TODAY I HAD A CONVERSATION WITH MS. PENNY TULLIS OF THE HOUSE STAFF REGARDING A PROPOSED PROJECT. AT YOUR REQUEST, I AM WRITING NOW TO MEMORIALIZE MY RESPONSE.

MS. TULLIS ADVISED ME THAT A GROUP WISHES TO ESTABLISH A DRUG REHABILITATION CENTER IN PUSHMATAHA COUNTY. SHE FURTHER ADVISED ME THAT THE GROUP INTENDS TO FUND THE PROJECT BY ISSUING BONDS. YOUR QUESTION IS WHETHER THE TRANSACTION MAY BE STRUCTURED IN A MANNER SO THAT THE COUNTY AND THE STATE WILL NOT BE LIABLE FOR THE BONDS.

I BELIEVE IT IS POSSIBLE TO FUND A PROJECT WITH A BOND ISSUE FOR WHICH NEITHER THE COUNTY NOR THE STATE IS LEGALLY LIABLE. IN THIS METHOD OF FINANCING, A PUBLIC TRUST ISSUES REVENUE BONDS. THE PROCEEDS OF THE REVENUE BONDS ARE USED TO CONSTRUCT THE PROJECT. AFTER THE PROJECT IS COMPLETED, THE REVENUES DERIVED FROM THE OPERATION OF THE PROJECT ARE THEN USED TO RETIRE THE BONDS. BECAUSE THE TRUST IS A SEPARATE, INDEPENDENT ENTITY, THE COUNTY AND THE STATE MAY AVOID LIABILITY FOR THE DEBT INCURRED BY THE TRUST.

WHILE IT IS POSSIBLE THAT A TRANSACTION MAY BE STRUCTURED TO AVOID IMPOSING LIABILITY ON PARTIES OTHER THAN A PUBLIC TRUST, WHETHER A PARTICULAR TRANSACTION ACTUALLY IS STRUCTURED IN THIS MANNER WILL DEPEND UPON THE SPECIFIC AGREEMENTS AND DOCUMENTS ASSOCIATED WITH THE TRANSACTION. BECAUSE I HAVE NOT REVIEWED ANY DOCUMENTS RELATING TO THE PROJECT ABOUT WHICH YOU INQUIRE, I CANNOT ADVISE YOU AS TO WHETHER THE COUNTY OR STATE WILL BE RESPONSIBLE FOR ANY BONDS WHICH MAY BE ISSUED IN CONNECTION WITH THIS PARTICULAR PROJECT.

(K. W. JOHNSTON)