senate State Affairs Committee, would do three things:

“It would replace the existing two-thirds voter approval requirement for cities to go into debt with a simple majority vote, as long as the structure the bonds are paying to build would be repaid with revenue generated by the project. Under that provision, the Boise Airport garage would have needed just 50 percent support, plus one voter.

“Publicly owned hospitals would be able to pay for capital needs without voter authorization, as long as tax dollars aren’t used to pay off the debt. That would mean Bannock County wouldn’t have to put its $200 million Portneuf hospital issue before voters next November.

“Cities and counties would be cleared to enter into long-term contracts for goods, services and leases and even power-purchase agreements, as long as the contracts are for less than five years, are paid for with user fees, or if the local governments can cancel the contracts on a year-to-year basis. Under such provisions, Ketchum likely wouldn’t have felt obliged to ask voters to approve its new snowplows.

Dan Chadwick, a lobbyist for the Idaho Association of Counties, contends the strict interpretation of the Frazier decision has cost taxpayers more money by limiting government financing options.

“If we do not amend the constitution, we’ll continue down the road we’re on, with the lending institutions very hesitant to provide funding for equipment for local governments, for hospitals to upgrade and update their facilities and equipment,” he said.

Chadwick says Frazier’s zeal to make governments secure two-thirds support for long-term debt is tantamount to micromanagement and hamstrings their ability to make day-to-day decisions.

Frazier counters he’s only sticking up for what Idaho’s founders demanded to prevent government from overstepping its authority and taking on debt without asking its citizens first.

“You don’t need to mess with the constitution,” Frazier said. “The solution is to go to the voters. That’s all they have to do, for big items.”