Court sides with city; appellants’ attorney expects to appeal to Minnesota Supreme Court
The Minnesota Court of Appeals has affirmed a district court’s ruling that the issuance of revenue bonds to fund construction of the Forest Lake City Center was done in a legal manner and did not require a public election.
Though City Center construction is progressing, its run through the courts may not yet be done. In the wake of Monday’s ruling, the lawyer for the appellants said he expects his clients to have him ask the Minnesota Supreme Court to take up the case.
The decision penned by Judge Margaret H. Chutich and filed Monday rejects an appeal of the March 2013 decision by Washington County District Court Judge John C. Hoffman to grant summary judgement to the lawsuit’s defendants, the city of Forest Lake and the Forest Lake Economic Development Authority. The Court of Appeals opinion came one day short of a year after the city was served with a summons and complaint asking the court to enforce a petition for a referendum on the bond issuance.
In district court, the plaintiffs – Lakes Area Business Association, Cameron and Cassandra Piper, and William Anderson – accused the defendants of circumventing the law by using lease revenue bonds instead of general obligation bonds in an effort to avoid a referendum.
Hoffman ruled the use of lease revenue bonds was legal. In this week’s decision, the Court of Appeals agreed.
Judges Chutich, John R. Rodenberg and Michelle A. Larkin heard oral arguments Nov. 13 and had until Feb. 11 to issue a ruling.
Based off the findings of the district court, the appeals court judges analyzed two issues they found to be at the heart of the case: Whether the election requirements of section 475.521 of Minnesota Statutes applies to the local issuance of revenue bonds, and whether the local economic development authority had the power to issue revenue bonds without an election under section 469.103.
Appellants argued the district court incorrectly applied the law because section 475.521 exclusively applies to bonds issued for capital improvements, which by definition include construction of a city hall and public safety facility.
However, the three-judge panel noted that section 475.521 applies to municipalities, not economic development authorities.
“First, even assuming that the redevelopment project is a ‘capital improvement’ within the meaning of the statute …, the plain language of section 475.521 establishes that it does not apply to the entity that actually issued the bonds here: the Forest Lake Authority,” Chutich wrote in the panel’s opinion.
The court also deemed it was within the authority’s right to issue revenue bonds without an election. The statute outlining economic development authorities’ power to issue general-obligation bonds states these bonds must be secured by the full faith, credit and resources of the issuing authority’s city, and therefore are governed by the provisions of chapter 475.
“No such limiting language applies to an economic development authority’s issuance of revenue bonds,” Chutich wrote. “If the Legislature had wanted the provisions of chapter 475 to cover revenue bonds issued under section 469.103, it certainly could have included a similar statement in the statutory provisions authorizing the issuance of revenue bonds.”
Chutich concluded the analysis by writing that the appellants’ “policy concern” should be addressed to the Legislature, since the statutes are clear. Earlier in the 14-page ruling, she wrote that when language is unambiguous, “the letter of the law shall not be disregarded under the pretext of pursuing the spirit.” She also quoted a 1963 Minnesota Supreme Court ruling, stating that changes to a statute must come from the Legislature, “for the courts cannot supply that which the Legislature purposefully omits or inadvertently overlooks.”
Further appeal possible
The appellants’ attorney, Frederic Knaak, on Monday afternoon said he had already heard that day from several contacts inside the Legislature who said their intent is not for the law to be interpreted how it has been by the district and appeals courts.
“Really, the question is whether we can persuade the Supreme Court to take this on, because we really think the city is getting away with something,” he said.
The court accepts review in about one in eight cases that petition to it. In May, it rejected the appellants’ petition for accelerated review, sending the case to the Court of Appeals.
In updating the City Council Monday night, City Administrator Aaron Parrish said the bill for the case’s defense is about $46,000 to date, and he does not expect the cost to increase significantly unless the case is heard by the Supreme Court. The city will be responsible for 15 percent of the legal fees, with the League of Minnesota Cities picking up the rest.