Payson's $70 Million Bond Controversy: A Legal Battle Over Referendum Rights

A small town in central Arizona is at the center of a legal dispute over a $70 million bond issue, with a lawsuit claiming the debt's approval violated the state constitution. The town council's decision to fast-track the bond sale has sparked a debate over the balance between municipal needs and residents' rights.

Uncovering the Payson Bond Saga: Transparency, Accountability, and the Fight for Referendum Rights

The Proposed $70 Million Bond: Funding Payson's Future or Sidestepping Resident Oversight?

The town of Payson, located in Gila County, Arizona, is seeking to issue $70 million in tax-exempt, fixed-rate "pledged revenue obligations" to fund a range of infrastructure projects, including public safety facilities, street improvements, parks, and an aquatic and recreation center. The town council approved the bond sale in a 6-1 vote, with the expectation of selling the debt through Stifel, Nicolaus & Co. in early September.However, the bond issue has come under scrutiny, with a lawsuit filed in Gila County Superior Court by a Payson resident, represented by the conservative Goldwater Institute. The lawsuit contends that the town council's approval of the bond bypassed the Arizona Constitution's right of referendum, using a narrow exemption for emergency measures necessary for the "immediate preservation of the peace, health or safety of the city or town."

The Lawsuit's Allegations: Circumventing the Constitution or Responsible Municipal Action?

The lawsuit argues that the town officials denied residents the opportunity to organize a referendum on the debt issue by "fast-tracking its issuance 'under the pretext of an emergency.'" The Goldwater Institute, the plaintiff's legal representative, claims that the "so-called 'emergency' here is nothing more than town officials' apparent belief that interest rates might rise in coming months, and that they'll secure slightly better municipal bond terms now than they could in 30 days if they gave residents the opportunity to organize a referendum."In response, the town of Payson has promised a vigorous defense against the lawsuit, stating that the use of the emergency clause in bond approvals is a common practice across Arizona. The town also cites several explanations for invoking the emergency clause, including the 2019 closure of a pool that limited the ability to teach children how to swim and avoid drowning, as well as the need to provide health-promoting aquatic activities for the community.

The Implications: Potential Costs, Precedents, and the Ongoing Debate

The lawsuit could have significant implications for the town of Payson. If successful, it could increase the cost of the debt, potentially leading to a counterclaim for damages. The town has stated that it is unaware of any previous litigation in Arizona challenging the use of an emergency clause in combination with the approval of bond sales.The case has also sparked a broader discussion about the balance between municipal needs and residents' rights. The Goldwater Institute's stance reflects a concern for preserving the constitutional right of referendum, while the town's defense highlights the practical challenges faced by local governments in addressing pressing infrastructure and community needs.As the legal battle unfolds, the outcome will likely have far-reaching implications for how municipalities in Arizona approach bond financing and the delicate interplay between local governance and citizen oversight.