CHICAGO -- An Iowa district court judge on Friday dismissed a lawsuit filed against state Treasurer Michael Fitzgerald by a taxpayers watchdog group, attempting to stop the issuance of $375 million of tax and revenue anticipation notes planned for this week.
The dismissal of the suit means the sale of the Trans is "back on track," according to Mr. Fitzgerald, who added that the Trans would be priced Wednesday or Thursday.
The suit, filed Thursday by Iowans for Tax Relief, had threatened to delay the issuance of the Trans that had been scheduled for this week. Proceeds from the one-year notes would be used for late school aid payments and other expenditures.
William Smith, attorney for the taxpayers group, said the case will be appealed to the Iowa Supreme Court. Mr. Fitzgerald contended the suit has no merit and that the appeal would not delay the Trans issue. He added that the appeal of the suit, however, would be noted in the official statement for the issue.
The suit alleges that the state's cash accounting system hides a long-term deficit. It also claims the state's issuance of Trans is effectively a refinancing of long-term debt and thus unconstitutional.
Polk County District Judge Harry Perkins dismissed the suit on procedural grounds, saying the tax-payers group was precluded from filing, the suit because it failed to appeal a similar suit that was dismissed last year, according to Iowa Deputy Attorney General Charles Krogmeier.
That suit was filed against the state's Executive Council -- a state agency including the governor, secretary of state, auditor, treasurer, and secretary of agriculture -- and all its members as individuals.
The suit was dismissed in April 1991 because the taxpayers group did not first seek to redress its complaints before a state agency as required by state law.
In January, the group addressed its complaints to State Auditor Richard Johnson and Mr. Fitzgerald, Mr. Krogmeier said. Both officials refused to issue a decision on the group's complaints, saying they did not have control over the state's accounting system, he explained.
Mr. Krogmeier added that Judge Perkins dismissed the latest suit because the plaintiffs also failed to use an appeal process to obtain responses to their complaint from Mr. Johnson and Mr. Fitzgerald.
The latest suit was the second setback for the Trans, which originally had been expected to be issued July 1. But lack of a fiscal 1993 state budget by mid-June delayed the sale. Mr. Fitzgerald said getting credit enhancement on the Trans may have been difficult without a completed budget.
A $3.4 billion general funds budget was finally approved on June 30, a day before fiscal 1993 began.
Iowa's $375 million Trans issue is rated MIG-1 by Moody's Investors Service and SP-1-Plus by Standard & Poor's Corp. Goldman, Sachs & Co. is the senior manager for the deal. Union Bank of Switzerland issued a letter of credit for the issue.
A Union Bank of Switzerland spokesman said the lawsuit is being "explored," adding that an "assessment on how to proceed" will be made after the review.
George Leung, a vice president and managing director of state ratings at Moody's, said agency officials are expected to meet soon with state officials to discuss the suit and the state's current financial situation.
Bob Swerdling, a director at Standard and Poor's, said the dismissal of the suit had made the rating agency "more comfortable with the state retaining its ability to employ cash flow borrowing to help them address their expenditure patterns throughout the fiscal year."