Price v. City of Mesa – 12/10/2014

December 2, 2014

Arizona Court of Appeals Division One holds City of Mesa not required to obtain voter approval prior to funding light rail project from excise taxes.

In January 2014, Mesa’s Mayor and City Council passed a resolution to advance costs for a light rail extension and parking lot in downtown Mesa.  Price, a Mesa resident, brought suit claiming the funding sources for the project were uncertain, insufficient, risked interfering with taxpayer-approved bonding programs, and required an election under Article 7, Section 13 of the Arizona Constitution.  Mesa contended it only intended to pledge excise tax revenues to fund the project and that Mesa’s taxpayers would not be responsible for repayment of those revenues.  Mesa further argued that because it did not assume a general liability to repay, the approved financing was not subject to the constitutional election requirement of Article 7, Section 13 of the Arizona Constitution.  Both sides moved for summary judgment on these legal grounds, and the trial court granted Mesa’s motion.

The Court of Appeals affirmed.  The appellate court rejected Price’s contention that the funding for the light rail extension required prior voter approval.  Price first argued that A.R.S § 28-7692, which permits municipalities to issue and sell notes for the funding of transportation projects, required prior voter approval.  The court noted that the express language of the statute includes no such requirement.  The court also rejected Price’s constitutional argument regarding voter approval.  The Court of Appeals noted that a city is obligated to obtain voter approval before issuing bonds if it pledges its general funds as security.  Ariz. Cons. Art. 7 § 13.  However, the court agreed with Mesa that the obligation actually incurred was a limited pledge from a limited source, excise taxes, not affecting Mesa’s general funds; thus no special election was necessary.  The Court of Appeals further noted that the legislature had already established that funding obligations for transportation projects were not general obligations.  A.R.S. § 28-7697.A

The Court of Appeals also rejected Price’s contention that the funding for the light rail’s Park and Ride parking lot required prior voter approval.  Price argued that the parking lot was a utility undertaking, requiring voter approval under A.R.S. §§ 9-521 and 523.  Assuming without deciding that a parking lot qualifies as a utility undertaking, the Court of Appeals rejected this argument.  It noted that the source of the funds approved for the parking lot were not municipal bonds under § 9-521, but rather excise taxes.

Judge Orozco authored the opinion, and Judges Howe and Portley concurred.