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Municipal Building Authority v. Lowder

711 P.2d 273 (1985)

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Municipal Building Authority v. Lowder

Utah Supreme Court

711 P.2d 273 (1985)

Facts

The Iron County Board of Commissioners (commissioners) planned to build a new jail pursuant to the Utah Municipal Building Authority Act (UMBA). The commissioners proposed using general bonds to finance the construction. Article XIV, Section 3 of the Utah Constitution required these bonds to be approved by voters. In December 1981, the bond proposal was defeated, and the commissioners devised a plan to construct the jail without voter approval. Article XIV, Section 3 only required voter approval when the indebtedness belonged to a county or a subdivision of a county. The commissioners created the Iron County Building Authority (ICBA), a quasi-municipal governmental entity designed not to be a subdivision of Iron County (county). Under the new plan, the ICBA would secure a construction site and issue revenue bonds with a term of 20 years to finance the construction and pledge its interest in the project site and the facility as security. The county would lease the new jail facility from the ICBA on a year-to-year basis for 20 years. After 20 years passed and the bonds were paid in full, the ICBA would transfer title of the new jail to the county. Additionally, the agreement stipulated that if the ICBA prematurely defaulted on the bonds, the bond holders could foreclose on the new jail and ICBA’s interest in the site, but they could not pursue the county or taxpayers in recourse. The district court upheld the UMBA and the commissioner’s decision to finance the construction of a new jail through the ICBA.

Rule of Law

Issue

Holding and Reasoning (Zimmerman, J.)

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