December 6, 2022

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Oklahoma Supreme Court to hear turnpike bond dispute

5 min read
Oklahoma Supreme Court to hear turnpike bond dispute

A battle over an initial installment of bonds to fund a $5 billion, 15-year Oklahoma Turnpike extension project heads for a showdown in the state supreme court. 

Oral arguments before the justices are scheduled for Nov. 28, with the Oklahoma Turnpike Authority (OTA) seeking validation of up to $500 million of second senior lien revenue bonds and hundreds of property owners in the path of toll road construction fighting to block the debt. 

Recently re-elected Gov. Kevin Stitt officially unveiled ACCESS (Advancing and Connecting Communities and Economies Safely Statewide) Oklahoma in February, calling it “a bold investment in our future that provides needed corridor connections and expansions while making travel easier and leading to more economic development across the state.”

The Oklahoma Turnpike Authority is eyeing 2023’s first quarter to issue bonds for a $5 billion extension project if the state supreme court validates the debt.

Oklahoma Department of Transportation

Two lawsuits were filed in Cleveland County District Court in May: one led by the group Pike Off OTA that directly challenges OTA’s authority to issue bonds for three extension projects and another claims OTA violated the Open Meeting Act, leaving property owners unaware of its plans.

In August, OTA petitioned the supreme court to validate the bonds and accept original jurisdiction for the two lawsuits, which it continues to fight in district court. 

After a referee appointed by the high court heard arguments in September,  justices assumed original jurisdiction over the bonds last month, noting however, the jurisdiction does not extend to “matters” and “issues” pending before the district court.

Prior to the OTA petition filing, the Oklahoma Council of Bond Oversight on Aug. 9 approved the bonds conditioned on the dismissal or resolution of the two lawsuits in OTA’s favor and supreme court validation of the debt by Feb. 5, 2023. The five-member council is responsible for reviewing and approving financings proposed by Oklahoma state agencies, authorities, and departments.

In its supreme court brief filed ahead of oral arguments, Pike Off OTA plaintiffs called the OTA’s efforts to build the South Extension, East-West Connector, and Tri-City Connector “unlawful” and contended the agency used up its “one bond issue” authorization under state statute with debt it sold in 1989.

“One issue means one issue,” the brief said. “It does not mean one issue in 1989, another one in 2022, and then several more in the future. It does not mean a ‘series’ of bond issues issued at distinctly different times under the supposed auspices of one trust agreement.”

It added OTA “is headed down an unlawful path of displacing families, destroying homes, disrupting lives, endangering the environment and water supplies, and eroding the principles of representative democracy.”

OTA’s brief said the Tri-City and East-West connectors are the final segments of the Oklahoma City Outer Loop, which was legislatively authorized 35 years ago and validated by the state supreme court in 1989 and 2016. It also said the legislature authorized the South Extension in 1993.

“The power of the authority to combine one or more projects and finance them under one bond indenture is well settled,” the brief said, noting the OTA has undertaken over 20 bond issues over the past 35 years to complete various turnpike projects. 

Plaintiffs in the Open Meeting Act lawsuit, which is not challenging the bonds, also weighed in with a brief. 

“It would be an unfortunate assertion of jurisdiction for this court to proceed with the OTA application and petition until the trial court does what the Oklahoma Council on Bond Oversight prescribed vis a vis the case — namely to determine whether the OTA violated the (Open Meeting Act)  such that its ACCESS Oklahoma and Kickapoo Turnpike extension plans should be invalidated and recommenced, but this time with proper public disclosure, vetting, and a meaningful opportunity for public review and comment,” the brief said.

Validation of the bonds by the high court should end litigation over the debt, according to the OTA. 

“The decision of the supreme court in a validation proceeding is final and conclusive as to all parties and cannot be contested or challenged in any court in Oklahoma,” said Wendy Smith, OTA’s finance and revenue director in an email.  “Accordingly, it has always been OTA’s position that the supreme court’s decision will address all legal issues, including those pending in Cleveland County, in connection with the OTA’s legal authorization to issue bonds to finance the construction of the projects.”  

If justices approve the bonds, OTA expects to sell them in 2023’s first quarter, Smith added.

The $500 million of bonds consists of $450 million to initiate funding for the ACCESS plan and $50 million to refund outstanding debt. 

After launching a request for proposals in mid-June, the OTA selected Wells Fargo as senior manager and Stifel, Nicolaus & Company; Morgan Stanley; BOK Financial; and Raymond James as co-managers.

HilltopSecurities was tapped as financial advisor, Hawkins Delafield & Wood as bond counsel, and Kutak Rock as disclosure counsel. 

OTA’s board approved up to $1 billion of debt in June. It also terminated an untapped $200 million revolving line of credit with Wells Fargo meant to jumpstart the project’s funding. That move followed the bond oversight council’s approval of the credit line in May with a stipulation the OTA could not use the funds for expenditures related to the three turnpike extensions cited in the Pike OFF OTA lawsuit.

Meanwhile, the controversy has caught the attention of state lawmakers with so-called interim studies targeting OTA launched in the Oklahoma House and Senate.

In September, Senate Transportation Committee Chairman Rob Standridge said the focus was on how legislative oversight might work since ACCESS Oklahoma “came as a bit of a surprise” for some residents. 

After House lawmakers heard from various parties last month, State Rep. Danny Sterling said the legislature may need to measure the original intent of the turnpike statute against current OTA actions. 

“Just because it’s always been done this way in the past doesn’t necessarily make it right in my opinion,” he said. “As the pending lawsuits are resolved, hopefully that will provide some clarity and direction for us as legislators as well.”