The Oklahoma Turnpike Authority triumphed in a hard-fought battle over the issuance of initial debt to finance a $5 billion expansion project, with the state Supreme Court Tuesday validating the bonds.
In a 6-3 decision, the high court approved $500 million of second senior lien revenue bonds, rejecting arguments OTA lacks legislative authorization to build or bond finance certain routes included in its 15-year ACCESS (Advancing and Connecting Communities and Economies Safely Statewide) Oklahoma program.
Oklahoma Department of Transportation
The state agency sought the court’s approval last August to issue bonds for the program, which has been the target of litigation brought by property owners in the path of toll road extensions. Their lawsuits claimed the state legislature did not authorize the route of a South Extension or additional bonds to finalize the Oklahoma City Outer Loop with Tri-City and East-West connectors.
The majority of justices upheld OTA’s ability to determine turnpike routes, noting that ruling against the proposed turnpikes would affect “the entire process of financing and constructing turnpike projects.”
“Striking the proposed routes at this juncture and not allowing the OTA to exercise its statutory discretion to determine routes that are feasible and economically sound would not only waste resources already spent, but would also lead to additional litigation,” the ruling stated.
In a dissenting opinion, Vice Chief Justice Dustin Rowe said the majority opinion gives OTA “incredibly broad discretion without any cognizable limits.”
“The OTA is apparently free to blatantly disregard the legislature’s directives with respect to routes and funding,” he wrote. “This decision does not simply approve the proposed bonds, it sets a new precedent that future bond applications seeking our approval are merely seeking our rubber stamp — which we freely give today.”
Robert Norman, an attorney for property owners who sued OTA, said dissenting opinions “provided a convincing, well-reasoned explanation of why the new turnpikes clearly exceed the critically important guardrails the legislature has placed upon the turnpike authority.”
He added, opponents have 20 days to file a petition for a rehearing and that OTA still faces a hurdle with the U.S. Bureau of Reclamation, which earlier this year denied an application for a turnpike route to cross sections of federal property.
Oklahoma Secretary of Transportation Tim Gatz told reporters Tuesday that discussions with the federal agency continue and that restarting engineering work on the ACCESS program, which was halted in April over concerns about bond market access due to ongoing litigation and an investigative audit of the agency, will take months.
“I believe (Supreme Court) validation is a key and important part of the process and I believe that the validation is really about the financing and the opinion of the financing for routes that are defined in statute,” Gatz said.
A team of underwriters for the bond sale has been in place since last summer, although Wells Fargo resigned as lead underwriter in May in the wake of its placement on the Oklahoma Treasurer’s list of companies banned from government contracts for “boycotting” the oil and gas industry. RBC Capital Markets was tapped as its replacement.
Before issuing any bonds, OTA will return to the Oklahoma Council of Bond Oversight because that body’s conditional approval of the debt expired in February. With the Supreme Court’s validation, OTA has met the council’s previously set conditions, which included the dismissal or resolution in its favor of two lawsuits brought by property owners.
In May, the high court ruled in the turnpike’s favor in both lawsuits. The investigative audit is believed to be ongoing, according to Gatz. Oklahoma Attorney General Gentner Drummond ordered the audit in March to determine whether OTA is in compliance with state law after concerns were raised about some of the agency’s practices.