LOUISIANA LOCAL GOVERNMENT ENVIRONMENTAL FACILITIES AND COMMUNITY DEVELOPMENT AUTHORITY, STATE OF LOUISIANA
ALL TAXPAYERS, PROPERTY OWNERS, CITIZENS OF THE STATE OF LOUISIANA AND NON-RESIDENTS OWNING PROPERTY OR SUBJECT TO TAXATION THEREIN, AND ALL OTHER PERSONS INTERESTED IN OR AFFECTED IN ANY WAY BY THE ISSUANCE BY THE LOUISIANA LOCAL GOVERNMENT ENVIRONMENTAL FACILITIES AND COMMUNITY DEVELOPMENT AUTHORITY OF ITS PROPERTY ASSESSED CLEAN ENERGY (PACE) SPECIAL ASSESSMENT REVENUE BONDS, IN ONE OR MORE SERIES
On Appeal from the 19th Judicial District Court, in and for the Parish of East Baton Rouge, State of Louisiana. District Court No. 633872. The Honorable Wilson Fields, Judge Presiding.
William L. Schuette, Fred L. Chevalier, Matthew W. Kern, Baton Rouge, LA, L. Etienne Balart, Scott T. Zander, New Orlearis, LA, Counsel for Plaintiff/Appellant, Louisiana Local Government Environmental Facilities and Community Development Authority.
BEFORE: WHIPPLE, C.J., PETTIGREW, WELCH, DRAKE, AND CHUTZ, JJ. WELCH, J., concurring in part and dissenting in part. DRAKE, J., concurring in part and dissenting in part.
[2015-0162 La.App. 1 Cir. 2]
This matter arises from a suit brought by the Louisiana Local Government Environmental Facilities and Community Development Authority (the LCDA), pursuant to the Bond Validation Act, La. R.S. 13:5121, et seq., to establish the validity, and legality of a proposed bond issuance and related contracts, prior to the marketing of the bonds. The appeal from the district court's denial of the Motion for Judgment is being given expedited consideration in accordance with La. R.S. 13:5128. For the reasons that follow, we amend the judgment and, as amended, affirm.
FACTUAL AND STATUTORY BACKGROUND
The Louisiana Local Government Environmental Facilities and Community Development Act
The LCDA was created pursuant to the Louisiana Local Government Environmental
Facilities and Community Development Authority Act (" the Community Development Act" ), La. R.S. 33:4548.1 et seq., as a political subdivision of the State to be comprised of political subdivisions desiring to become members of the authority. La. R.S. 33:4548.4. Having found that " there exists a great and growing need in the state for economic development and the upgrade, rehabilitation, repairing, and construction of infrastructure and environmental facilities in the state to maintain a healthful and safe environment for the people of Louisiana," the Legislature declared, in pertinent part, that the " purpose and intent of [the Community Development Act] is to provide an instrumentality with the authority to provide economic development, infrastructure, and environmental facilities ... and to assist in the financing of such needs to political subdivisions of this state." La. R.S. 33:4548.2.
[2015-0162 La.App. 1 Cir. 3] Pursuant to the Community Development Act, the LCDA is vested with financial powers, including the power to issue bonds on behalf of or for the benefit of any participating political subdivision or organization to provide funds for economic development and other authorized projects. La. R.S. 33:4548.3(B)(2)(e), 33:4548.5(A)(9) & 33:4548.6(A); Louisiana Local Government Environmental Facilities and Community Development Authority v. All Taxpayers, 2011-0027 (La.App. 1st Cir. 2/2/11), 56 So.3d 1194, 1204, writ denied, 2011-0467 (La. 4/25/11), 62 So.3d 93.
The Sustainable Energy Financing Law
The Sustainable Energy Financing Law, La. R.S. 33:130.811, et seq., authorizes the governing authority, of a local governmental subdivision that is otherwise authorized to collect property taxes and to issue and sell bonds, to create a special district known as a " sustainable energy financing district," whose purpose " shall be to encourage, accommodate, and provide a source of revenue and means for financing capital improvements for energy efficiency improvements" and " renewable energy improvements" for commercial or residential immovable property within the district. La. R.S. 33:130.811. The area of such a sustainable energy financing district shall consist of immovable property located within the local governmental subdivision whose owners agree to participate in the district. La. R.S. 33:130.811(B).
An owner of residential or commercial immovable property within the district may request financing in the form of a loan from the district to cover the costs of energy efficiency improvements or renewable energy improvements that the owner contracts to make to the immovable property. La. R.S. 33:130.812(B)(1). The amount of the loan " shall be assessed [2015-0162 La.App. 1 Cir. 4] against the immovable property upon which the improvements are placed and shall be collected in the same manner as is provided for the ad valorem taxes assessed on the property by the local governmental subdivision creating the district." La. R.S. 33:130.812(C)(1). In order to carry out its purpose of providing financing to the owners of residential and commercial immovable property within the district, the local governmental subdivision and the sustainable energy financing district shall have the power to borrow money and to issue bonds or obligations. La. R.S. 33:130.813(A)(1) & (4).
The Property Assessed Clean Energy Special Assessment Revenue Bonds
In furtherance of its purpose under the Community Development Act, the LCDA is seeking to issue one or more series of Property Assessed Clean Energy Special Assessment Revenue Bonds (PACE bonds), not to exceed the total principal amount of one billion dollars. According to the documents of record, the PACE
bonds will be issued pursuant to a Master Trust Indenture to be executed by the LCDA, as issuer of the PACE bonds, and Deutsche Bank Trust Company Americas, as trustee, for the purpose of aiding sustainable energy financing districts in financing qualifying improvements under the Sustainable Energy Financing Law. The proposed PACE bonds would be secured by and paid pursuant to " Loan, Assignment, Security and Cooperative Endeavor Agreement[s]" (the Loan Agreements) executed by participating sustainable energy financing districts and the LCDA; and the participating districts would, in turn, satisfy the loan payments from special assessments on the property of participating owners within the districts, as authorized by " Financing, Assessments and Cooperative, Endeavor Agreement[s]" (the Financing Agreements) executed between those participating property owners and districts. Pursuant to the [2015-0162 La.App. 1 Cir. 5] Loan Agreements, and as required by the Community Development Act, the PACE bonds are to be limited obligations of the LCDA, payable solely from payments received by the LCDA from the participating districts, without obligating the State to levy any taxes for their payment. La. R.S. 33:4548.6(L).
Turning to the present litigation, on September 29, 2014, the LCDA filed a Motion for Judgment in the Nineteenth Judicial District Court pursuant to the Bond Validation Act, La. R.S. 13:5121 et seq., seeking to establish, among other things, the validity of the PACE bonds, the proceedings taken in connection with the authorization of the bonds, and the contracts and agreements providing for their security and method of financing. According to the allegations of the motion, on September 11, 2014, eighteen days prior to the filing of its Motion for Judgment, the LCDA adopted a resolution authorizing the issuance of the PACE bonds, in one or more series, upon receipt of the appropriate approvals and authorization to proceed. In the Motion for Judgment, the LCDA detailed the security and financing method for the PACE bonds, as set forth above, and, as required by La. R.S. 13:5123, alleged that the bonds when issued will be valid and legal obligations of the LCDA.
Pursuant to the requirements of La. R.S. 13:5123, the LCDA named as defendants all taxpayers, property owners, citizens of the State of Louisiana, and nonresidents owning property or subject to taxation therein; [2015-0162 La.App. 1 Cir. 6] and, in accordance with the requirements of La. R.S. 13:5124, sought an order directing the publication of the Motion for Judgment and of the time and place fixed for the hearing on the Motion, in The Advocate, as a daily newspaper published in the City of Baton Rouge, Louisiana, being the official journal of the LCDA. The LCDA prayed that, after due proceedings, the district court render judgment establishing and declaring: (1) The validity of the PACE bonds; (2) the validity of all proceedings taken in connection with the authorization of the PACE bonds; (3) the legality and validity of the Sustainable Energy Financing Law and its authorization of the creation of sustainable energy financing districts, the levy of assessments and the other transactions contemplated thereby; (4) the validity of the Indenture, the Loan Agreements,
the Financing Agreements and any other contracts or agreements providing for the payment of the PACE bonds; (5) the validity of the pledges of revenues and the covenants and provisions which constitute the contract between the LCDA and the holders of the bonds; (6) any other matters regarding the validity or approvals related to the bonds; and (7) any other matters or objections adjudicated or that might have been called into question in this proceeding. Lastly, the LCDA sought a permanent injunction to prevent any person from instituting any action or proceeding contesting the validity of the PACE bonds or any other matters outlined above for which it sought declarations of validity.
The Motion for Judgment and notice of the hearing thereon were duly published. Additionally, as required by La. R.S. 13:5124(B), a certified copy of the Motion for Judgment was sent by certified mail to the State [2015-0162 La.App. 1 Cir. 7] Bond Commission and the Louisiana Attorney General. No objections to the Motion for Judgment were filed.
On November 6, 2014, the scheduled date of the hearing, the LCDA submitted documentary evidence and presented argument in support of its Motion for Judgment. At the close of the hearing, the district court took the matter under advisement.
Thereafter, on November 17, 2014, the district court conducted another hearing on the Motion, and, as indicated by the record herein, the court expressed concerns at that hearing of the lack of due process regarding the method of notice to all defendants, a class which included all property owners of the State of Louisiana, by publication in The Advocate. Accordingly, the district court ruled orally that it was denying the Motion for Judgment to validate the PACE bonds pursuant to the statutory framework of the Bond Validation Act on the basis that the Bond Validation Act did not provide for proper notice to all property owners in the State of Louisiana, as defendants to this action.
A judgment denying the LCDA's Motion for Judgment was ultimately signed on January 7, 2015, and the LCDA has timely appealed from that judgment, contending that the district court erred in: (1) denying the LCDA's Motion for Judgment seeking to validate municipal bonds and related agreements, documents and proceedings pursuant to the Bond Validation Act, when no challenge or opposition had been asserted; (2) denying the LCDA's Motion for Judgment based on its belief that the service by publication provision of the Bond Validation Act was [2015-0162 La.App. 1 Cir. 8] unconstitutional when no challenge to the manner of notice or the constitutionality of the statute had been asserted; (3) ignoring controlling Louisiana Supreme Court precedent holding that the right to challenge the validity of municipal bonds is not a right to life, liberty or property ...