CAO 01-18 GO Bonds Proceeds
TO:
FROM:
SUBJECT:
DATE:
CITY OF MIAMI BEACH
OFFICE OF THE CITY ATTORNEY
MEMORANDUM
Jorge M. GOnZale.z ~.. ,'. /. ./
City Manager \ /~
Murray H. DUbbin'\I\
City Attorney . ~
Lawrence A. ~__Q.fu
First Assistan()7iWAttorney .
Use of Proceeds of General Obligation Bonds for Undergrounding of Utilities
CMO No. 2-9/01
CAO No. 01-18
November 14,2001
QUESTION:
ANSWER:
Whether the Mayor and City Commission may reallocate funds derived from
General Obligation Bonds, from the improvements approved by the voters
in the General Obligation Bond referendum held on November 2, 1999, in
orderto use said proceeds for the undergrounding of electric, telephone and
cable television utilities in certain neighborhoods.
The referendum materials, referendum ballot, resolutions and other
documents (the "Bond Documents") that authorized the General Obligation
Bonds contain provisions which require General Obligation Bond proceeds
to be dedicated to specific types of projects. Undergrounding of electric,
telephone and cable television utilities in certain neighborhoods were not
included in any of the Bond Documents. Therefore, General Obligation
Bond proceeds may not be used for such purpose:
FACTUAL BACKGROUND:
On November 2, 1999, the voters of the City approved the issuance of $57,915,000
aggregate principal amount of General Obligation Bonds. Resolution No. 99-23301 adopted by the
Mayor and City Commission on September 17, 1999, which authorized the bond referendum
provided the following ballot question:
"To improve neighborhood infrastructure in the City of Miami Beach, consisting of
streetscapes and traffic calming measures, shoreline stabilization and related
maintenance facilities, shall the City of Miami Beach be authorized to issue general
obligation bonds not exceeding $57,917,000, in principal amount, payable from
unlimited ad valorem taxation, bearing interest at rates to be determined at the
time(s) of sale thereof, not exceeding the maximum legal interest rate at such
time(s)?"
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Resolution No. 99-23301 did not contain a specific list of projects t.:; :::e financed with
the proceeds of the G.O. Bonds for neighborhood improvements However one of the
materials that was distributed in the program to educate the voters contained a specific list
of the proposed projects, without any costs assigned thereto (see Exhibit 'A' attached
hereto.
DISCUSSION:
The Florida cases dealing with the use of the bond proceeds fall into two categories.
The first of these, which is illustrated by Bigham v. State, 115 Fla. 852. 156 So. 246
(1934), was a case in which a ballot described nine distinct roads which would be
constructed and the amount of the bond issue that would be spent with respect to each
road. In that case, where there was an attempted diversion of certain excess bond
proceeds to another use, the court stated that no other use could be made of the bond
proceeds. In 1972, the Attorney General of the State of Florida rendered Op. A.G. 072-171
which answered the question "does the Board of County Commissioners have the authority
to disburse funds from the Palm Beach County $6,000,000 Beach Acquisition Bonds to the
City of Delray Beach to help pay for the City's beach restoration and preservatiort
program?" In that opinion. the Attorney General opined that the terms of the bond
resolution relating to the issuance of the Beach Acquisition Bonds did not authorize the
Board of County Commissioners to disburse the bond proceeds to the City of Delray Beach
to help pay for said City's beach restoration and preservation program. It should be noted
that both in the Bigham case, supra, and the aforementioned Attorney General's opinion,
the proposed or attempted diversion of bond proceeds was to a different use.
In 1977, the Attorney General opined that interest on the investment of proceeds
in a construction trust fund could not be diverted to the payment of a deficit in a school
board operating budget. citing the Bigham case and Oven v. Ausley 143 50.588 (1932)
Op. A.G. 77-26 (March 3, 1977).
In a 1986 Opinion of the Attorney General of Florida, the Florida Attorney General
opined that excess monies raised through taxation, in a situation in which the voters had
approved bonds for sports complex, could not be utilized for any purpose other than to
finance the sports complex, Op. A.G. 86-39 (May 8, 1986). That opinion was grounded on
the leading case of Oven v. Ausely, supra, which stated that "it is a violation of an
elemental principle in the administration of public funds for those who are charged with the
trust of their proper expenditure not to apply such funds to the purpose for which they are
raised. When funds are raised by taxation for one purpose they cannot be diverted to some
other purpose without legislative authority." 143 So. 588, 589.
Oven v. Ausely, supra, has been cited favorably in a number of instances involving
both use of bond proceeds and expenditure of monies raised through taxation. See, for
example, City of Coral Gables v. Hepkins, 144 So. 385 (1932), which held that trust
property owned by a municipality and held for public purposes is exempt from sale under
execution; Dickinson v. Stone, 251 So. 2d 268 (1971), holding that unless otherwise
expressly provided by law, appropriated money should be expended only for the purpose
for which it was appropriated; and City of Miami v. Gates, 393 So. 2d 586 (1981), holding
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that tax revenues specifically authorized and assessed for the pension system could nct
be diverted to another use.
The second category of cases is represented by Crow v. Dade County. 54 So. 2d
753 (1951), in which the Supreme Court of Florida was presented with a question as to
whether, in a case where the electors approved a bond issue for the purpose of "extending
and improving a county hospital," the Board of County Commissioners had the power to
use the proceeds of the bonds to erect and equip a unit of Jackson Memorial Hospital to
be used, in part, for a medical school offering instruction to students leading to a degree in
medicine. In that case, the court took a very practical approach, the essence of which was
that a fair interpretation of the ballot was that those who voted in favor of the bond issue
knew that they were approving funds to extend and improve Jackson Memorial Hospital,
to enlarge existing buildings, to construct and equip additional buildings and to acquire land
for that purpose. In the Crow case, supra, the court looked to the ultimate purpose, to wit:
to extend and improve a county hospital, and reasoned that a medical school did in fact
extend and improve the county hospital. The essence of the Crow opinion is that the
original purpose was served by the challenged course of action.
In Pirman v. Florida State Improvement Commission, 78 So. 2d 718 (1955), it
was specifically held that there is no requirement under the Constitution or statutes of the
State of Florida for a bond resolution to establish the location of the roads prior to
validation, but if it does, there may no deviation from the locations specified in the bond
resolution. 78 So. 2d 718 at 721. To similar effect, see Homeowners' Association v. City
of Orlando, 602 So. 2d 1300 (1992), Platts v. Division of Bond Finance, 275 So. 2d 231
(1973), and State of Florida v. Florida Development Commission, 95 So. 2d 13 (1957).
The Crow and Pirman cases indicate that the "litmus test" for the use of the
proceeds of any bond issue is the degree of specificity with which the referendum ballot and
the bond resolution or ordinance are drafted, and the extent to which the proposed use of
the proceeds comports with the avowed purpose and intention of the bond issue. Within
the guidelines established by the cases discussed above, it is clear that the City
Commission may reasonably reallocate the proceeds of the G.O. Bonds among the
categories listed in the referendum ballot (Le., streetscapes and traffic calming measures,
shoreline stabilization and related maintenance facilities). However, the proceeds of the
G.O. Bonds may not be used for purposes other than those stated. The proposed projects
set out in Exhibit "A" hereto are what the voters approved: Undergrounding of utility lines
was not among those projects.
The case law is perfectly consistent with the maxim of statutory construction that is
applicable to the listing of things in legislation or contracts: "Expressio unius est exe/usia
alterius" (literally, the expression of one excludes others). This maxim creates an inference
the omissions should be understood as exclusions. See, Singer, Sutherland Statutory
Construction, srh ed., 947.23, et. seq. Thus, having specified "streetscapes and traffic
calming measures, shoreline stabilization and related maintenance facilities" in the ballot
that was approved by the voters, the inference is created that all other types of projects are
excluded. While the maxim is one of construction, and not a matter of substantive law, it
is a product of "common sense and logic". Singer, supra, ~47.24. Also, see Smalley
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Transportation Co. v. Moed's Transfer Co., 373 So. 2d 55 (1979). "This maxim properly
applies only when in the natural association of ideas in the mind of the reader that which
is expressed is so set over by way of strong contrast to that which is omitted that the
contrast enforces the affirmative inference that that which is omitted must be intended to
have opposite and contrary treatment." Ford v. United States, 273 U.S. 593, 47 S. Ct.
531,71 L.ED. 793 (1927). In the instant situation, Exhibit "A" is clear thatthe contemplated
improvements include streetscapes, landscaping, lighting, bicycle paths, pedestrian
improvements, traffic enhancements, reconfiguration of intersections, and renovation of
seawalls. None of the enumerated improvements is below ground: With the exception of
seawalls, all of the improvements are at surface level, which tends to confirm that the
undergrounding of utility lines was clearly not contemplated. The clear and unambiguous
expression contained in the ballot and the explanatory materials support the intention to
exclude such use.
cc: Mayor David Dermer and
Members of the City Commission
Robert Middaugh, Assistant City Manager
Patricia D. Walker, Chief Financial Officer
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