ATLANTA -- West Virginia state lawmakers late Monday approved legislation permitting the School Building Authority to sell $180 million of debt held up by the state Supreme Court since this summer.
But before selling the bonds, which will now be backed by sales taxes, the authority plans to bring a test care before the high court, authority executive director Clacy Williams said yesterday.
"Right now, we are just very pleased about passage of the bill, and I don't have any timetable" for the test case, Williams said. "But we will move with it soon."
A spokesman for Gov. Gaston Caperton, who pushed hard for the bill, said the governor would soon sign the measure, which includes a new ethics provision banning contacts between the authority and persons or firms involved in illegal activity.
Passage of the bill came in the second day of a special session called by Caperton. The legislation earmarks $12 million a year from consumer sales taxes to secure up to $185 million of new School Building Authority bonds. It also provides $4 million in annual sales taxes to fund up to $50 million of bond issuance by the West Virginia Regional Jail Authority.
The school authority had been set to sell about $190 million of new-money debt and $150 million of refunding bonds in June before a lawsuit was filed by two taxpayers in a state court contesting the authority's legal right to issue annual appropriation-backed bonds. The state Supreme Court agreed with the plaintiffs in a July ruling that banned future new-money sales of such bonds unless voters first approve them or a dedicated revenue source is found.
The legislation approved Monday also includes an ethics provision. According to a copy of the bill obtained by The Bond Buyer, the authority "may not employ or contract with any person or business entity acting as an investment adviser, underwriter, broker, dealer ... transfer agent, attorney, bond counsel, trustee ..." if the authority finds that within five years of the date of a proposed sale that person or entity has been convicted of a securities-related crime and bribery, perjury, or larceny.
The provision also bans contracts with bond market participants who have offered more than $100 to a public official or the "immediate family" of a public official if the gift "constituted a material part of the factual basis" upon which that person was convicted of a felony or misdemeanor.
According to Rep. Robert Kiss, D-Prosperity, the provision was prompted by lawmakers' concerns about the connection between Donaldson, Lufkin & Jenrette Securities Corp. and Bill Collins, the defendant in a recently concluded federal extortion trial in Kentucky.
Earlier this year, before the taxpayers suit, the authority chose Donaldson to underwrite both the new-money issue and a proposed $150 million refunding deal.
Last week a Frankfort, Ky., jury found Collins, the husband of former Kentucky Gov. Martha Layne Collins, guilty of one extortion count and a related tax fraud charge. He was accused to forcing Donaldson, Lufkin and another firm, Cranston Securities Co., to make political contributions and invest in a horse partnership business in exchange for state bond business between 1983 and 1987, his wife's term of office.
A spokesman for Donaldson declined comment until the firm had obtained a copy of the bill.
