Really interesting arguments at the Idaho Supreme Court this morning in the case of Greater Boise Auditorium District vs. David Frazier, in which the district is appealing a lower-court ruling denying judicial confirmation for a lease-back arrangement on a downtown convention center expansion. Judicial confirmation would rule that the lease doesn’t violate the Idaho Constitution’s debt restrictions. Numerous government entities have filed amicus briefs siding with the district, saying that if 4^th District Judge Lynn Norton’s ruling stands, it’ll inhibit a wide array of normal business practices for local government entities.

The question is the meaning of Article 8, Section 3 of the Idaho Constitution, which is entitled, “Limitations on County and Municipal Indebtedness.” It forbids any county, city, school district, or other subdivision of the state from incurring “any indebtedness, or liability, in any manner, or for any purpose, exceeding in that year, the income and revenue provided for it for such year, without the assent of two-thirds of the qualified electors thereof.” Later in the same section, it says, “This section shall not be construed to apply to the ordinary and necessary expenses authorized by the general laws of the state.” It also makes provisions for bonds paid off by revenues, which require simple majority voter approval.

“What this means is essentially that local governments need to operate on a cash basis,” attorney Chris Meyer told the court on behalf of GBAD. “Plainly, the expansion of auditorium district facilities is not an ordinary and necessary expense within the meaning of the Constitution, and the district has never suggested otherwise. Nevertheless, the center lease does not require voter approval.” That’s because it contains a non-appropriation clause, allowing the district to walk away from the deal at any time with no liability, he said.

John Runft, attorney for Frazier, argued that the lease deal is really “an agreement to acquire real property … It’s a long-term investment, that’s what it is. … I believe there the court must look at the intent of the transaction.” Runft said, “The liability that you would lose your investment, I think, is a form of liability.”

Chief Justice Jim Jones said, “It seems to me that the framers of the Constitution were not intent on saying, ‘We’re just going to limit any long-term liability just for the heck of it.’” He cited an earlier decision from the court that Article 8, Section 3 “was designed primarily to protect taxpayers and citizens of political subdivisions. If we say that the lease before us is acceptable under Article 8 Section 3, what will be the harm to the taxpayers?”

Runft said while taxpayers in the auditorium district wouldn’t have to pay more, “I believe the harm to the taxpayers generally would be setting this case as a precedent.” If the court followed that precedent in other cases, he said, “I think the taxpayers would lose their right to be involved.”

Justice Roger Burdick said, “You basically say they would lose all of the lease payments they have paid in the past. But on a daily basis, governmental agencies, districts, etc., make bad deals.They buy a lawnmower that’s no damn good, and they’ve lost that amount of money. So I don’t understand. The issue is risk to future generations. And if that risk has been assumed by some bank or some third party… .” He said, “That’s one of the problems with judicial confirmation. The people who oppose judicial confirmation seem to come in and say the sky will fall because of these what-ifs, but there’s no evidence to these what-ifs.”

Runft said the framers’ intent was: “Pay cash, otherwise go to the people. That is the ultimate purpose of our being here, to defend the right of the people … to have their voice heard.” To that, Jones commented, “You go to the people to get their approval on something that they’ll never have to pay either way.” Said Runft, “I accede to your observation on this case, but if the precedent is set… .”

Jones said, “Every state lease has these very same provisions. Every long-term lease made by every highway district, every school district, every subdivision of government in the state of Idaho has non-appropriation provisions, just so that they can get around the restrictions of Article 8, Section 3.”

Meyer said the district committed full funds to buy the facility within a year if judicial confirmation was denied, and it has the money. “That is a done deal, that will happen, and the funds are available to fund that if this court denies judicial confirmation,” he said. The long-term lease agreement was a separate financing step after that, and is what requires the judicial confirmation. “The framers were concerned with solving a particular problem, which was that local taxpayers couldn’t get out of obligations that had been made that ultimately proved to be economic disasters,” Meyer told the court. He said that’s not at issue here. “The Legislature has seen fit to specifically authorize the district to undertake the kinds of leases that it has undertaken in this case.” If, as Runft argued, that would open a Pandora’s box in other cases, Meyer said, the Legislature is the place to address that.

The justices took the case under advisement, and will issue their written ruling later.