Board of Commissioners of Orleans Levee District v. Taxpayers

Citations: 396 So. 2d 502; 1981 La. App. LEXIS 3666Docket: No. 12213

Court: Louisiana Court of Appeal; March 9, 1981; Louisiana; State Appellate Court

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The Board of Commissioners of the Orleans Levee District (Levee Board) is appealing a trial court's December 9, 1980 judgment that denied its motion for judgment and declared the sale of Marina Bonds, Series 1980A, invalid, with costs to the plaintiff. The intervenors, including the State of Louisiana and Save Our Wetlands, Inc., challenged the motion on several legal grounds. On August 20, 1980, the Levee Board authorized the issuance of $31,080,000 in bonds to fund a marina construction adjacent to the Orleans Lakefront Airport, with interest capped at 12% and the option for sale by sealed bids or negotiation. The bonds were to be backed by revenues from the marina and available tax proceeds after prior bond payments. The trial court's judgment was affirmed, adopting its reasons for judgment, which aligned with the appellate court’s findings. The Levee Board's authority to develop and maintain a marina was established under R.S. 38:281, which enables levee boards to undertake recreational projects and utilize available funds. Additionally, R.S. 38:1235.1(C) grants the Levee Board jurisdiction to construct and maintain recreational facilities. The Levee Board also claims authority to issue bonds under Art. VI, Part III, Section 40 of the 1974 Louisiana Constitution, provided there is approval from the State Bond Commission.

Bonds issued by the Board under Paragraph (A) are to be sold according to legal provisions concerning levee districts, allowing the Board to issue bonds without requiring legislative approval. The bonds are structured to be repaid through revenues generated from a proposed marina and are backed by a secondary pledge of tax proceeds from Section 39, Article VI of the Louisiana 1974 Constitution.

The governing authority of levee districts can levy a tax up to five mills annually for constructing and maintaining levees and related purposes, with the Orleans Levee District limited to two and a half mills. If additional funds are needed, tax increases can be proposed, subject to voter approval in an election.

The primary role of the Orleans Levee Board is to protect New Orleans residents through levee construction and maintenance, and they are permitted to issue bonds without voter consent. However, the authority to operate a marina is secondary and does not fall under the same provisions, requiring reliance on Part II of the Louisiana Constitution for bond issuance authority.

Article VI, Section 37 allows political subdivisions to issue bonds for revenue-producing public utilities, with security provided by mortgages or pledges of income from these utilities, but not from other subdivision revenues. The proposed bonds are a mix of revenue bonds and General Obligation Bonds, with the latter requiring voter approval as defined in Article VI, Section 44(6). General Obligation Bonds necessitate majority voter approval after authorization by the State Bond Commission.

Article VI, Section 33 of the Louisiana Constitution mandates electoral approval for General Obligation Bonds issued by any political subdivision, as their repayment relies on ad valorem taxes levied on citizens. The Board lacks legal authority to issue such bonds without voter consent. Additionally, the proposed repayment method violates the Constitution by relying solely on revenues from a proposed Marina and certain tax proceeds, which may only be pledged within specific constraints outlined in Article VI, Section 37. This section permits bonds to be secured by mortgages on public assets or revenues from public utilities but prohibits charges against other income or revenues of the political subdivision. The Louisiana Supreme Court's ruling in Bd. of Comm, of La. LAMPCO v. All Taxpayers clarified that revenue bonds must be payable exclusively from project revenues and not impose obligations on other municipal assets. Therefore, any pledge of revenues or taxes not derived from the project would contravene Section 37's stipulations. The Board acknowledges this restriction, which applies to bonds authorized by legislation, further emphasizing the prohibition against issuing such bonds without compliance with these constitutional limitations. In 1975, specific authority and restrictions were granted to the Orleans Levee District under R.S. 38:1235.1 et seq.

Funds available for board objectives are restricted by both constitutional provisions and R.S. 38:1235.3. This statute allows the board to issue bonds, with payment terms determined by the board, and permits the mortgage and pledge of reclaimed lands, cash, leases, and other rights related to the development. The intent is for the bonds to be self-sustaining, prohibiting the use of ad valorem taxes for payment, as these taxes do not derive from the financed development. 

R.S. 38:1235.3(A) caps the bonds at a principal amount of $15,000,000, and any issuance exceeding this limit is null and void. The Orleans Levee district is subject to this limit, and any proposal to exceed it is invalid. Additionally, the board is authorized to issue revenue-producing bonds that must be self-sustaining; failure to meet this requirement violates legislative authority. The State of Louisiana contends that the board lacks ownership of the water bottoms for marina construction, although the Louisiana Supreme Court has granted the Levee Board limited rights over navigable water bottoms per R.S. 38:1235.2, as established in Arnold v. The Board of Levee Commissioners of the Orleans Levee District, 366 So.2d 1321 (La.Sup. Ct. 1978).

The Levee Board intends to secure a AAA rating for a bond issue by privately placing an insurance policy, which raises legal concerns. According to R.S. 38:1235.1(1), reclamation and construction work must be contracted out in compliance with existing laws. R.S. 38:2212 mandates that any public work over $10,000, including labor and materials, and material purchases exceeding $2,500, must be publicly advertised and awarded to the lowest responsible bidder. The issuance of the insurance contract without public bidding contravenes these public bid laws and exceeds the Levee Board's authority. Although the Board proposed to ensure compliance with the Public Bid Law at trial, this offer was deemed too late to rectify the issue. Political subdivisions must adhere strictly to legal requirements before obtaining court approval. Consequently, the Orleans Levee Board lacks the authority to issue $31,080,000 in Marina Bonds, Series 1980 A, leading to the affirmation of the trial court's judgment.