Mississippi Advisory Opinions June 01, 1994: AGO 000009460 (June 1, 1994)

AGO 000009460.

Dear Mr. Watkins:

Attorney General Mike Moore has received your letter of request and has assigned it to me for research and reply. In your letter you pose the following questions which will be answered in the order presented:

As legal counsel for the Ocean Springs School District, the Mississippi Association of School Superintendents and the Mississippi School Boards Association, we would like to request an official Attorney General Opinion regarding Chapter 414, House Bill 585, General Laws of the State of Mississippi, 1994, effective July 1, 1994. Section 4 of House Bill 585 specifically applies to local school districts and prohibits a school district from budgeting an increase in ad valorem tax effort in dollars for the support of the school district unless the school district first advertises its intent to do so. The advertisement must be at the same time the district advertises its intent to fix its budget for the forthcoming school year. Section 4 further sets out the procedure and form for the advertisement.

There are numerous technical matters concerning the implementation of House Bill 585 that creates ignificant problems and questions for school districts in the budgeting process. However, we believe it is unnecessary to address those issues at this time since the statutory provisions do not appear to be applicable until after July 1, 1994. Therefore, we would like you to address the following matters:

1. A question has arisen concerning the possible application of the provisions of the House Bill 585 prior to the effective date of House Bill 585. The effective date of the act is not until July 1, 1994. School districts are currently in the process of developing, preparing and adopting budgets for the next fiscal year, which begins on July 1st, under the budgeting statutes presently in effect including notice, hearing,and potential referendum requirements, pursuant to Sections 37-57-105, 37-57-107 and 37-61-9 of the Mississippi Code of 1972, as amended. Even though local school boards are not required to finally adopt and file budgets until July 15th, it is undisputed that most school districts in the state, as a matter of practice if not necessity, adopt budgets during the month of June of each year. The process is generally completed prior to the beginning day of the new fiscal year, July 1.

Our first question is whether or not school districts which take action to adopt budgets prior to July 1 would be required to follow the notice provisions of House Bill 585, notwithstanding the fact that the bill, including the notice provisions, does not take effect until July 1, 1994.

In response to your first question, Section 4 of House Bill 585 which provides for public notice and hearing on school district budgets provides as follows:

(1) No school district may budget an increase in an ad valorem tax effort in dollars for support of the school district unless it advertises its intention to do so at the same time that it advertises its intention to fix its budget for the forthcoming fiscal year.

(2) No request for an ad valorem tax effort in dollars for the support of the school district in excess of the certified tax rate pursuant to Sections 37-57-105 and 37-57-107 may be levied until an order has been approved by the school board of the school district in accordance with the following procedure: (a) The school board of the school district shall advertise its intent to exceed the certified tax rate in a newspaper of general circulation in the county.

The advertisement shall be no less than one-fourth (1/4) page in size and the type used shall be no smaller than eighteen (18) point and surrounded by a one-fourth inch solid black border. The advertisement may not be placed in that portion of the newspaper where legal notices and classified advertisements appear. It is the intent of the Legislature that the advertisement appear in a newspaper that is published at least five (5) days a week, unless the only newspaperin the county is published less than five (5) days a week. It is further the intent of the Legislature that the newspaper selected be one of general interest and readership in the community, and not one of limited subject matter.The advertisement shall be run once each week for the two (2) weeks preceding the adoption of the final budget. The advertisement shall state that the school board of the school district will meet on a certain day, time and place fixed in the advertisement, which shall be not less than seven (7) days after the day the first advertisement is published, for the purpose of hearing comments regarding any proposed increase and to explain the reasons for the proposed increase. The meeting on the proposed increase may coincide with the hearing on the proposed budget of the school board of the school district.

(b) The form and content of the notice shall be as follows:

"NOTICE OF TAX INCREASE"

The (name of the school district) has proposed to increase its total budget by (percentage of increase) percent by certified copy of an order to be adopted by the school board of the school district to the taxing entity which is the levying authority for the school district as defined in Section 37-57-1 requesting an ad valorem tax effort in dollars for the support of the school district. The proposal of the school district is to increase its budget by (estimate of dollars) and by (estimate increase of millage rate).

All Concerned citizens are invited to attend a public hearing on the tax increase to be held on (date and time) at (meeting place).

A final decision on the proposed tax increase will be made on (date and time) in a public hearing to be held at (meeting place).

(3) The school board of the school district, after the hearing has been held in accordance with the above procedures, may adopt an order requesting the levying of an ad valorem tax effort in dollars in excess of the certified tax rate.

(4) All hearings shall be open to the public. The school board of the school district shall permit all interested parties desiring to be heard an opportunity to present oral testimony within reasonable time limits.

(5) Each school board of a school district shall notify the taxing entity of the date, time and place of its public hearing. No school board of a school district may schedule its hearing at the same time as another overlapping school district in the same county.

As correctly pointed out in your letter Section 12 of House Bill No. 585 states as follows:

This act shall take effect and be in force from and after July 1, 1994.

Miss. Code Ann. Sections 37-57-105 and 37-57-107 (1993 Supp.) provide that if the statutory caps are exceeded, then a district must provide for notice, petition and possible election or notice and election respectively. Miss. Code Ann. Section 37- 69-1 (1972) as amended provides that a school district budget for the fiscal year beginning July 1 and ending June 30 must be set on or before July 15 and provides notice of public hearing on the proposed budget regardless of increase or decrease in the amount of the budget.

It is the opinion of this office that if a school district sets its budget prior to July 1, 1994, as allowed by Miss. Code Ann. Section 37-61-9, then it must adhere to the provisions of Miss. Code Ann. Sections 37-57-105, 37-57-107 and 37-61-9. Should a school district anticipate that its budget will not be set prior to July 1, 1994, the effective date of House Bill No. 585's notice and hearing provisions, such district would adhere to the provisions of 37-57-105, 37-57-107, 37-61-9 and Section 4 of House Bill No. 585. If there are technical problems between the notice provisions of House Bill 585 and 37-61-9, then the provisions of House Bill 585 would govern as it is the latest enactment by the Legislature on the specific subject of notice and hearings. Those districts that do not have an ad valorem tax increase would continue to adhere to the provisions of 37-61-9. Your second question is as follows:

2. A second significant question raised by this legislation regards the scope of its applicationas to special debt levies authorized after July 1, 1994. The notice requirements of Section 4 apply to increases in ad valorem taxes "for support of the school district." Construing this provisionto be consistent with existing statutes concerning school bonds and notes, as provided in Chapter 59 of Title 37, we believe that proper interpretation of the intent of House Bill 585 is that the provisions apply only to the operational levy of school districts used for the support of the schools,and not to special debt service levies that are otherwise mandated by an existing and more strenuous statutory notice and approval scheme.

Under the school bond statute, a school district is required to actually obtain voter approval in a mandatory referendum prior to issuing bonds. In the case of school notes, the school district is required to publish a specific notice of intent and allow voters an opportunity to call a referendum prior to issuing the notes. In the case of both bonds and notes, once the requisite notice and voter approval procedures have been met, the statutes provide for a mandatory tax levy by the levying authority to secure the debt.

Our concern is not merely academic, but is of great practical import and pertains to the ability of school boards to sell bonds as authorized by the voters of the district. If the house Bill 585 advertisement provisions are extended beyond "support" levies and affix to special debt service levies as well, we are advised that bond counsel may be unable to give the requisite unqualified opinion that the debt is properly secured, because of the future requirement of publishing the additional advertisement prior to adoption of the following year's budget. This event would be catastrophic and would impair a board's ability to market the voter-approved school bonds and notes. We do not believe that this was the intent of the legislature and that the application of taxes "for support" of school districts is clearly distinguishable from those taxes imposed to satisfy debt service obligation of the school district.

Our second question is whether or not thea dvertisement required by House Bill 585 for any increases in the ad valorem tax effort in dollars for support applies to increases for special debt service levies otherwise authorized by existing state statutes.

It is the opinion of this office that the provisions of Chapter 59 Title 37 of the Mississippi Code constitute a separate statutory scheme which is not impacted by the language of House Bill 585. Once bonds are validated by the Chancery Court, the tax levy must be made. There is no provision wherein House Bill 585 may undo the wishes of the electorate or subvert the mandate placed upon the levying authority to levy taxes necessary to service the debt in accord with Miss. Code Ann. Sections 37-59-23 and 37-59-107 (1972).

Section 1 of House Bill 585 provides that the requisite notice and hearing shall be given for "an increase in an ad valorem tax effort in dollars for support of the school district..." Section 2 further states that "no request for an ad valorem tax effort in dollars for the support of the school district in excess of the certified tax rate pursuant to Sections 37-57-105 and 37-57-107 may be levied" unless the school board complies with the notice and hearing provisions further outlined in the bill. While House Bill 585 uses the term "support" which is repeated in the language and title of Chapter 57 of Title 37, there is no reference to debt service or Chapter 59 in this bill.

Therefore, the purpose of House Bill 585 is to advise the public of any increase in the taxes allowed by 37-57-105 and 37- 57-107 for the support and operational budget of the schools.

Both 37-57-105 and 107 specifically exclude taxes levied for the payment of the principal and interest on school bonds or notes (as defined at 37-59-1) from the formulas therein. In conclusion it appears that House Bill 585 places upon any school district, which plans to exercise its statutory authority to increase taxes within the limits imposed by Miss. Code Ann. Sections 37-57-105 and 107, a duty to provide more and explicit notice of this intent and to provide a public hearing wherein the school district must explain the reasons for the increase and allow the public to express their views to the school board.

I hope that this opinion has been responsive to your questions.

Very truly yours,

MIKE MOORE ATTORNEY GENERAL

BY: Anita C. Clinton Special Assistant Attorney General