Governments and urban renewal agencies across the state paid close attention to a 2015 Idaho Supreme Court case, Greater Boise Auditorium District v. David R. Frazier.
The district asked Idaho’s top court to overturn a pair of court decisions that denied the district permission to enter a financing agreement with Boise’s urban renewal agency to borrow money for an expansion of Boise Centre. Frazier, a Boise government watchdog, wanted the district to either pay cash for the expansion or take a bond measure to the voters.
The court granted the district’s request. The decision affects governments throughout Idaho because it clarifies that they can enter repeated leases, even if they’re structured as a series of debt payments, as long as the governments aren’t bound to them for more than a year at a time.
Highway districts are one type of government that, perhaps unexpectedly, could benefit from the ruling.
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Many highway districts, especially small ones, like to lease heavy equipment because a single machine, such as a road grader, can cost hundreds of thousands of dollars, said Stuart Davis, executive director of the Idaho Association of Highway Districts.
If those districts were to pay cash instead, Davis said, they might deplete their savings paying for the equipment. Then, if the equipment breaks down, they’d have to wait until they save enough money to fix it before putting it back to work. So a project might be delayed.
With a lease, Davis said, the districts can budget their costs more effectively. They also have less down time because most vendors pay for repairs and short-term replacements while the leased equipment is being worked on, he said. So they’re better at satisfying their mandate to build and fix roads.
Often, a lease is more fiscally responsible than outright ownership, Davis said.
“You get a much bigger bang for your buck,” he said. “Frazier may have lost the decision, but if his final goal was to get better and more accountable and more transparent government, he got it.”
Some districts were struggling to lease equipment before the Supreme Court ruling because banks worried they weren’t legal, Davis said. That won’t be a problem now.
The Idaho Constitution requires governments to get approval from two-thirds of voters before taking on debt for more than one year, unless the debt is for “ordinary and necessary expenses.” A decade ago, the same David R. Frazier from last year’s case argued to the Idaho Supreme Court that the city of Boise’s plan to borrow money long-term for an airport parking garage didn’t meet the ordinary and necessary threshold. The court sided with Frazier, saying that for the debt to be considered necessary, it should be required “on an immediate or emergency basis.”
Frazier worried the Supreme Court’s most recent decision will make public debt a free-for-all now that the auditorium district has established a legal path. Chris Meyer, the attorney who argued the district’s case, said it was “really sort of dodging a bullet rather than establishing a new set of opportunities for financing.”
“We didn’t carve out any new liberal opportunity,” Meyer said.