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Tuesday, June 20, 2006

Ind. Decisions - More on: Supreme Court affirms, 4-0, the trial court in toll road case

In today's 19-page opinion in Bonney v. IFA, written by Justice Boehm, the Court concludes that "the General Assembly intended the [public lawsuit] statute to apply to lawsuits such as this. We also conclude that no substantial issue is raised by the plaintiffs' three contentions that HEA 1008 violates the Indiana Constitution. ... Accordingly, we affirm the order of the trial court."

Re application of the public lawsuit statute:

It reflects the General Assembly's recognition that the mere pendency of a lawsuit can frustrate a project even if the claims are eventually found to be without merit. The statute acknowledges that litigation can be deployed to delay and sometimes even defeat public projects, and can be driven by a variety of motivations, some of which may have little to do with the merits of the project from the perspective of the general public. * * *

The plaintiffs contend that their case is not a public lawsuit because the IFA is ot a municipal corporation and also because only challenges to the acquisition, not disposition, of public improvements constitue public lawsuits. For the reasons explained below, we disagree with both contentions. Accordingly, we affirm the trial court's certification of the complaint as a public lawsuit.

The Court then goes on to find that the IFA "is clearly a 'municipal corporation'" within the public lawsuit statute's definition."

Re "special legislation," the Court states:

The General Assembly’s decision to build a road in one part of the state or provide addi-tional funding because the Toll Road runs through a given county does not make the law special legislation. The threshold question is whether a law is special or general. Kimsey, 781 N.E.2d at 692. If it is “special,” the next issue is whether a general law “can be made applicable.” Id. A general law cannot “be made applicable” where the law’s objective is to support a given project.

Major Moves legislation that includes allocation of lease proceeds for construction projects throughout the state does not become special legisla-tion because it also makes lump sum allocations to seven Indiana counties. To the extent Article IV of the Indiana Constitution places any constraints on individual projects contained within a larger statewide statute, they are imposed by the single-subject requirement of Article IV, Sec-tion 19, not the special legislation provision found in Article IV, Section 23. And plaintiffs correctly do not challenge HEA 1008 under Section 19. Provisions for raising public funds and directing their use are properly contained in the same bill. [citations omitted]

The determination to fund one project and not another does not violate Article IV, Section 23 for a more fundamental reason. Article X, Section 3 of the Indiana Constitution provides the General Assembly with the power to make appropriations by law. Virtually every appropriation is to some extent arbitrary because there is no principled basis for a court to evaluate the de-cision of the General Assembly to allocate funds to one purpose over another. For that reason appropriation of funds is a central legislative function unusually unsuitable to judicial review as a matter of separation of powers.

Re the "debt" question:
We agree with the defendants that the “public debt” subject to Section 2 is only debt of the State itself. Because there is no longer any such debt to retire, Section 2 presents no constitutional barrier to HEA 1008. The plaintiffs point to debt of local units of government and debt of public instrumentalities such as IFA that they contend is required to be retired before any pro-ceeds of the lease can be applied to the purposes specified by HEA 1008. Both are forms of “public debt” in some lay sense of the term, but neither is an obligation of the State, and therefore neither is “public debt” as that term is used in Section 2. * * *

Beginning with the Toll Road Commission, several of the entities that now compose IFA had issued bonds to finance specific projects whose revenues were the source of payment of principal and interest on the bonds. This method of financing public projects was initially challenged on the ground that it amounted to the incurring of state debt in violation of Article X, Section 5. This contention was rejected as to several of the predecessors of IFA including the Toll Road Commission. [citations omitted]

Most of these entities have now been consolidated into the IFA. It is now well settled, and the plaintiffs agree, that debt secured by revenue from the projects the bonds finance (tolls, lease rentals, port fees, etc.) does not violate the Indiana constitutional ban on debt of “the State.” The general credit of the State is not on the line to discharge these revenue bonds, and a creditor could not levy on the State House or a state park to recover its principal or interest. Ennis, 108 N.E.2d at 697. For that reason, the courts of this state and most others have consistently held that the debt of these authorities is not debt of the State. It follows, therefore, that Section 2 im-poses no requirement that the proceeds of the lease, or any sale of any public work, be applied to discharge these obligations. Again, this is not merely a textual point. In practical terms, there is no reason why the debt of IFA should be required to be retired because, unlike the State of Indi-ana, IFA could immediately reissue debt if it chose to do so. Lawyers and investment bankers would profit from such a rule, but it is hard to see who else would.

In summary, logic, the constitutional debates and judicial precedent all lead to the conclusion that Article X, Section 2 of the Indiana Constitution requires neither debt of units of local government nor debt of IFA or similar entities to be retired with the proceeds of a sale or lease of public works because neither is “public debt” as that term is used in Section 2. * * *

Conclusion. The order of the trial court is affirmed.

Shepard, C.J., and Sullivan and Rucker, JJ., concur.
Dickson, J., not participating.

Posted by Marcia Oddi on June 20, 2006 10:23 AM
Posted to Ind. Sup.Ct. Decisions