State lawmakers cannot use proceeds from trust land sales or leases to run the Land Department, at least not without getting voter approval, the Arizona Court of Appeals ruled Nov. 17.
In a unanimous decision, the judges rejected arguments by the Brewer administration that the diversion of cash is legal.
Attorneys for the state Land Department, which manages the properties, had argued that anything that the Land Department does to improve the value of the trust's land increases the amount of money that the trust earns. That meets the constitutional requirements, the lawyers argued.
Judge Donn Kessler said that is legally irrelevant because the Arizona Constitution specifically forbids what was done.
"If the Legislature desires to use the proceeds from trust lands to pay for managing trust lands, it must obtain permission from the people of Arizona in the form of a constitutional amendment," he wrote for the court.
Land Commissioner Maria Baier said she was still studying the ruling. But she said it is likely see will seek review by the Arizona Supreme Court.
The lawsuit stems from an effort by legislators to provide more money for the Land Department. Of the 10 million acres Arizona got when it became a state, about 9.2 million acres remain.
The federal law conveying the land to the state specified that when Arizona sells such land, the money must go to specific beneficiaries, mostly public schools.
The Arizona Constitution forbids taking money from trust funds for any reason other than the purpose for which they were established.
Two years ago, though, the Legislature let the state land commissioner divert up to 10 percent of what was raised in the prior fiscal year in proceeds from all trusts, including the one for public schools.
This includes not only property that the state sells, but also any revenues generated from the sale of minerals and timber on that land. That move allowed lawmakers to cut taxpayer funding used to run the Land Department so funds could be shifted to plug other budget holes.
Proponents of the move argued it would help the trust - and the beneficiaries -- in the long run.
It could help the agency prepare state land so that it's ready to sell later, when the real-estate market returns and developers want to buy it, presumably, at higher prices.
And Baier said using some of the proceeds is only logical.
"Most trusts don't function unless there's a funding mechanism built into them," she said.
Kessler, however, accepted the arguments of the Center for Law in the Public Interest, saying the courts cannot ignore the plain requirements of the Arizona Constitution.
He said the legislation allows the use of trust funds to assist the state in reducing budget deficits.
"In doing so, it diverts money from the trusts' permanent funds, depriving the trusts of the value of lands sold and the products derived from such lands, as well as interest earned on those proceeds," he wrote. "It is a paramount requirement that the trusts must be fully compensated for any lands or products lost from the trust through sales."
The case is Rumery v. Baier 1 CA-CV 10-0807.
by Howard Fischer Arizona Business Gazette Nov. 24, 2011 12:00 AM
Court: Trust-land proceeds can't be used to run department
Reuters: Business News
National Commercial Real Estate News From CoStar Group
Latest stock market news from Wall Street - CNNMoney.com
- ► 2016 (145)
- ► 2015 (146)
- ► 2014 (102)
- ► 2013 (395)
- ► 2012 (392)
- Banks Revising Foreclosure Procedures
- Warehouse sales are booming
- After-tax return could alter look of investment
- Scottsdale Quarter development could include apart...
- Details of refinancing eligibility trickling in
- Billionaires can avoid reporting gains on stocks
- Court: Trust-land proceeds can't be used to run de...
- Developer land returned to farming in Maricopa and...
- Phoenix Optima condo developer set for 3rd effort
- Phoenix area housing market slips a bit
- Benjamin Group restructures under a new name
- 'Floating' house by Taliesen-trained architect fet...
- Oil Hits $100 Per Barrel. It’s All About the Pipel...
- 74 downtown Phoenix condos purchased
- Project Rebuild holds promise for housing industry...
- Dick's Sporting Goods buys W. Valley warehouse
- Phoenix, CityNorth developer clash - USATODAY.com
- Phoenix-area foreclosures way down in October
- Developer aims to restart condo project
- Phoenix home-fraud lawsuit leads to indictment
- Ariz. high court may weigh Chandler site
- 34 years of keeping families in their homes
- France outraged over 'shocking' debt downgrade mis...
- Dallas developer to revive stalled Scottsdale cond...
- Wall Street safety net still is full of holes
- More Arizonans can refinance for underwater mortga...
- Fannie Mae loss widens, asks taxpayers for $7.8B
- Ellman out as Westgate manager
- Saguaro hotel promises to be bright spot on Civic ...
- Arizona seniors lost millions in annuity fees
- Global survey hints at uptick in worker unhappines...
- Apartment vacancy rate dips below 9% for 1st time ...
- Combs: Single-asset LLC will provide best protecti...
- Builders look back on bad year
- Reagor: Real-estate agents ask lenders key questio...
- Many seek advice from financial experts
- Banks in Arizona shift to short sales
- Freddie Mac seeks $6 billion in aid
- Phoenix-area bankruptcy filings drop
- SkySong apartment site, hotel expansion win OK fro...
- Vestar develops Las Vegas retail project
- Man's short sale spurs website to help others
- Fountain Hills CopperWynd resort reopens
- Chase, Wells Fargo drop plan to charge fee for deb...
- ▼ November (44)