CHICAGO -- Oakland County, Mich., residents have narrowly approved up to $500 million of unlimited-tax general obligation bonds for an incinerator and recycling program, but debate over that and future bond issues remains.

At the center of the controversy is the issuance of limited-tax bonds by the county and other local issuers in the state. Those bonds have been under attack by taxpayer advocates in the state who claim the bonds violate the 1978 so-called Headlee Amendment to the Michigan Constitution because they are not approved by voters.

That and other concerns regarding the amendment have reached Gove. John Engler, who plans to appoint a commission to review all the provisions of the amendment, including its impact on bond issuance, state officials said.

Oakland County officials had originally planned to sell limited-tax bonds -- backed by revenues from the program and the full faith and credit of the county up to the limit of its current taxing capacity -- to finance the solid waste management program. But over the summer, the 27-member board of commissioners opted instead to place the bond issue on the Nov. 5 ballot with an unlimited GO tax pledge that would allow the county to raise property taxes to pay off the bonds.

County and taxpayer group officials interpreted the decision to place the measure on the ballot differently.

Doug Williams, the county's chief deputy treasurer, said going for a vote was a way to find out whether residents in the 63 communities within the county wanted the program.

"It was a referendum on the incinerator," he said, adding that the county's action had nothing to do with its ability to issue limited-tax debt.

Mr. Williams said the county decided on the referendum route because many communities were reluctant to make waste commitments without a clear indication of how their residents felt about the program. He pointed out that while the county needed 600 tons of waste of day to support the system, only 80 tons have been committed so far.

"Now that we have a popular vote, we expect lots of communities to sign up," explained Anne Hobart, a spokeswoman for the county's public works department.

To Richard Headlee, chairman of Taxpayers United of Michigan, the vote came because his organization threatened to sue the county if it issued the bonds with a limited-tax pledge, which he claimed is a fabrication by bond attorneys to get around his namesake amendment to the state constitution.

Mr. Headlee said those kind of bonds are illegal because they violate the amendment, which he contended requires voter approval of full faith and credit bond issues, as well as any new or increased taxes.

"The county did a 180-degree turn and came back to follow my counsel and put [the bond issue] on the ballot," said Mr. Headlee, who publicly supported the bond issue one it was placed on the ballot. "Now they have the constitutional authority to do things right."

Mr. Headlee, who said he expects to serve on the governor's commission, added that he hoped the voter-approved issue would mean the county would cease issuing limited-tax bonds in the future.

Mr. Williams said the solid waste GO issue did not represent a change in the county's philosophy and that a $4 million limited-tax issue was scheduled to be sold this week.

John Everhardus, a lawyer at Dickinson, Wright, Moon, Van Dunsen & Freeman, the bond counsel for Oakland County and many other issuers in the state, defended the use of limited-tax bonds, saying the amendment only limits a government's ability to raise taxes.

That situation does not apply to limited-tax bonds because an issuer cannot raise taxes beyond its millage limit to payoff the bonds, he said.

But Mr. Headlee contended that one day someone will sue and win, affecting billions of dollars of outstanding limited-tax bonds.

"Some day in the future, this thing is going to be resolved and a whole lot of bondfs out there are going to be stripped of their full faith and credit," Mr. Headlee warned.

Controversy over the solid waste bond issue itself, narrowly approved in a 70,908 to 70,685 vote Nov. 5, has not died down. Local taxpayers groups have charged that the county illegally used public funds to promote an affirmative vote for the bond issue in violation of the 1976 Michigan Campaign Finance Act.

Dominick Vincentini, chairman of the Oakland County Taxpayers Association, said the Michigan attorney general office and the Oakland County prosecutor were contacted about the alleged campaign violations and that the groups have asked the authorities to stop certification of the vote.

Chris DeWitt, a spokesman for the Michigan attorney general's office, said the office would "take a look at some of the concerns raised," but that it was premature to say what would happen. A spokesman from the county prosecutor's office did not return phone calls.

County officials denied the charge. "Not one tax dollar was paid to influence the vote," contended Jack Hays, the county's corporation counsel, who said he authorized the informational package that was disseminated to voters prior to the election.

The actual issuance of the bonds may be a year away, according to Mr. Williams. He said the county would first have to meet its waste commitment goal and then determine exactly how much of the $500 million of bond authorization would be needed to build the system.

The county's plan all along was to have tipping fees from the communities cover debt service on the bonds that will be sold in at least three separate issues, Mr. Williams said, adding that the GO pledge was simply "frosting on the cake."

All the issues will be handled by the same selling group, selected two years ago, that includes Lehman Brothers as the book-running manager and Kidder, Peabody & Co. as the co-senior manager.

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