DALLAS -- McAlester, Okla., voters have approved the state's first-ever revenue bond limits for a city, in a referendum triggered by concerns over a plan to finance a for-profit prison project.

In an Oct. 15 special election, taxpyers approved an amendment to the city charter that requires voter approval of all bonds in excess of $500,000 that are issued by the city's nine trust agencies. City officials say they now await a legal challenge to determine exactly how the debt limits will work.

"The way the petition was worded, we didn't know if it meant $500,000 aggregate or per occurrence," said McAlester City Manager Randy Green.

He said the city's lawyers have interpreted the measure to mean that all debt sales above an aggregate of $500,000 must be approved by a majority of voters. The measure affects trust agencies that sell revenue bond debt for public works, the local airport, housing, the hospital, and economic development.

"We feel like it will be an immense detriment to economic development and growth," he said.

In fact, it was the push by developers to build an $18 million privately operated, for-profit prison with McAlester-issued revenue bonds that prompted the local campaign for the referendum. While the vote was designed to block that issue, it effectively limits future revenue bond issues without voter approval.

Outstanding debt is not affected by the new restrictions.

Mr. Green said the campaign was led by officials at the First National Bank & Trust Co. in McAlester. Officials there did not return telephone calls.

The measure was approved with 56% of the vote.

"There was not a coordinated effort against the referendum," Mr. Green said, noting the legal prohibition against a city's using tax dollars in such a campaign. "Many people may have just assumed that this is what the city wanted."

The vote comes as the city is preparing to seek voter approval next year for an $8 million general obligation program. The issue would fund street and other infrastructure work and would be the first GO debt sold by McAlester since the late 1970s.

A city of about 16,000 in southeast Oklahoma, McAlester does not have a rating from a national agency for any of its $3 million in outstanding standing GO debt.

Bill Moyer, executive director of the Oklahoma Municipal League, said that if the idea of revenue bond limits catches on in other Oklahoma cities, only the state's 85 home rule cities -- such as McAlester -- can legally amend their charters to put such local controls in place.

As in most states, Oklahoma laws already require that all GO issues be approved by voters. Nationally, however, most local governments have no restrictions on the use of self-supporting revenue bonds.

Oklahoma began to liberalize the use of revenue bond debt in 1953 with the passage of the state's Trust Authority Act, which allowed local government to establish revenue bond-issuing agencies that were not subject to voter approval.

Paul Nieto, chairman of Nieto, Cumbie & Associates Inc. in Oklahoma City, the financial adviser to McAlester, said that while debt limits are new, efforts by voters to control trust agencies are not.

He said some cities now must have voter approval before raising the water and sewer rates charged to fund public works projects financed by the trust agencies.

It is not yet clear if the vote in McAlester will trigger similar referendums in other parts of Oklahoma. Adds Mr. Moyer, "I'm sure that when word gets out, there may be more attempts at this."

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