ATLANTA -- The West Virginia School Building Authority last week filed a lawsuit before the state Supreme Court seeking to clear the way for an upcoming new-money bond issue made possible by legislation also passed last week.

The planned $180 million deal, proceeds of which would be used to build new schools, has been held up since June by a lawsuit that questioned the authority's use of annual general-fund appropriations to back its bonds. In July, the West Virginia Supreme Court banned future new-money sales of the authority's bonds unless voters first approve them or a dedicated revenue source is found.

With legislation passed last Monday that authorizes the use of state sale tax revenues to cover debt service, the authority now hopes to move forward with the issue. But it has decided to first file a lawsuit in order to validate the use of the sales taxes as security for the bond issue, according to the authority's president, Henry Marockie.

"We filed the lawsuit at this time because we have a compelling state interest to clear up this matter as quickly as possible," Marockie said in an interview on Friday.

Marockie said that because of the urgency of the matter, he was justified in seeking an immediate hearing before the state's high court.

The suit filed by Marockie, who is also state superintendent of education, names Charles H. Wagoner, secretary of the school authority, as respondent.

It asks Wagoner to call for a special session of the authority on Nov. 5 to consider the issuance of bonds. Marockie said Wagoner refused to give notice of the meeting, citing the need for a clarification of whether the proposed bond issue is legal under the state constitution.

In a brief accompanying his suit, Marockie sought to give reasons why the new revenue source for the authority's bond issues avoids the legal problems cited by the Supreme Court in July.

"The dedication of the sales tax-... creates a constitutional fund which this court has permitted to be pledged in support of repayment of bonds," Marockie argued in the brief.

In signing the legislation permitting sales taxes to be used to back school authority bond issues, Gov. Gaston Caperton said last week of Marockie's suit, "This action by an independent body of state government will bring the issue squarely before the state Supreme Court, which invited a test case earlier this year."

The lawsuit challenging the authority this summer was filed by two taxpayers, William S.E. Winkler and Diane Hickle. The plaintiffs sought to block further bond sales by the authority, charging that because it backs its debt with appropriations from the West Virginia Legislature, its borrowings are general obligation of the state and, as such, require voter approval.

In July, the state Supreme Court sided with the taxpayers. In a 40-page opinion written by associate justice Thomas Miller, the high court rejected the authority's contention that the Legislature had the option of not continuing appropriations for the School Building Authority's debt.

"To accept the premise that the Legislature is not bound to fund the bonds and would allow a default, thereby impairing the credit rating of the state, assumes a naivete on our part that we simply do not possess," Miller wrote at the time.

The School Building Authority legislation, which became law last week, earmarks $12 million a year from consumer sales taxes to secure up to $185 million in 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.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.