Harris v. City of Little Rock

Summary

The Supreme Court of Arkansas affirmed a chancery court judgment upholding Little Rock's issuance of $16.5 million in capital-improvement revenue bonds, including bonds financing land acquisition for the William Jefferson Clinton Presidential Park. The court held that Amendment 65 permits repayment from user fees and other revenues derived from governmental operations, but prohibits direct or indirect use of tax revenues to secure repayment; the record did not establish that tax revenues would be used indirectly. The court also upheld increased recreational-facility user fees as reasonable fees rather than illegal exactions or taxes.

Holdings

1. Amendment 65 permits revenue bonds to be repaid from rents, user fees, charges, or other non-tax revenues derived from the financed project, the operations of any governmental unit, or another special fund or source. Because the City's Parks and Recreation Department is an instrumentality of the City, the user fees from its facilities could secure repayment of the bonds.
2. Amendment 65 prohibits a municipality from doing indirectly what it cannot do directly; using tax revenues to offset losses caused by pledging user fees for bond repayment would indirectly use tax revenues to secure the bonds. However, Harris failed to prove that the City had actually used or would necessarily use tax revenues for that purpose, so the challenge was premature and advisory.
3. The increased user fees were valid fees rather than taxes because they were imposed on facility users, deposited into a separate enterprise fund for the parks, and fairly and reasonably related to the benefits conferred by the facilities. The fee increases therefore did not constitute an illegal exaction.

Questions Presented

1. Whether Amendment 65 permits revenue bonds to be repaid with user fees and other revenues generated by governmental units and municipal instrumentalities other than the particular projects financed by the bonds.
2. Whether the City's covenant to provide sufficient funds for park and recreational operations indirectly pledged tax revenues to repay the bonds in violation of Amendment 65.
3. Whether the City's increased recreational user fees were actually taxes or otherwise constituted an illegal exaction because they were not fairly and reasonably related to the benefits provided.

Disposition

affirmed