VOL. 18  ISSUE NO. 43   |   OCTOBER 24 – 30, 2012


CCUSD’s appeal in bond money case under advisement

‘Voters obviously need to know what they’re voting for’
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PHOENIX – Oral arguments were held on Tuesday before Arizona Court of Appeals Judges Patricia A. Orozco, Maurice Portley and Randall M. Howe in the appeal of Superior Court Judge Eileen Willett’s order in favor of Jayne Friedman and Rich Bail against Cave Creek Unified School District (CCUSD) in their challenge to the district's use of bond money for projects other than those authorized by voters in 2000.

kimberly demarchiAttorney Kimberly Demarchi (r) of Lewis and Roca LLP, representing CCUSD/appellants, stated, “The cause of action doesn’t entirely fit,” and asked, “Can we live with the damage it causes?”

Demarchi said even with the facts understood, the law doesn’t fit the circumstances and argued, “There must be an actual contract and there must be an impairment of that contract.”

Citing federal law, Demarchi stated, “Impairment only exists if there is an actual contract, not a quasi-contract,” adding, “Statutes don’t create contracts.”

Quoting from the California Constitution, which has additional language about bonds being presented to voters, Demarchi said Arizona’s Constitution did not contain that additional language.

Demarchi argued the trial court erred by implementing statute.

Howe asked Demarchi if bonds could then be used for anything.

Demarchi claimed they could be used for anything the district wants until we change our Constitution.

She stated A.R.S. §15-1024(B) addresses how to use surplus bond money and the expectation was that taxpayers would get the surplus money back.

Pointing out that was only one of the ways to use surplus funds, Demarchi said, “Even if we accept elections are contracts, we need to have reasonable expectations.”

Addressing the special laws provision, Demarchi said there was concern about universal people who need help and only helping some. She stated it was perfectly OK for special circumstances to be brought to the attention of the legislature without it only benefiting that one party.

Stating it is not a one-member class, Demarchi stated Section 34 pertained to every district that had bond money held between 2000 and 2004 but didn’t have any information as to how many districts that involved.

She said, during the financial crisis the law was enacted to benefit any districts that had such surplus funds.

According to Demarchi, the question that was never asked was if there were any districts with money held after 2004.

christina sandefurRepresenting plaintiffs/appellees, Attorney Christina Sandefur (r) of the Goldwater Institute addressed the tests of the special law clause and said it goes back to what the framers of the law intended.

She said, “Once this class was created it was already closed.”

In order to meet the test, there must be elasticity, whereas members could enter and exit the class, explained Sandefur, stating this class was already closed by past characteristics.

Sandefur said a class cannot be under-inclusive, noting only about 3 percent of districts could possibly benefit.

She said it was curious as to why the legislature chose 9 years for the expenditure of those funds and there needed to be a rational reason why the class was so narrow.

The purpose, she said, as it was presented to the legislature, was “to allow Cave Creek to use its 2000 bond money.”

Responding to questions from Portley as to whether the legislature could just take the money and put it in the general fund and redistribute it, Sandefur reiterated, “Only the public can approve a bond measure.”

She said the district could have gone back to the voters to ask if the money could be used for something else but they didn’t, and stated, “We have to look at the law in place at the time.”

During rebuttal, Orozco noted the Constitution provides bonds must be submitted to voters and said, “Voters obviously need to know what they’re voting for.” She asked Demarchi if nine years later voters didn’t still have the right to decide how that money is spent.

DeMarchi claimed it lacked legal theory.

Portley told the parties they would take the matter under advisement, which Sandefur said afterward could take anywhere from four to six months.

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