Court backs school district in lawsuit

Deschutes County Circuit Court Judge Alta Brady ruled in favor of the Sisters School District in a lawsuit brought against it last May by Mike Morgan of Sisters.

Morgan sued to stop the district from making any further payments on $2.1 million in "Full Faith and Credit Obligations" the district issued in 2007 to fund replacement of the elementary school roof and other facilities needs.

The suit argued that the Full Faith and Credit Obligations agreed to by the school board on March 12, 2007, are in fact bonds and the school board should not have obligated the district without a vote of the taxpayers.

In her ruling, Brady determined that Morgan lacked standing to pursue the claim. In an advisory opinion on the merits of the case, Brady found that the district acted legally under Oregon law.

"We are particularly gratified by the fact that the judge not only dismissed the case on grounds that Mr. Morgan did not have legal standing to bring the lawsuit but also issued an advisory opinion upholding the district's right to undertake the FFCO borrowing," said school board chair Christine Jones. "I regret very much that we have to spend the district's scarce resources - time and money - on lawsuits of this nature, rather than on educating children."

Morgan had argued that repayment of the debt could potentially require diverting funds from educational purposes and force the district to raise taxes.

Brady stated that "if Plaintiff's argument is taken to its logical extreme, a taxpayer could challenge, through a declaratory judgment, any financial decision made by a public entity by alleging an impact on the availability of money for provision of public services."

On the substance of the issue - whether the district was required to seek voter approval before incurring the debt - Brady stated that:

"The financing agreement provides for payment from existing non-restricted revenues, including taxes levied within constitutional limits. Voter approval is only required under ORS 328.205 ... when bonded indebtedness is payable from taxes exceeding constitutional limits. Defendants (the school district) were not required to obtain voter approval for the obligations issued pursuant to ORS 271.390." (Click here to view the full text of the ruling.)

"Judge Brady's ruling is not unexpected. We have always believed that this case would not be resolved short of the appellate court," Morgan said.

"Taxpayers should consider this: If I don't have legal standing to bring this lawsuit then who does? The short answer is nobody. If taxpayers don't have standing to bring suit to protect themselves from unlawful taxes then our only recourse is civil disobedience; e.g., the Boston Tea Party. We trust we will prevail on appeal."

Morgan noted that a bill recently introduced by Rep. Gene Whisnant (R-Sunriver) would make explicit in law the argument that school districts and other entities cannot issue "Full Faith and Credit Obligations" without a vote of the people.

Whisnant earlier told The Nugget that the legislation does not change the law but merely "amplifies" what is in current law.