Anaheim city officials moved forward Tuesday night with a $300 million bond plan to finance expansion of the Anaheim Convention Center, in spite of attempts by a citizen group to block the deal in court on the grounds that such bonds must go to voters for approval.
The council voted 4-1, with Mayor Tom Tait the lone and persisting vote against, to issue the bonds through a Joint Powers Authority, a joint entity of the city council and the Housing Authority, an agency created last week.
The city council created a new Joint Powers Authority to circumvent a lawsuit that challenges the authority of the city’s former redevelopment agency to issue the bonds.
“It’s a workaround our lawsuit, and it’s a workaround to get around the city charter and the state constitution,” Greg Diamond, general counsel for the Coalition of Anaheim Taxpayers for Economic Responsibility or CATER, the group leading the lawsuit, told a reporter. Diamond was also a losing candidate in the June primary for District Attorney.
The bond deal was originally approved by the council by the same 4-1 vote in March, but was halted when CATER filed suit in May arguing the city cannot, as stipulated in the city charter, issue bonds without the approval of voters. According to the group, the old Anaheim Public Financing Authority and now, the Joint Powers Authority, are merely proxies for the city council.
“[The Joint Powers Authority] is, in reality, the City of Anaheim. The same people govern the City, the Housing Authority and the [Joint Powers] Authority,” reads a letter from the Briggs Law Corporation that was sent to the city council late Tuesday afternoon.
“In fact, if the entities are one and the same, city officials are acting in a way that conflicts with the charter and are potentially violating their fiduciary duties and ethical obligations.”
The firm represents San Bernardino-based Inland Oversight Committee, a nonprofit that promotes transparency and responsible government issues and is one party to the CATER lawsuit. The Briggs firm also represents San Diegans for Open Government, a group that is challenging a $520 million convention center project in San Diego.
CATER and Briggs maintain that, whether issued through the old Anaheim Public Financing Authority or the new Joint Powers Authority, it’s illegal to incur bond debt without voter approval.
“The proposed financing structure is an obvious attempt to get around the debt limitations [in the charter], which require a vote of the electorate before the City incurs any general- or revenue-bond indebtedness,” Briggs wrote. “…This is a debt being incurred by the City in substance, even if not (entire) in form. Unless this transaction is put to voters, it is illegal.”
The Anaheim city attorney and bond counsel maintain the creation of the new joint authority is expressly allowed by the state’s Joint Exercise of Powers Act, which permits two or more agencies to create a new legal entity. It is common for agencies to use joint powers authorities to issue bonds for public projects, they said.
"Not only are we not inventing the wheel with this financing plan, we're using a wheel that was ostensibly invented by the courts, in the joint powers authority, to issue these bonds,” said City Attorney Michael Houston.
Houston said because the joint entity is issuing the bonds, the city would be making “rental” rather than “bond” payments. Bond payments would trigger the city charter requirement for voter approval.
In the months since the CATER lawsuit, supporters of the bond and convention center expansion -- which include the council majority, city staff, and business, labor and resort district interests -- have grown impatient. On Tuesday night, they came out in full force, filling seats and lining the aisles of the council chambers.
They argued that without the 200,000 square foot expansion, the convention center risks losing a number of convention groups that have outgrown Anaheim’s exhibition space to convention centers in San Francisco, Los Angeles and San Diego.
Tait, who has been the only no vote on the bonds since March, has butted heads with city staff, who say the $190 million expansion project will more than pay for itself in revenue.
Tait said the project is too expensive for the city’s general fund, which would pay $14.9 in debt service annually. He has also questioned staff revenue projections, noting that in the event hotel taxes come in under projections, money for bond payments would have to be squeezed out of the general fund.
“This whole lawsuit would go away if we just went to a vote of the people. That's what this is about tonight,” Tait said.
Tait wanted the council to discuss bringing the issue before voters at a future meeting, but his motion died without a second.
Councilwoman Kris Murray said the bond deal was a “win-win” situation.
“We can debate this all night but I trust the forecasts that we balance our budget on,” said Murray. “Anaheim is ahead of the curve...two [Orange County] cities are considering a sales tax increase because they are cutting services and can’t make ends meet. Anaheim, courtesy of our resort district, stadiums, the economic engines of our city -- we aren’t in that position, we are reinvesting.”
Councilwoman Gail Eastman, glancing at the remaining crowd, noted the number of people who came out in support of the bond deal.
"There are more people who care about this [project] than there are those who are afraid to make a hard decision because of the unknown,” Eastman said.
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