Oregon Advisory Opinions January 30, 1978: OAG 78-13 (January 30, 1978)

OAG 78-13.

Oregon Laws 1977, ch 838, established an Oregon Port

Revolving Fund from which port districts can borrow money under certain conditions.

Port districts are municipalities with wide powers to conduct their activities. Those powers include authority to contract and to sue and be sued. ORS 777.050. Port districts' powers were expanded in 1971 to give the ports broad authority to develop their property. ORS 777.250. The powers granted to a port are within the control of the legislature. As stated in State v. Port of Astoria , 79 Or 1, 154 P 399 (1916) at p 25:

"When the legislature grants power to a port, that power is not thereby irretrievably lost to the grantor, but the grant may be increased or diminished, or even revoked if vested rights have not intervened."

Thus, ports can raise money and use their management powers as the legislature provides.

Once a port obtains voter approval, ORS 777.410 allows it to borrow money and sell bonds to an aggregate amount not exceeding two and one half percent of the true cash value of all taxable property within the port. In an emergency, a special issue of bonds up to $50,000 in any 12-month period may be made. A port may also issue revenue bonds without voter approval. ORS 777.560.

A port may levy a tax each year not to exceed one-fourth of one percent of true cash value of the property in the port district and may assess a tax to pay general obligation bonds or "other evidences of indebtedness" issued by the port then

outstanding. ORS 777.430. The latter authority would be extremely broad except for two limitations. The first limitation is that a port is a creature of the legislature and cannot incur indebtedness except as provided in ORS ch 777. The power to borrow funds is set forth above. The authority to raise money to pay for that borrowing is in ORS 777.430.

A second limitation is imposed by Or Const art XI, §11, which provides in relevant part that the taxing unit (the port) may not levy taxes in excess of its tax base. Despite language in ORS 777.430(2) which appears to allow a levy over and above the one-fourth percent of true cash value authorized in ORS 777.430(1), the limitation in art XI, §11 applies to all levies except those for payment of bonded indebtedness and taxes levied outside the art XI, §11 limitation which are specifically approved by a majority of the taxing unit's voters.

Oregon Laws 1977, ch 838, provides broad authority for the Oregon Port Revolving Fund to loan money to ports for projects which the ports are not otherwise able to efficiently finance. If an application is made by a port district for a loan from the Oregon Port Revolving Fund, the Oregon Economic Development Commission, in administering the fund, should be convinced that the port has the ability within its financing limitations to repay the loan and interest. This is a factual determination and we can find no bar to the port pledging contractually to properly assess a tax to meet its obligations.

A municipality is contractually bound to exercise its taxing power to anticipate and provide for payment of its obligations; its refusal to do so may impair the obligation of the contract. State v. Daytona Beach , 118 Fla 773, 160 So 501 (1935); See also , US Const art I, §10. Further, the Oregon courts have stated that an indebtedness of a municipality is a general obligation of the municipality and "we have thus seen that it was the duty of the port to impose a sufficient annual tax to meet the demands of its bond holders." Morris Co. v. Port of Astoria , 141 Or 251, 15 P2d 385 (1932). While the latter case dealt with the contractual obligation arising from issuance of bonds, it is our opinion that the same contractual obligation is imposed by the legislature upon port districts which borrow from the Oregon Port Revolving Fund.

If the Oregon Economic Development Commission is satisfied there is an adequate taxing base, unencumbered by other obligations of the port, to repay its loan, there is no reason why the commission cannot accept a pledge from the port under contract. In addition, the kind of projects the legislature envisioned in testimony before the Joint Trade and Economic Development Committee on February 3, 1977, such as aquaculture, wood waste conversion, moorages, public facilities and power development, could yield revenue which the commission may contractually require to be pledged as further security for its loan.

The budget of a port district must be published, and the

commission may require as part of the loan contract that it be reviewed by the commission, in order to keep a continuing watch on the port's financial management.