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Frazier Further Restricts Local Governments’ Ability to Finance Public Projects

Added by S.C. Danielle Quade in Articles & Publications, Business Law on May 23, 2007

As a result of the recent Idaho Supreme Court ruling in City of Boise v. Frazier, municipal governments and political subdivisions in Idaho are facing significant limitations on their ability to finance facilities and equipment. Since the inception of Idaho’s statehood, article VIII, section 3 of the Idaho Constitution has limited the ability of counties, cities, boards of education, school dis-tricts, and other subdivisions of the State of Idaho to incur indebtedness or liabilities without (i) a vote of two-thirds of the qualified electors, and (ii) an annual tax sufficient to pay principal and interest on such debt as it becomes due. The difficulty in achieving a two-thirds majority vote has made article VIII, section 3’s “proviso clause,” as it has been termed, the saving grace for many projects heretofore financed and constructed. The proviso clause, included in article VIII, section 3 after substantial debate at the Constitutional Convention of Idaho, provides an exception from the requirements of article VIII, section 3 for “ordinary and necessary expenses authorized by the general laws of the state.” Consequently, if an expense is deemed to be ordinary and necessary, a vote of the general electorate and the identification of a tax for repayment is not necessary for the debt to be incurred. Prior to the Frazier decision, the Idaho Supreme Court’s interpretation of “ordinary and necessary expenses” had become fairly well-defined to include repair of existing facilities, as well as construction of new facilities if the project was related to a facility that had been maintained by the municipality on a long-term basis and that facility had become obsolete or created public safety concerns. However, in Frazier, the Idaho Supreme Court breathed new life into its somewhat forgotten 1897 holding that “necessity for making the expenditure at or during such year” is required for an expense to be ordinary and necessary.

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(c) 2007 Idaho Law Review. This article was originally published in the Idaho Law Review, Volume 43, Number 3. It, along with all articles published by the Idaho Law Review, are available through the following electronic databases: Westlaw, LexisNexis, and Hein Online. For subscription or other information, please contact the Idaho Law Review at (208)885-7241 or review@uidaho.edu.bsite or distribute it electronically.