nvdaily.com link to home page

Traffic | Weather | Mobile Edition
Archives | Subscribe

Local News arrow Courts & Legal News arrow Crime & Public Safety

| 0 | 9 Comments

Jail foes, officials spar in court

Mark Prince

Brad Pollack
Brad Pollack

By Joe Beck -- jbeck@nvdaily.com

WOODSTOCK - Lawyers for one plaintiff and three defendants clashed in Shenandoah County Circuit Court on Thursday over whether a referendum is needed to finance the regional jail in Warren County.

The jail has been under construction since early summer, but opponents are still challenging the legality of decisions taken by the Shenandoah County Board of Supervisors, the Rappahannock-Shenandoah-Warren Regional Jail Authority board and the Virginia Resources Authority to borrow more than $80 million to fund the project.

Judge Dennis L. Hupp, who questioned some of the plaintiff's claims from the bench, said he would issue a ruling Friday.

Bradley G. Pollack, a Woodstock attorney representing jail opponents led by Toms Brook resident Mark W. Prince, argued that the three defendants failed to produce the bonds that were authorized by the jail authority and Board of Supervisors in mid-April. Pollack said Hupp should wait until the bonds are available before issuing a decision or allow a jury trial.

J. Jay Litten represented the Board of Supervisors for the defense. He was joined by Robert Hodges who represented the VRA, and William H. Hefty of Richmond representing the Jail Authority. Much of their argument, presented by Hodges, claimed that Prince's efforts to block the project came too late to be considered by Hupp.

Hodges cited a state law that provides 30 days to file a lawsuit challenging a borrowing decision by a governing body. Hodges said one of the reasons for the short time period is that state lawmakers did not want projects authorized by local officials to be halted once construction had started.

Prince filed his complaint against the defendants on July 2, and the last action taken pertaining to the financing of the jail was on May 29, Hodges said. In any event, Hodges said, May 29 was almost certainly much too late a date from which to apply the deadline. The window for legal action had probably closed weeks before, he said.

Pollack contended that the 30-day deadline expired on a weekend. Therefore, he said, the plaintiffs had met the deadline by filing on July 2, a Monday.

Hupp reacted with skepticism to some of the other arguments offered by the plaintiffs.

He mentioned twice that he had not had enough time to read a plaintiff's brief that had been submitted to him Thursday morning and was therefore placed in "a somewhat difficult position" in evaluating its merits.

Both sides sparred over the meaning of two Virginia Supreme Court cases on the subject of citizen challenges to borrowing decisions. Both cases were decided in favor of the local government units.

Pollack contended that the cases were either too old or too narrow in their scope to offer much guidance on how the regional jail case should be decided.

He said the part of the Constitution on which one case was decided did not exist until 1971.

Pollack also urged Hupp to block payments on what he called an unconstitutional debt approved by jail authority.

"Surely this court will not allow payments on bonds ... not lawful debt under the constitution to survive a taxpayer challenge, long respected in Virginia law, as set forth in plaintiff's complaint," Pollack wrote in a court document.

After hearing Pollack repeat the argument in court Thursday, Hupp said he was wary of exceeding his power as a judge if he tried to block payments approved by elected officials.

"It certainly doesn't comport with my view of judicial restraint," Hupp said of Pollack's argument.


RSW Regional Jail Timeline
June 4, 2010 RSW Regional Jail Service Agreement
July 16, 2010 Interim Financing for RJ Project Wells Fargo
July 22, 2010 Resolution of RSW Regional Jail Authority Authorizing the issuance of its RSW Regional Jail Authority Regional Jail Facility Grant Anticipation Note, Series 2010 in the amount not to exceed $7,000,000 and the acceptance of Wells Fargo Term Sheet July 16, 2010; Resolution certified on by quorum present on July 22, 2010 and witnessed on the 4th day of August 2010.
March 26, 2012 http://www.moodys.com/research/MOODYS-ASSIGNS-INITIAL-Aa3-ISSUER-RATING-TO-RSW-REGIONAL-JAIL--PR_241700 Moody’s Rates RSW Regional Jail Bonds Rating Action:
MOODY'S ASSIGNS INITIAL Aa3 ISSUER RATING TO RSW REGIONAL JAIL AUTHORITY (VA) New York, -- Moody's Investors Service has assigned an initial Aa3 issuer rating to the RSW Regional Jail Authority (VA). The rating is assigned in connection with the authority's anticipated issuance of $56.5 million of bonds issued through the Virginia Resources Authority and another $32.6 million of privately placed notes to finance construction of a regional jail facility. The bonds are secured by net revenues of the authority.
April 2, 2012 Support Agreement Rappahannock BOS
April 10, 2012 Virginia Resources Authority BOD meeting Next BOD meeting July 17, 2012 ***No Mention of BOD Approving the RSW Regional Jail bond sale and purchase*******
April 10, 2012 Virginia Resources Authority-Amended and Restated Resolution-“Look at the last Whereas and you will see that the information has to have been presented to the board and they didn’t even have the agreements or the Resolutions after this date”
Whereas, the foregoing arrangements will be reflected in the following documents, forms of which have been previously presented to this Board or presented to this meeting: the Master Indenture, (ii) a model Supplemental Series Indenture, to which forms of the Bonds are attached as exhibits, and (iii) model Local Bond Sale Agreements, Local Lease Acquisition Agreements, Financing Agreements and Financing Leases to be used in the acquisition of revenue Local Obligations, general obligation Local Obligations, “double-barreled” Local Obligations and lease Local Obligations (collectively, the “Local Obligation Documents”; and
April 10, 2012 Support Agreement Shenandoah BOS
April 19, 2012 Resolution of the Board of Directors of the RSW Regional Jail Authority Approving Jail Facility Revenue Bonds $65,000,000
(Jail Authority desires to issue a regional jail facility revenue bond to finance the project) VRA indicated willingness to purchase bond from a portion of the proceeds of its Infrastructure and State Moral Obligation Revenue Bonds (Virginia Pooled Financing Program), Series 2012A and provide a portion of the proceeds to the Authority not less than $51,000,000. Sale of the Bonds is tentatively scheduled for May 22, 2012 but can go to June 1, 2012 *******NOTE The VRA Bond was sold after this date******** Bond Details; the bond shall be issued as a single, registered bond, shall be designated “Regional Jail Facility Revenue Bond, Series 2012” ; numbered R-1 and shall be dated within 30 days prior to the closing date of the VRA Bonds. Maximum aggregate not to exceed $65,000,000 and true interest cost of less than 5% per annum. Mature no later than Dec 31, 2043. Must maintain the VRA Reserve??????
April 24, 2012 Support Agreement Warren BOS *****this is in the resolution of the BOD of RSW RJ Authority document dated April 19th ******* Note the date so how could they approve the sale of the bonds
without the support agreement in place.
Exhibit (A) Form of Bond (Regional Jail Bond Details Match the Bond but the bond is incomplete and not authorized (signed) by the RSW Regional Jail Chairman or the Secretary/Treasurer and there is a comma under the 3. Bond details ….bond shall be designated “Regional Jail Facility Revenue Bond, Series 2012” and on the Bond Face it is on two lines without the comma and is as follows:
Regional Jail Facility Revenue Bond
Series 2012

April 30, 2012 Local Bond Sale and Financing Agreement between RSW Regional Jail and the VRA. (missing document) ?????Did the RSW Regional Jail follow bond sale rules?
May 21, 2012 Moody’s pulled the rating according to Fred Hughes.
May 22, 2012 Proposed Sale Date of the RSW Regional Jail Bond as stated in the RSW Regional Jail Resolution approving Jail Facility Revenue Bonds Dated April 19, 2012 ****Note the April 19th document looks into the Future to approximately May 22, 2012 to forecast that the original RSW Bond that was pulled and they needed to issue a new set of Bonds. This document states that the VRA will purchase the RSW Regional Jail Bonds and the VRA will issue
May 31, 2012 RSW Authority Minutes
VRA For the benefit of the Authority members, Mr. Walker asked Ms. Long what the schedule was for the separate bond sale. Ms. Long stated that they were currently waiting on bond ratings from the rating agencies which they expected to receive by the following day. This would allow pricing of the bonds by the middle of the following week and closing on June 13th. Mr. Walker asked if it was Moody’s that they were waiting for on the rating. Ms. Long stated that they were waiting on Moody’s and S&P.
Mr. Stanley thanked Mr. O’Brien and Ms. Long for attending the meeting and for their commitment to expedite the sale to keep with the original bond closing schedule and to keep the jail project on schedule.
SunTrust Funding Resolution
Mr. Siegel stated that he had a copy of a proposed resolution for the Board’s consideration for SunTrust notes in the amount of up to $32,840,000. He indicated that this was part of the original debt structure to be paid off when the State reimburses its share of the project. He outlined the details of the resolution. He indicated it had a fixed rate of 2.06% through November 1, 2015. He added that there was a support agreement from each of the jurisdictions. He said the resolution authorizes the Chairman, Vice-Chairman and Secretary to sign the necessary documents to move forward with the closing. He added that the closing would occur simultaneously with the VRA closing.
Mr. McCarthy stated as a point of clarification that this resolution was the update of an earlier resolution adopted by the Authority. Mr. Siegel confirmed Mr. McCarthy’s statement.
On a motion by Mr. McCarthy, seconded by Mr. Murray, and by the following vote, the RSW Regional Jail Authority approved the SunTrust Funding Resolution as presented:
Aye: Helsley, McCarthy, McEathron, Murray, Stanley, Walker, Welch
Nay: Carter Did they comply with Virginia Code ?.
June 5, 2012 Standard and Poor Summary of: Virginia Resources Authority Virginia; Moral Obligation; state revolving funds/pools Bond proceeds from this specific issue will be used to purchase a local bond issued by the RSW Regional Jail Authority. This borrower was originally scheduled to be a participant in the series 2012A issue; however, VRA's decision to offer a separate bond issue arose due to its concerns regarding opposition to the project and its interest in providing additional disclosure information for bondholders. There continues to be some local opposition to the project; however, while the credit quality of the participants in the pool program is a key factor is our assessing the financial risk profile, no individual participant's credit quality specifically drives the rating on the infrastructure revenue bonds.
June 12, 2012 Regional News Virginia Jail Bonds Separated Due to Lawsuit Threat by: Kyle Glazier WASHINGTON — The Virginia Resources Authority withdrew a $46 million chunk of its nearly $400 million pool bond issue last month and is reissuing it in a stand-alone deal scheduled to close next week, after a group of citizens questioned the legality of the transaction. http://www.bondbuyer.com/issues/121_113/virginia-jail-bond-resource-authority-lawsuit-1040805-1.html

**** Page 25 of the Virginia Resources Authority FY 2011 CAFR States:********NOTE RSW Regional Jail was not rated when the VRA Purchased these bonds********
Credit Risk
Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Authority places emphasis on securities of high credit quality and marketability.
The Policy requires that bankers’ acceptances, negotiable certificates of deposit, and negotiable bank notes, all maturing within one year, have a rating of no less than “P-1” by Moody’s Investors Service (Moody’s) and “A-1” by Standard & Poor’s Ratings Group (S&P). Commercial paper must have a short term debt rating of no less than a “A-1” (or its equivalent) from at least two nationally recognized rating agencies, one of which must be Moody’s or S&P. Corporate notes and bonds, negotiable certificates of deposit, and negotiable bank notes maturing in less than five years must have no less than a “Aa” rating by Moody’s or an “AA” by S&P. Asset –backed securities maturing in less than five years must have no less than a “AAA” rating by at least two nationally recognized rating agencies, one of which must be Moody’s or S&P. GICs must be held with financial institutions with long-term credit ratings of at least “Aa” by Moody’s or “AA” by S&P. The various bond indentures require that bond fund investments, or any collateralizing securities, have no less than a “AA” rating by at least one nationally recognized rating agency.
Although state statute does not impose credit standards on repurchase agreements or money market mutual funds, the Authority has established stringent credit standards for these investments to minimize portfolio risk. (Document attached)

????? Bonds sold

Fellow Taxpayers;
September 27, 2012 is the first day in a long struggle to take back our Commonwealth from those that want to abuse the power the people have given them in order to put the yoke of tax burden on our children’s shoulders without the vote of the people. We meet in the Shenandoah County Circuit Court at 10:30 am to hear pleadings about how our constitutional rights are being trampled by our local RSW Regional Jail Authority and Board of Supervisors who first attempted to sue the citizens for voicing their opinions and then harnessed a 79 million dollar jail that they stated would cost 68 million (service agreement stated) around our necks without the vote of the people. 11 million over budget and they just broke ground!

In essence what the reader should know, is that the RSW Regional Jail was established to build and house inmates for a tri-county area and the project is tremendously over budget. Additionally we are being charged twice the interest rate of a voter backed bond because our officials elected to purchase moral obligation bonds which they say don’t require a referendum of the people. This extra fee equates to $20,000,000.00 taken from your children’s mouth’s and given to the big bankers for the Regional Jail alone. That is not mentioning the various other infrastructure projects (4 total and looking to add another) that our County Board of Supervisors have entered into without the vote or want of the people because our legal system is allowing this to happen.

What you will see during the course of events is that we have uncovered that the VRA purchased the RSW Regional Jail Bonds that Moody’s and Standard and Poor wouldn’t rate. This rating was required by their internal regulations and they enabled these transactions without the meeting of the Board of Directors and issued their own Bonds with their Moody’s rating using the RSW name. Smoke and mirrors was just the beginning and if we are allowed to proceed with the court case we feel that more than just this was hidden from view because the VRA, a public agency of the Commonwealth handling billions in financing couldn’t/wouldn’t answer our interrogatories (questions) within the 21 day period required by law. We feel that the bond sale from the RSW Regional Jail that they tried and failed twice to issue in stand alone position to the public, was sold and transacted inappropriately. The documents that we were given by the other counsel show the Resolutions having a cut-off date and we think the bonds were sold outside that date having no other documents to reference.

The following information is compiled from many compilations and are attributed to the source, document or person. I have provided you a narrative of judicial rulings and actual cases that bear witness to what is transpiring in our back yard. My notes are in blue and all of the mistakes are mine as I have worked late into the night many times to compile the information for the brief and this document.

General George Washington of Fairfax County Virginia wrote to his neighbor Henry
“Light Horse Harry” Lee on 31 October 1786, with a wise observation related to law:
“Precedents are dangerous things; let the reins of government then be braced and held
with a steady hand and every violation of the Constitution be reprehended, if defective,
let it be amended, but not suffered to be trampled upon whilst it has an existence.”

The Virginia Constitution
Article VII Section 10. Debt.
(a) No city or town shall issue any bonds or other interest-bearing obligations which, including existing indebtedness, shall at any time exceed ten per centum of the assessed valuation of the real estate in the city or town subject to taxation, as shown by the last preceding assessment for taxes. In determining the limitation for a city or town there shall not be included the following classes of indebtedness:
• (1) Certificates of indebtedness, revenue bonds, or other obligations issued in anticipation of the collection of the revenues of such city or town for the then current year; provided that such certificates, bonds, or other obligations mature within one year from the date of their issue, be not past due, and do not exceed the revenue for such year.
• (2) Bonds pledging the full faith and credit of such city or town authorized by an ordinance enacted in accordance with Section 7, and approved by the affirmative vote of the qualified voters of the city or town voting upon the question of their issuance, for a supply of water or other specific undertaking from which the city or town may derive a revenue; but from and after a period to be determined by the governing body not exceeding five years from the date of such election, whenever and for so long as such undertaking fails to produce sufficient revenue to pay for cost of operation and administration (including interest on bonds issued therefor), the cost of insurance against loss by injury to persons or property, and an annual amount to be placed into a sinking fund sufficient to pay the bonds at or before maturity, all outstanding bonds issued on account of such undertaking shall be included in determining such limitation.
• (3) Bonds of a city or town the principal and interest on which are payable exclusively from the revenues and receipts of a water system or other specific undertaking or undertakings from which the city or town may derive a revenue or secured, solely or together with such revenues, by contributions of other units of government.
• (4) Contract obligations of a city or town to provide payments over a period of more than one year to any publicly owned or controlled regional project, if the project has been authorized by an interstate compact or if the General Assembly by general law or special act has authorized an exclusion for such project purposes.
• (b) No debt shall be contracted by or on behalf of any county or district thereof or by or on behalf of any regional government or district thereof except by authority conferred by the General Assembly by general law. The General Assembly shall not authorize any such debt, except the classes described in paragraphs (1) and (3) of subsection (a), refunding bonds, and bonds issued, with the consent of the school board and the governing body of the county, by or on behalf of a county or district thereof for capital projects for school purposes and sold to the Literary Fund, the Virginia Supplemental Retirement System, or other State agency prescribed by law, unless in the general law authorizing the same, provision be made for submission to the qualified voters of the county or district thereof or the region or district thereof, as the case may be, for approval or rejection by a majority vote of the qualified voters voting in an election on the question of contracting such debt. Such approval shall be a prerequisite to contracting such debt.
Any county may, upon approval by the affirmative vote of the qualified voters of the county voting in an election on the question, elect to be treated as a city for the purposes of issuing its bonds under this section. If a county so elects, it shall thereafter be subject to all of the benefits and limitations of this section applicable to cities, but in determining the limitation for a county there shall be included, unless otherwise excluded under this section, indebtedness of any town or district in that county empowered to levy taxes on real estate.
The amendment ratified November 4, 1980 and effective January 1, 1981—In subsection (a), substituted "ten per centum" for "eighteen per centum".
• If you will notice that in section (b) it states that NO DEBT and to the framers of the constitution that meant all debt. If you have a “Contract obligation to provide payments over a period of more than one year to any publicly owned or controlled regional project, if the project has been authorized by an interstate compact or if the General Assembly by general law or special act has authorized an exclusion for such project purposes, which is exactly the case for the RSW Regional Jail you should put the project to the vote of the people for approval or you can vote to be treated as a city.*Note how this last sentence paralleled section (4) above*

Town of South Hill V. Allen
{Viewing the Constitution}
Body of text
It was clearly the intention of the framers to afford municipalities protection against undue extravagance by their governing bodies and, at the same time, give them power, with the approval of the electors, to exceed the limitations for the purpose of financing self-liquidating capital improvements.

The language used is plain and unambiguous. It conveys a clear and definite meaning, indicating the purpose intended. When this is the case, courts are not permitted to interpret that which needs no interpretation, and hence general rules for the construction of either constitutional or statutory provisions of doubtful meaning have no application.

"We are unable to adopt the constructive interpolations ingeniously offered by counsel for defendant in error. Why not assume that the framers of the constitution, and the people who voted it into existence, meant exactly what it says? At the first glance, its reading produces no impression of doubt as to the meaning. It seems all sufficiently plain; and in such case there is a well-settled rule which we must observe. The object of construction, applied to a constitution, is to give effect to the intent of its framers, and of the people in adopting it. This intent is to be found in the instrument itself; and when the text of a constitutional provision is not ambiguous, the courts, in giving construction thereto, are not at liberty to search for its meaning beyond the instrument."

"There is even stronger reason for adhering to this rule in the case of a constitution than in that of a statute, since the latter is passed by a deliberative body of small numbers, a large proportion of whose members are more or less conversant with the niceties of construction and discrimination and fuller opportunity exists for attention and revision of such a character, while constitutions, although framed by conventions, are yet created by the votes of the entire body of electors in a State, the most of whom are little disposed, even if they were able, to engage in such refinements. The simplest and most obvious interpretation of a constitution, if in itself sensible, is the most likely to be that meant by the people in its adoption."

"Such considerations give weight to that line of remark of which People Purdy, 2 Hill [N.Y.] [31], 35 [36], affords an example. There, Bronson, J., commenting upon the danger of departing from the import and meaning of the language used to express the intent, and hunting after probable meanings not clearly embraced in that language, says: 'In this way the constitution is made to mean one thing by one man and something else by another, until in the end it is in danger of being rendered a mere dead letter, and that, too, where the language is so plain and explicit that it is impossible to make it mean more than one thing, unless we lose sight of the instrument itself and roam at large in the boundless fields of speculation.'"

"Words are the common signs that mankind make use of to declare their intention to one another; and when the words of a man express his meaning plainly, distinctly and perfectly, we have no occasion to have recourse to any other means of interpretation."

The form of certificate provided for in the contract contains the following language:
{This is the same type wording in the RSW Regional Jail Service Agreement}
"It is the essence of said contract and this certificate that no indebtedness or other obligation or duty on the part of the Town of South Hill shall be created or inferred hereby which may require payment from taxes or general funds or constitute an indebtedness or general obligation of the Town of South Hill within the meaning of, or be in any wise in contravention of the Constitution or laws of the State of Virginia." Thus parties competent to lawfully contract for the construction and sale of a public utility enter into a contract of sale and purchase, wherein they expressly specify that, regardless of present and future conditions, no indebtedness or obligation of any character, constituting an indebtedness within the meaning of a constitutional limitation or in contravention thereof, shall be created against a contracting party.

4. MUNICIPAL, STATE AND COUNTY SECURITIES -- Limitation of Amount -- Section 127 of the Constitution -- Purpose. -- It was clearly the intention of the framers of section 127 of the Constitution {New Constitution 1970; Article VII Section 10}, limiting the amount of bonds or other interest-bearing obligations that may be issued by a city or town, to afford municipalities protection against undue extravagance by their governing bodies and, at the same time, give them power, with the approval of the electors, to exceed the limitations for the purpose of financing self-liquidating capital improvements.

6. CONSTITUTIONAL LAW -- Construction of Constitutions -- Object of Construction -- When Text Not Ambiguous. -- The object of construction, applied to a constitution, is to give effect to the intent of its framers, and of the people in adopting it. This intent is to be found in the instrument itself; and when the text of a constitutional provision is not ambiguous, the courts, in giving construction thereto, are not at liberty to search for its meaning beyond the instrument.

7. INTERPRETATION AND CONSTRUCTION -- Construction of Language -- Where Words Convey Definite Meaning Involving No Absurdity or Contradiction. -- To get at the thought or meaning expressed in a statute, a contract or a constitution, the first resort, in all cases, is to the natural signification of the words, in the order of grammatical arrangement in which the framers of the instrument have placed them. If the words convey a definite meaning which involves no absurdity, nor any contradiction of other parts of the instrument, then that meaning, apparent on the face of the instrument, must be accepted, and neither the courts nor the legislature have the right to add to it or take from it.

8. STATUTES -- Construction -- Where Law Is Expressed in Plain and Unambiguous Terms. -- Where a law is expressed in plain and unambiguous terms, whether those terms are general or limited, the legislature should be intended to mean what they have plainly expressed, and consequently no room is left for construction.

The Virginia Constitution can be amended via two different paths:

1. Through a legislatively-referred constitutional amendment as established in Section 1 of Article XII. These can be proposed in either house of the Virginia General Assembly. If a proposed amendment is approved by a simple majority vote in one session of the state legislature, it is automatically referred to the next session of the state legislature that occurs after the next general election of members of the Virginia House of Delegates. If in that second session the proposed amendment is "agreed to by a majority of all the members elected to each house" it is then placed before the state's voters. It can go on a special or general election ballot. If approved by a simple majority vote, it becomes part of the state's constitution.

2. Through a constitutional convention as established in Section 2 of Article XII. A convention can happen if the state's legislature "by a vote of two-thirds of the members elected to each house" calls a convention.

According to the Virginia Code Constitution (1950) 2008 Replacement Volume;
A amendment to Article VII Section 10 was proposed and agreed to by the General Assembly at the 1997 Regular Session (Acts 1997, c. 771) and was referred to the 1998 Session. It was again agreed to at that session (Acts 1998, cc. 587, 613, 767 and 771) and submitted to the people November 3, 1998 when it was defeated.

Another proposed amendment to theis section was proposed and agreed to by Acts 1989, c. 670 and Acts 1990, cc. 736 and 881, and submitted to the people Nov. 6, 1990 and was defeated.
Fiat is a Latin term meaning “let it be done.” Judicial fiat refers to an order or a decree especially an arbitrary one. It can also refer to a court decree relating to a routine matter such as scheduling.

A Judge’s fiat can be a handwritten and initialed note from the judge directing that some action occur. It can even be an endorsement of another document. A fiat signed by a judge is binding as a court order.

According to “Dykes v. Northern Virginia Transportation District Commission” we have one criterion for determining the existence of unconstitutional debt: Is the full faith and credit of the Commonwealth pledged or committed? If not, no unconstitutional debt is created.

*** The Constitution clearly states “No debt shall be contracted” whether this be a moral obligation or not it is still debt that has to be paid from the taxpayers pockets.

Dykes v. Northern Virginia Transportation District Commission
Original Hearing
{Dykes Won and the proposed bond issue was declared invalid}
CARRICO, Chief Justice, dissenting.
I think the Court must also look to the substance of applicable statutory provisions in determining the real effect, rather than the mere practical effect, of the documents in question. And, when I look at the case in this way, I do not see the evil the majority seems to find lurking behind every word the parties have used to express their undertaking.

{Dykes lost and the proposed bond issue was declared valid}
Dissenting Opinions of the “Dykes v. Northern Virginia Transportation District Commission”;

A rehearing of this case has produced no arguments which were not made and considered when a majority of this Court decided that the proposed bond issue was invalid.[*] No matter how the new majority phrases it, the present decision is simply an approval of an end run around the constitutional requirement of voter approval before a county can be saddled with long-term indebtedness. Accordingly, for the reasons expressed in the former majority opinion and in the dissent now filed by Justice Stephenson, I dissent.

STEPHENSON, Justice, with whom WHITING, Justice, and POFF, Senior Justice join, dissenting.

I join Justice Whiting's dissent. I write separately, however, to express additional reasons to support my position.

Never before has this Court validated a bond issue like the one in question. I find the scheme employed by the County to be a shocking, patent attempt to circumvent and nullify the requirement of voter approval contained in § 10(b).

By the proposed contract with the Commission, the County would agree to make annual payments sufficient to pay the debt service on the bonds. The funds for these payments are derived solely from, and are contingent upon, annual appropriations from the County's general revenues.

The County contends, and the majority holds, that "no constitutional debt was incurred by the County" because the payments are contingent upon the annual appropriations. Although the County states that the bondholders can expect it to make continuous, annual appropriations, it relies upon its right and power not to do so, i.e., to default without fault, as making the scheme constitutional. We should not validate such a scheme.

More importantly, no government should employ such a scheme. Indeed, "government is, or ought to be, instituted for the common benefit, protection, and security of the people," Va. Const. art. I, § 3, and the preservation of a free government requires "a firm adherence to justice, moderation, temperance, frugality, and virtue," Va. Const. art. I, § 15. These quotations are not merely abstract terms; they are found in the Bill of Rights and have been part of our basic law since the Commonwealth was established.

Is anyone so naive that they truly believe that the County, in reality, is not compelled to make annual appropriations until the bonds are retired? What are some of the consequences if the County ceases to make the appropriations? Obviously, the bondholders would have no recourse, and their bonds would be worthless. Quite obviously, also, the County's credit would be seriously impaired, if not destroyed.

The § 10(b) requirement of voter approval of long-term county debt has existed for more than six decades. The requirement was not deleted when our Constitution was revised in 1971.

More recently, the General Assembly proposed an amendment to § 10 that would have allowed counties to issue bonds, without voter approval, "for transportation purposes, the principal and interest on which [would have been] payable exclusively from the pledge of the revenues and receipts of any local taxes...." Acts 1989, c. 670; Acts 1990, cc. 736, 881. On November 6, 1990, however, this proposal was rejected overwhelmingly by the Commonwealth's voters.

12*12 Today, the majority, in effect, has sanctioned what the voters rejected. Consequently, by employing the approved scheme, counties now are at liberty to create bond indebtedness, payable from their general revenues, without submitting the matter to their voters. For all practical purposes, the § 10(b) debt proscription has been nullified by judicial fiat.

[1] Subject to a reserved right not to make the appropriations, the county also would pay the commission's listed expenses.

[*] Apparently, financial analysts and bond counsel consider the detriments of non-performance by the county to be so great that this promise, although not legally binding, provides sufficient security to potential bondholders to endorse the sale and purchase of the bonds.

Commentaries on the Constitution of Virginia Howard Volume 2

Some regional governments will take over more functions from local governments than will others, and the bond capacitates they need will differ accordingly. The commission thus thought it would be unrealistic to attempt to write into the Constitution a specific limit on the debt capacity of regional governments. Instead it recommended that each proposal be submitted to the voters in the region for their approval. It did not recommend that each smaller unit within the region approve the bonds.

Section 10 enumerates the constitutional restrictions placed on the power of localities to incur debt. The Constitution does not itself grant any borrowing power to localities; rather, it limits the power that the General Assembly may confer on the localities. Section 10 (a) limits borrowing by cities and towns; section 10 (b) applies to counties and regional governments. The most notable difference is that cities and towns may issue bonds without referendum but are submit to a ceiling based on assessed value of real property, whereas counties and regional governments are not subject to any ceiling but must in general submit bond issues to referendum. Both parts of section 10 contain a number of exceptions as to kinds of bonds not covered by the section’s general limitations on borrowing. Both the city and the county debt provisions of section 10 draw heavily on the corresponding sections of the Constitution of 1902 (sections 115-a and 127); thus judicial precedents decided under that Constitution remain in good part relevant under section 10.

Virginia Code 1950 The Constitution of Virginia
Page 206 It was clearly intended to afford municipalities protection against undue extravagance by their governing bodies and, at the same time, give them power with the approval of the electors to exceed the limitations for the purpose of financing self-liquidating capital improvements. Town of South Hill v. Allen, 177 VA 154, 12 S.E. 2d 91 (1964).

Page 209 County may not create corporation to contract debt on its behalf. A county may not create a corporation with the sole authorized purpose to contract debt on behalf of the county. See opinion of Attorney General to the Honorable Harry J. Parrish, Member, House of Delegates, 99-090 (01/04/00)

Page 205 It is a restriction upon the power of the legislature to delegate to municipalities the right to incur debts or obligations contrary to the provisions stated therein. Town of South Hill V. Allen, 177 Va. 154, 12 S. E. 2d 770 (1941); Button v. Day 205 Va. 269, 139 S. E. 2d 91 (1964).

Page 207. The rule that arises out of the peculiar nature of service contracts saves such contracts from invalidity under this section. This rule recognizes that a commitment for services to be paid for only after the services are rendered is not a commitment for debt or indebtedness within the meaning of constitutional limitations or prohibitions. Rather this commitment is to honor each year the account payable incurred for services rendered that year. Board of Supvrs. V.Massey, 210 Va. 680, 173 S.E. 2d 869 (1970).

2003 Report of the Attorney General
Page 50, 51; Because capital budget items are non recurring expenses for major projects they have no claim to legitimacy by precedent or tradition.
Article VII Section 10 (b) of the Virginia Constitution limits the ability of a county to contract debt and otherwise incur financial obligations. Subject to certain exceptions, Section 10(b) prohibits counties from contracting debt or establishing a fixed contractual obligation to make payments in future years, unless the proposed debt is authorized by general law and approved by the qualified voters of the county in a duly authorized referendum. The limitation imposed upon county debt by Section 10 (b) has been applied to unconditional long-term obligations requiring the payment of money. Contractual provisions which purport to bind a locality to a fixed obligation to make payments in future years generally are considered to be debts subject to the constitutional restrictions of Article VII Section 10.
The position of this Office, as stated in numerous prior opinions, is that a local governing body may not enter into any agreement which provides for payments of county funds in future years, unless the agreement first is submitted to the qualified voters of the locality for approval in a referendum authorized by general law, or the payments to appropriate funds during each year in which a payment is to be made. A “debt” is described as establishing a unconditional long-term obligation to make payments in future years.

New York 1970’s Credit Crisis “Moreland Commission 1976”
3. The PACB was established in 1976 as a temporary response to the credit crisis precipitated by the Urban Development Corporation’s default the year before on $105 million in bond anticipation notes, a form of so-called moral obligation debt.
4. Governor Hugh Carey responded to the credit crisis and the need to make public authorities more accountable, by appointing a commission under New York’s Moreland Act to examine the process of the creation and management of all the State’s public debt, in particular the origin and growth of moral obligation financing.
5. Moral obligation financing involved bonds issued not by the State, but by public authorities, including the UDC. They were backed by the public authority’s pledge to create, out of funds raised by the bonds, a reserve fund equal to one year’s debt service on the bonds. Should a public authority, because of insufficient revenues, be required to draw on the reserve fund to meet debt service, the Governor was required to so certify to the Legislature, which was then obligated to consider whether to appropriate the amount needed to make up the deficiency in the reserve. Neither the Legislature nor the State however had any legal obligation to do so. What the bondholders counted on was that the State was likely to appropriate the money because failure to do so would cripple the State’s credit. The UDC’s 1975 $105 million default was the first time that the State had to confront its moral obligation even though billions of dollars of such bonds had been issued.
19. The Legislature also imposed a cap on the issuance of further moral obligation debt.

In 2010 all of the major bond insurers were failing and required billions of dollars and a restructuring of the industry.

Confidence Game
How a Hedge Fund Manager Called Wall Street’s Bluff
Christine S. Richard Author
Bloomberg News
Mrs Richard covered the bond market as a Wall Street reporter for 10 years, first for Dow Jones and later for Bloomberg News.
Page 62 and 63
The “moral obligation” bond had been created by a young attorney named John Mitchell, who would later become Richard Nixon’s attorney general and serve 19 months in prison for his role in the Watergate scandal.

During his final year of law school, Mitchell worked as a clerk for the New York law firm Caldwell and Raymond, where he was assigned to look into a federal plan to encourage the financing of affordable housing. Mitchell figured investors would balk at buying bonds to finance the construction of affordable housing if those bonds relied on the program’s loans to high –risk homeowners for repayment. But surely those investors would buy the debt if they believed the government stood behind the bonds. Mitchell suggested that federal housing authorities, though not bound to buy the program’s defaulted housing loans, pledge their intention to do so. Mitchell later applied this concept to all types of debt advising local governments on how to set up a bond issuing authority that, in turn, secured a pledge from the government that it “intended” to help pay off the authority’s debt if necessary. The issuance of these bonds didn’t require a vote by local payers because the municipality was not pledging its full faith and credit to the repayment of the bonds.

The securities were dubbed “moral-obligation bonds,” and they made Mitchell a wealthy man by the time he was 30. Municipalities seeking to raise debt beat a path to his door, turning Mitchell into the best-known public-finance lawyer in the country. Mitchell’s innovation changed the public finance markets radically, making it possible for municipalities to issue much more debt. New York Governor Nelson Rockefeller, who used moral –obligation bonds to finance the construction of affordable housing in New York City in the 1960’s called Mitchell’s creation “the greatest system ever invented.” Mitchell’s former law partner, William A Madison, summed up the moral-obligation concept this way; “it was a---sort of like a gimmick.”

In 1976, the state of New York outlawed the use of moral-obligation bonds after a Moreland Act Commission found the debt had contributed to the state’s fiscal crisis the year before. The commission concluded that the sale of such bonds created “ a dangerous and misleading illusion.” It allowed politicians to put a growing and unrecognized burden on taxpayers, according to the report.

In a November 1984 interview in Bond Buyer magazine, four years before Mitchell died, he was asked to respond to critics’ charges that moral-obligation bonds bypass the voters’ right to a referendum on debt issues. His answer: “That’s exactly the purpose of them”.

Oklahoma Grady County Jail.
2010 population 53,421 [ http://en.wikipedia.org/wiki/Grady_County,_Oklahoma ] This is slightly larger than Shenandoah County!

It was built in the late 1990’s when Oklahoma’s rural counties were told their dilapidated Depression-era jails weren’t up to code. Inspectors cited leaky pipes, crumbling walls, and faulty wiring, and they gave the counties an ultimatum: Fix your jails or empty them. Without a jail, Grady County would have to pay someone else $100,000 a year to house its prisoners.

That’s when a Missouri architect named Lawrence Goldberg entered the picture. In the “law and order” state of Oklahoma, where incarceration rates are high and sentences long, the business of housing prisoners was both expensive and potentially profitable. Goldberg pitched the Grady County commissioners on the idea of building a new jail that would be big enough to house the county’s prisoners and still have space left over to rent cells to other counties or the federal government.

Grady County proceeded with plans to build the jail despite voter objections. Rather than owning the jail, the county decided to lease it. And instead of selling bonds backed by the full faith and credit of the county, the Grady County Industrial Authority sold certificates of participation (COPs). The securities were backed by the county’s annual lease payments on the jail. The stream of payments Grady County expected to make were no different under the lease arrangement than they would have been under the terms of a fond financing. But COPs aren’t considered long-term debt and therefore don’t require voter approval. So while voters in nearby Mayes County sold 3.2 Million of debt with voter approval to build their new jail, the Grady County Industrial Authority sold $12 million of COPs over the objections of its citizens. (These Bonds were twice the interest rate of voter backed bonds) Due to cost overruns on the project, the Grady County Industrial Authority later sold another $5 million of COPs, bringing the total cost of the jail to $17 million.

Almost immediately, the jail had trouble covering payments on its $17 million of debt. Four years after the builders broke ground for the project, a 15 member grand jury found that “officials built a jail that was too big for the county’s jail needs, yet too small to produce enough revenue to sustain the [bond] payments.” Charged with investigation the construction, financing, and operation for the Grady County jail, the grand jury placed the blame on “an inaccurate and overly opportunistic feasibility study,” including “a fatal assumption that the federal government would lease out a large number of beds at a rate of at least $40/day.” One projection submitted by the developer had the federal government paying $60 to $275 a day to house each prisoner. The jail was lucky to get $40 for a federal prisoner.

The report concluded: “These are private bonds and this debt should never be placed on the taxpayers of Grady County without a vote of the people. This debt and financing risk should be shouldered by the private individuals who chose to invest in these revenue bonds.”

The manipulation of our Constitution, as written, has been an ongoing attack by judicial and legislative FIAT since it was decreed by that any debt incurred by the County required the vote of the people. Currently, there is not one government project that you can site under Article VII Section 10 (b) that has to be brought to the people for a vote and this is not what the framers of our Constitution envisioned. The evil that Chief Justice Carrico sought in the Dykes decision (below) is now here.
CARRICO, Chief Justice, dissenting.
“ And, when I look at the case in this way, I do not see the evil the majority seems to find lurking behind every word the parties have used to express their undertaking.” Remember that subtle changes written by lawyers trying to gratify the banking and financial institutions are the first to manipulate our constitution. This concern for big business was reflected in Dykes first decision where Chief Justice Carrico dissenting stated “and I daresay the business and financial communities in this state will be equally surprised and dismayed at the majority’s revelation.”

Article VII Section 10 (b) No debt shall be contracted by or on behalf of any county or district thereof or by or on behalf of any regional government or district thereof except by authority conferred by the General Assembly by general law.

If read as required “No debt” clearly means no debt of any kind, moral obligation or general obligation and that should have been reflected in the Dykes decision. The courts and lawyers seem more concerned with explaining away debt and putting layer upon layer of legalism to blur the Constitution. The court needs to put on corrective glasses to see through to what the Constitution actually says and remember that the Constitution was ratified by the People which hold more power than the few who write and implement the laws. I ask… if you were to have any layperson in any court read section (b) then describe to them what Moral and General Obligations are and they would classify them as debt. They would also state that the funds being used for the RSW Regional Jail, County Government Building, Social Services Building, New Courthouse and now the Edinburg School are being stolen from us without our consent. The court is not here to make someone happy, they are here to correctly interpret the law and dispense justice within the framework of the Constitution first and foremost and then address the Code of Virginia written by lawyers.

Our Country and State have accellerated spending phenominally over the last 15 years and forced the movement of manufacturing overseas which has created a National debt crisis. The only way to stop this is to follow our Constitution and I pray that this court will interperit it as it was intended. If interperited correctly they will require the Shenandoah County Board of Supervisors ask for the vote of the people before they build this jail or proceed with another multi-million dollar project.

It is time to tell the emperior that he has no clothes and now no money!

Mark W. Prince
394 Brook Creek Rd.
Toms Brook, VA 22660
mark@sunpeakusa.com .

Looking up.....I see nothing longwinded...LOL. Is LOL still meaninfull...not reall sure. This one is short.......NO Regional Jail for Shen County!!

Mr. Prince,
If you take out the afore written 6000 word essay attempt to try this case in the court of public opinion, it leaves us with just one question; if the court finds that your argument holds no merit will you stop? If it finds in your favor, then job well done. If not, please go away!

The fact that Judge Hupp is going to rule tomarrow after admitting he did not have time to read the plaintiffs brief shows he is not taking the case seriously. I would like to thank you Mr. Prince for trying but they all work together. Judge Hupp does not have the guts to stand up for the people. It is bigger than all of us. Too many counties, government, towns, who knows what all is involved! It is all about money, not what the citizens want. It is sad but greed rules.

Wow, this just don't go away. Isn't there an article talking about the building process; yet we are still fighting over whether it should be built.

I really appreciate when a citizen spends his time and money to try to call out an issue that might bring to light something done improperly that can save all citizens in our community money in these tough times. Sometimes you have to get the public involved to hold the elected officials accountable for their actions. After all, the officials are supposed to work for it's citizens and should be transparent. I think judge Hupp is a man of integrity but if I was Mr Prince, I would have the judge take the time to read the argument thoroughly before ruling his opinion. Where are you Tea Time? I would think you would be all over this issue because you as a county citizen are paying for this jail.

Mark Prince has way too much time on his hands. Does he have a real job?

Mark Prince is doing all the work so what's the beef from mvctoys and others? It's the same ole story, don't rock the boat and don't tell us anything but the "fairy tales" we've been fed from day one.

How can anyone talk about these few people who come forth and try to do something for the people who ultimately pay these bills???????

Don't tell the masses that Santa, the Easter Bunny and a few other "myths" don't exist either. Tell them that these fast food joints are really "doing it all for you" and "aren't you lovin' it"? And don't mention anything about the Earth that we are destroying or the BS that we've been fed from day one.

Just skip through the lies and believe that all's well. IGNORANCE IS BLISS! So true, so true, and so easy. Accept everything and just pay your taxes folks.

Thanks Mark for trying. . . some of us do appreciate your efforts (and perhaps understand too). It takes brains (first of all ), courage to stand up to these fat cats, and an unbelievable "spirit" to take it on. It's the people who keep fighting the odds and trying to change our world from the corrupt place it has become that gets the critics going.

I appreciate your comments, Unreeldeel, you got it right.

Leave a comment

What do you think?

(You may use HTML tags for style)


Comments that are posted on nvdaily.com represent the opinion of the commenter and not the Northern Virginia Daily/nvdaily.com. If you feel that a comment is objectionable, please click on the Report Abuse link above and in your e-mail to us include the comment. We will review the reported comment and make a decision on deleting it if we feel that it contains inappropriate content.

Look Who 'Likes' nvdaily!

Daily readers: Click the "LIKE" button above to get Daily news and breaking news alerts on your Facebook page.

Activity & Recommendations

Local News Sections

Agency on Aging Agriculture Apple Blossom Festival Aviation Basye Berryville Boyce Breaking News Briefs Business Charities Civil War Clarke County Colleges Corrections Courthouse Notes: Permits, Transactions Courts & Legal News Crime & Public Safety Economy and Jobs Edinburg Education Edward N. Bell Election 2012 Entertainment Environment Fairs & Festivals Fire & Rescue Fishers Hill Fort Valley Frederick County Front Royal George Washington National Forest Guest Column Hard Times Health History Homes In The Spotlight Ledger Livestock Local Markets Maurertown Media Middletown Military & Veterans Moms Mt. Jackson New Market Page County Pets & Animals Politics Quicksburg Religion RSW Jail School News Shenandoah County Shenandoah Farms Volunteer Fire Department Star Tannery State Stephens City Steven A. Boyce Strasburg Toms Brook Traffic & Transportation Utilities Valley 911 Warren County Weather West Virginia Winchester Woodstock Year in Review

News | Sports | Business | Lifestyle | Obituaries | Opinion | Multimedia| Entertainment | Homes | Classifieds
Contact Us | NIE | Place a Classified | Privacy Policy | Subscribe

Copyright © The Northern Virginia Daily | nvdaily.com | 152 N. Holliday St., Strasburg, Va. 22657 | (800) 296-5137

Best Small Daily Newspaper in Virginia!

nvdaily.com | seeshenandoah.com