All-County Taxpayers Association - Updates & Commentary - The People Have Prohibited It The Government Did It Anyway With The Industrial Development Authority (IDA) (Legal Briefs)

All-County Taypayers Association

"The price of freedom is eternal vigilance...
Let the eye of vigilance never be closed."
- Thomas Jefferson

STATE OF NEW YORK SUPREME COURT
ALBANY COUNTY
________________________________________________
ROBERT L. SCHULZ and JOHN SALVADOR, JR.

Plaintiffs-Petitioners,

VERIFIED COMPLAINT PETITION
Index No. 3271-98

- against -

THE NEW YORK STATE LEGISLATURE, JOSEPH BRUNO,
SENATE MAJORITY LEADER, SHELDON SILVER,
ASSEMBLY SPEAKER; THE WASHINGTON COUNTY BOARD
OF SUPERVISORS, PETER TELISKY, CHAIRMAN; THE
WARREN COUNTY BOARD OF SUPERVISORS, LOUIS TESSIER,
CHAIRMAN and THE WARREN WASHINGTON COUNTIES
INDUSTRIAL DEVELOPMENT AGENCY, BRUCE FERGUSON,
CHAIRMAN,
Defendants-Respondents.
________________________________________________

Robert L. Schulz and John Salvador, Jr., allege:

1. This is a declaratory judgment action pursuant to CPLR 3001 and an action pursuant to Article 7A of the State Finance Law, and a proceeding pursuant to CPLR 7800.

2. The relief requested herein is a preliminary injunction and a final order:

a) declaring Chapter 682 of the Laws of 1985 to be unconstitutional, null and void,

b) declaring the Counties’ October 1988 debt service contracts to be unconstitutional, null and void,

c) declaring Warren County’s debt service Budget Note Resolutions to be unconstitutional, null and void,

d) declaring the Counties’ June 1998 debt service Home Rule Resolutions to be unconstitutional, null and void,

e) declaring the State Finance Law Section 123-b(1) to be unconstitutional, null and void, and

f) preliminarily enjoining and prohibiting the Counties from servicing any part of any debt obligations of the IDA until the Court makes a final determination of the questions presented herein, and g) for such other and further relief as to the court may seem just and proper.

PARTIES

3. Robert L. Schulz is a sovereign citizen of New York State. He resides in the Town of Fort Ann, Washington County. His mailing address is 2458 Ridge Road, Queensbury, New York 12804. He is an individual taxpayer and property owner liable to pay taxes upon an assessment of more than $1,000 in the Town of Fort Ann, Washington County, and in Queensbury, Warren County, New York. He pays State income, sales and compensating use taxes. He is a registered voter registered to vote in the Town of Fort Ann, Washington County, New York. He voted in the last general election in New York State. He is eligible to vote in the next general election in New York State.

4. John Salvador, Jr. is a sovereign citizen of New York State. He resides in the Town of Lake George, Warren County. His mailing address is 2999 State Route 9L, Lake George, New York 12845. He is an individual taxpayer and property owner liable to pay taxes upon an assessment of more than $1,000 in the Town of Lake George, Warren County, New York. He pays State income, sales and compensating use taxes. He is a registered voter registered to vote in the Town of Lake George, Warren County, New York. He voted in the last general election in New York State. He is eligible to vote in the next general election in New York State.

5. The New York Legislature is the Legislative Branch of the State of New York, Joseph L. Bruno is a member of the Legislature and is the Majority Leader of the Senate, Sheldon Silver is a member of the Legislature and is the Speaker of the Assembly.

6. The Washington County Board of Supervisors is the chief administrative and legislative body of Washington County, New York. Peter J. Telisky is the Chairman of the Board.

7. The Warren County Board of Supervisors is the chief administrative and legislative body of Warren County, New York. Louis Tessier is the Chairman of the Board.

8. The Warren Washington Counties Industrial Development Agency, as a public corporation created by the State Legislature, is a political subdivision of the State of New York. Bruce Ferguson is Chairman of the IDA.

PRELIMINARY STATEMENT

9. This is plaintiffs’ first lawsuit against the Hudson Falls trash plant since May 4, 1992, which lawsuit ("Schulz I") was brought shortly after the plant started operating. Schulz I was dismissed by the Hon. John G. Dier without explanation. Justice Dier did not include a memorandum decision with his order dismissing the case. The Appellate Division affirmed Justice Dier’s dismissal saying "...petitioners have failed to demonstrate that the subject financing scheme is invalid."

10. The facts have changed substantially since 1992 making it easier for plaintiffs to show that the financing scheme is constitutionally invalid. What may have seemed more like a waste disposal service contract with a relatively minor debt service "cost component" in 1992 is now clearly seen as a debt service contract with a minor waste disposal cost component. Indeed, the amount of money the Counties are paying to the IDA to service the bonds in 1998 ($9,442,000) far exceeds the operating and maintenance costs. What has become known since 1992 is that the constitutionally obnoxious contracts the Counties entered into in 1988 require the taxpayers to pay about $10 million for debt service, for each year, for twenty years for a total of nearly $200 million.

11. The contract has 14 more years to run, at $10 million per year that’s $140 million! The situation is so bad for the Counties that they: 1) have begun to issue budget notes to borrow the money to pay the monthly debt service invoices received from the IDA. The Counties have also had to beg the State Legislature for $3.5 million in emergency State aid for 1998 because their trash plant debt service payment obligation has meant millions of dollars were not available for needed county services; and 2) they have decided to join the ranks of the near bankrupt cities of Utica, Troy and NYC by requesting special State legislation authorizing the State Comptroller to intercept the Counties’ sales tax revenues to pay the IDA’s debt obligations.

12. It is also now known that after paying $200 million for the plant, with taxpayer funds, the IDA, a political subdivision of the State will give the plant to the private developer in violation of the no-gifting provision of the Constitution.

13. It is also now known that Chapter 682 of the Laws of 1985, a special act which set the stage for the obnoxious contracts, was itself enacted in violation of the home rule prohibitions of the Constitution. In the instant case, plaintiffs present legal questions as well as facts which were not present or determined in Schulz I.

14. Finally, there is mounting evidence that the IDA bonded a construction cost that was grossly inflated and that the contractor’s "equity contribution" is not equity at all but money that came from the proceeds of the IDA’s bond issue and which the taxpayers are paying back with interest.

STATEMENT OF THE FACTS

15. On or about August 1, 1985, the Legislature adopted Chapter 682 of the Laws of 1985, a special act, authorizing Washington County: 1) to enter into a contract with the Washington Warren Counties Industrial Development Agency ("IDA") for the financing [debt service] and maintenance of "resource recovery" facility ("plant"); 2) to pay for the financing [debt service] and maintenance of the project in any manner that the County may agree upon; and 3) to levy taxes on the taxable real property in the county to raise the money to pay for the financing [debt service] and maintenance of the project. Exhibit A hereto is a copy.

16. On or about October 28, 1988, Washington County entered into contracts with the IDA and the with Warren County (the "contracts") for the financing and operation of the plant which would burn trash sent to it from inside the counties of Warren, Washington and from outside these two counties. The contracts called for a "Yearly Disposal Fee" ("Tipping Fee" or "Fee") to equal DEBT SERVICE plus operating and maintenance costs ("O&M") minus certain credits. [Fee = DEBT SERVICE + O&M - credits]. The O&M costs include guaranteed profit payments to the developer and numerous automatic "pass throughs."

17. THE DEBT SERVICE THE COUNTIES AGREED TO PAY EQUALS ABOUT $10 MILLION EACH YEAR FOR TWENTY YEARS FOR A TOTAL OF ABOUT $200 MILLION. YES, BY THE TERMS OF THESE CONTRACTS THE COUNTIES PLEDGED TO PAY ABOUT $200 MILLION IN PRINCIPLE AND INTEREST TO SERVICE THE DEBT CONTRACTED BY THE IDA TO FINANCE THE CONSTRUCTION OF THE PLANT. AT THE END OF TWENTY YEARS THE OWNERSHIP OF THE PLANT IS TO BE TRANSFERRED FROM THE IDA TO THE PRIVATE DEVELOPER OF THE PROJECT – ADIRONDACK RESOURCE RECOVERY ASSOCIATES AND THE FOSTER WHEELER CORPORATION. YES! AFTER PAYING ABOUT $200 MILLION TO BUILD THE PLANT, THE COUNTY TAXPAYERS WILL NOT OWN THE PLANT. A DEVELOPER WHO TOOK NO RISK WILL BE REWARDED WITH OWNERSHIP OF THE PLANT.

18. The plant opened in 1992. Both counties found it necessary to make payment out of their general funds to meet their contractual obligations. In 1992, the State Legislature included a member item appropriation of $350,000 to help the two counties. The counties and the State Legislature were immediately taken to court by plaintiffs Schulz, Salvador and others ("Schulz I"). Schulz I included eight causes of action including the following:

SCHULZ I: FIRST CLAIM

DEFENDANT STATE LEGISLATURE HAS ENACTED LEGISLATION
WHICH VIOLATES ARTICLE VII, SECTION 8 OF THE STATE CONSTITUTION

"The money of the state shall not be given or loaned to or in aid of any private corporation or association, or private undertaking; nor shall the credit of the state be given or loaned to or in aid of any individual, or public or private corporation or association, or private undertaking...." Article VII, Section 8.1 Constitution of the State of New York

SCHULZ I: SECOND CLAIM

DEFENDANTS STATE LEGISLATURE HAS ENACTED
LEGISLATION WHICH VIOLATES ARTICLE X,
SECTION 5 OF THE STATE CONSTITUTION

"Neither the state nor any political subdivision thereof shall at any time be liable for the payment of any obligations issued by such a public corporation heretofore or hereafter created, nor may the legislature accept, authorize acceptance of or impose such liability upon the state or any political subdivision thereof; but the state or a political subdivision thereof may, if authorized by the legislature, acquire the properties of any such corporation and pay the indebtedness thereof."

Article X, Section 5
Constitution of the State of New York

SCHULZ I: THIRD CLAIM

DEFENDANT COUNTIES HAVE VIOLATED ARTICLE VIII,
SECTION 1 OF THE STATE CONSTITUTION

"No county, city, town, village or school district shall give or loan any money or property to or in aid of any individual, or private corporation or association, or private undertaking, or become directly or indirectly the owner of stock in, or bonds of, any private corporation or association; nor shall any county, city, town, village or school district give or loan its credit to or in aid of any individual, or public or private corporation or association, or private undertaking...."

Article VIII, Section 1
Constitution of the State of New York

SCHULZ I: FIFTH CLAIM

DEFENDANTS HAVE VIOLATED SECTION 870,
ARTICLE 18-A, GENERAL MUNICIPAL LAW

"Section 870. State and municipality not liable on bonds or notes. The bonds or notes and other obligations of the authority shall not be a debt of the state or of the municipality, and neither the state nor the municipality shall be liable thereon, nor shall they be payable out of any funds other than those of the agency."

Section 870, Article 18-A
State General Municipal Law

19. On May 11, 1992, in an affidavit signed by Harry Booth, Chairman of the Board of Supervisors of Washington County, Mr. Booth said, "For the disposal of the solid waste, Washington County is required to pay to the IDA a disposal fee that covers the cost of servicing the bonded indebtedness of the Plant, and the costs of operating and maintaining the Plant...That the waste disposal fee is being paid out of taxpayer funds is completely in keeping with the express authority of Chapter 682 of the Laws of 1985. Chapter 682 authorized Washington County to enter into a long-term waste disposal contract and to pay its share of the cost out of real property taxes."

20. The matter was dismissed by order of the Hon. John G. Dier without a memorandum or decision.

21. On appeal the Third Department affirmed. Exhibit F hereto is a copy of the decisions in Schulz I. With respect to the Claim that a $350,000 State appropriation for the "Washington-Warren Counties Burn Plant" violated Article VII, Section 8 and Article X, Section 5 of the N.Y. Constitution, the Third Department ruled:

"Inasmuch as the appropriation was a gift of State aid to Washington and Warren Counties, petitioners have failed to demonstrate that the State and its related respondents violated the cited provisions of the N.Y. Constitution."

22. With respect to the claim that use of County funds to pay shortfall in waste disposal fee violated Article VIII, Section 1 and GML Section 870, the Third Department ruled:

"While it is true that Washington and Warren Counties are contractually obligated to pay the monthly waste disposal fee which, as noted previously, is based upon a number of cost components, including operating costs and debt service on the bonds, the record before us makes clear that the Counties obligation in this regard is contingent upon the continued provision of waste disposal services and, further, that the Counties are not directly liable to the bondholders. We, therefore, conclude that petitioners have failed to demonstrate that the subject financing scheme is invalid."

23. In the fall of 1997, during Warren County’s 1998 budget adoption process, the county knew that during 1998 it would be required to pay about $2.5 million dollars out of its general fund to the IDA for the plant’s debt service. The county also knew that it would have to increase the county property tax by over 10% in order to be able to make that payment to the IDA in 1998. However, the county decided not to include the tax increase in 1998. Instead it decided to adopt its 1998 budget out-of-balance, i.e., without a means of paying in full the amount it knew its contract with Washington County required it to pay.

24. Because Warren County did not budget for the full amount of the plant’s debt service the County knew it would be required to pay pursuant to its 1988 Contract with Washington County and the IDA, the County’s Solid Waste Account ran dry in April 1998. As a consequence, the County began to pass Resolutions to sell Budget Notes to borrow the money to make the payments (the "Budget Note Resolutions"). On May 15, 1998, the County Board of Supervisors adopted Resolution 367 to sell a Budget Note in the amount of $462,500. See Exhibit B hereto. On June 12, 1998, the County Board of Supervisors is expected to adopt a Resolution authorizing the sale of another Budget Note in the amount of approximately $1.2 million.

25. On June 8, 1998 and June 10, 1998, Warren County and Washington County adopted Resolution No. 372 and Resolution 191, respectively, requesting the Introduction of a Bill in the State Legislature concerning a proposed law to authorize agreements, pledges and/or intercepts of County Sales Tax Revenues in connection with the IDA’s debt obligations on the plant and the Counties’ October 1988 contracts to pay the IDA’s debt obligations. Resolution 372 and 191 are collectively referred to herein as "the Home Rule Resolutions." Exhibit C hereto is a copy of Resolution 372. Exhibit D is a copy of Resolution 191. Exhibit E is a copy of the State Legislation the counties have resolved to have passed by the State Legislature as a home rule bill. The bill would authorize the State Comptroller to make payments to the IDA out of State funds under his care and management, without appropriation by law. The bill would also authorize the use of State and local funds to pay the debt obligations of the IDA. The bill would have the State and the Counties lending their credit to the IDA and its bondholders by committing State and local tax funds to the repayment of the IDA’s bonds.

FIRST CLAIM

CHAPTER 682 OF THE LAWS OF 1985 IS UNCONSTITUTIONAL

26. The original N.Y. Constitution reads in relevant part:

"Article I. People the only source of authority. This convention, in the name and by the authority of the good people of this State, DOTH ORDAIN, DETERMINE AND DECLARE that no authority shall, on any pretense whatever, be exercised over the people or members of this state, but such as shall be derived from and granted by them."

27. The N.Y. Constitution reads in relevant part:

"Section 2.(b). Subject to the bill of rights of local governments and other applicable provisions of this constitution, the legislature:

(2)Shall have the power to act in relation to the property, affairs or government of any local government only by general law, or by special law only (a) on request of two-thirds of the total membership of its legislature body or on request of its chief executive officer concurred in by a majority of such membership, or (b)...on certificate of necessity from the governor reciting facts which in his judgment constitute an emergency requiring enactment of such law and, in such latter case, with the concurrence of two-thirds of the members elected to each house of the legislature." (Plaintiffs emphasis).

Section 2.(b)(2)(a),(b) Article IX
New York Constitution

Article X, Section 5
New York Constitution

"...nor shall any county, city, town, village or school district give or loan its credit to or in aid of any individual, or public or private corporation or association, or private undertaking...."

Article VIII, Section 1
New York Constitution

28. The U.S. Constitution reads in relevant part:

"The United States shall guarantee to every state in this union a republican form of government...."

Article IV, Section 4
U.S. Constitution

"No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States."

Section 1, Clause 2
Fourteenth Amendment

29. Chapter 682 of the Laws of 1985 is violative of the N.Y. Constitution, Articles IX, X and VIII and the U.S. Constitution, Article IV and the Fourteenth Amendment.

30. Chapter 682 was passed by the Legislature without a local Home Rule Message required by Section 2(b)2(a) of Article IX and without a message of necessity by the governor required by Section 2(b)2(b) of Article IX.

31. Chapter 682 authorizes Washington County to use public funds to pay the obligations of the IDA, a violation of Article X, Section 5.

32. Chapter 682 authorizes Washington County to lend its credit to a public corporation (the IDA) by entering into an agreement to use property tax revenues to pay the debt service of the plant, in violation of Article VIII, Section 1.

33. Because Chapter 682 violates the will of the people as expressed in the N.Y. Constitution, Chapter 682 is violative of plaintiffs’ fundamental civil rights to a government republican in form and substance and against laws that abridge plaintiffs’ privileges and immunities.

SECOND CLAIM

THE 1988 CONTRACTS ARE UNCONSTITUTIONAL

34. The original N.Y. Constitution reads in relevant part: "Article I. People the only source of authority. This convention, in the name and by the authority of the good people of this State, DOTH ORDAIN, DETERMINE AND DECLARE that no authority shall, on any pretense whatever, be exercised over the people or members of this state, but such as shall be derived from and granted by them."

35. The N.Y. Constitution reads in relevant part:

Article X, Section 5
New York Constitution

"nor shall any county, city, town, village or school district give or loan its credit to or in aid of any individual, or public or private corporation or association, or private undertaking...."

Article VIII, Section 1
New York Constitution

36. The U.S. Constitution reads in relevant part:

"The United States shall guarantee to every state in this union a republican form of government...."

Article IV, Section 4
U.S.Constitution

"No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States."

Section 1, Clause 2
Fourteenth Amendment

37. The Contracts are violative of the N.Y. Constitution, Articles X and VIII and the U.S. Constitution, Article IV and the Fourteenth Amendment.

38. The Contracts commit Warren and Washington Counties to use public funds to pay the obligations of the IDA, a violation of Article X, Section 5.

39. The Contracts have Warren and Washington Counties lending their credit to a public corporation (the IDA) by entering into an agreement to use property tax revenues to pay the debt service of the plant, in violation of Article VIII, Section 1.

40. The Contracts have Warren and Washington Counties and the IDA agreeing to transfer ownership of the plant to the private developer after the counties have paid about $200 million to construct it, a violation of the "no gifting" provision of Article VIII, Section 1.

41. Because the Contracts violate the will of the people as expressed in the N.Y. Constitution, the Contracts are violative of plaintiffs’ fundamental civil rights to a government republican in form and substance and against laws that abridge plaintiffs’ privileges and immunities.

THIRD CLAIM

THE WARREN COUNTY BUDGET NOTE RESOLUTIONS
OF 1998 ARE UNCONSTITUTIONAL

42. The original N.Y. Constitution reads in relevant part:

43. The N.Y. Constitution reads in relevant part:

"No indebtedness shall be contracted for longer than the period of probable usefulness of the object or purpose for which such indebtedness is to be contracted."

Article VIII, Section 2
N.Y. Constitution

Article X, Section 5
New York Constitution

44. The U.S. Constitution reads in relevant part:

"The United States shall guarantee to every state in this union a republican form of government...."

Article IV, Section 4
U.S. Constitution

"No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States."

Section 1, Clause 2
Fourteenth Amendment

45. The Budget Note Resolutions are violative of the N.Y. Constitution, Articles X and VIII and the U.S. Constitution, Article IV and the Fourteenth Amendment.

46. In violation of Article VIII, Section 1, the Budget Note Resolutions authorize Warren County to contract indebtedness for a period longer than the useful life of the purpose of the indebtedness which was to pay IDA debt service invoices, which debt ends with the payment of the invoice. The Resolutions also authorize Warren County to use the borrowed funds to pay the obligations of the IDA, a violation of Article X, Section 5.

47. Because the Contracts violate the will of the people as expressed in the N.Y. Constitution, the Contracts are violative of plaintiffs’ fundamental civil rights to a government republican in form and substance and against laws that abridge plaintiffs’ privileges and immunities.

FOURTH CLAIM

THE HOME RULE RESOLUTIONS OF 1998 ARE UNCONSTITUTIONAL

48. The original N.Y. Constitution reads in relevant part: "Article I. People the only source of authority. This convention, in the name and by the authority of the good people of this State, DOTH ORDAIN, DETERMINE AND DECLARE that no authority shall, on any pretense whatever, be exercised over the people or members of this state, but such as shall be derived from and granted by them."

49. The N.Y. Constitution reads in relevant part:

"No money shall ever be paid out of the state treasury or any of its funds, or any of the funds under its management; except in pursuance of an appropriation by law...."

Article VII, Section 7
NY Constitution

"...nor shall the credit of the state be given or loaned to or in aid of any individual, or public or private corporation or association, or private undertaking...."

Article VII, Section 8
New York Constitution

"...nor shall any county, city, town, village or school district give or loan its credit to or in aid of any individual, or public or private corporation or association, or private undertaking...."

Article VIII, Section 1
New York Constitution

50. The U.S. Constitution reads in relevant part:

"The United States shall guarantee to every state in this union a republican form of government...."

Article IV, Section 4
U.S. Constitution

"No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States."

Section 1, Clause 2
Fourteenth Amendment

51. The Home Rule Resolutions are violative of the N.Y. Constitution, Articles VII, VIII and X, and the U.S. Constitution, Article IV and the Fourteenth Amendment.

52. The Home Rule Resolutions request State legislation which would authorize the State Comptroller to make payments to the IDA out of funds under his care and management without appropriations by law, in violation of Article VII, Section 7.

53. The Home Rule Resolutions request State legislation which would have the State and Warren and Washington Counties lending their credit to a public corporation (the IDA) by agreeing to use tax revenues to pay the debt service obligations of the IDA, in violation of Article VII, Section 8 and Article VIII, Section 1.

54. The Home Rule Resolutions request State legislation which would authorize the State and Warren and Washington Counties to use public funds to pay the debt obligations of a public corporation (the IDA) in violation of Article X, Section 5.

55. Because the Home Rule Resolutions violate the will of the people as expressed in the N.Y. Constitution, the Home Rule Resolutions are violative of plaintiffs’ fundamental civil rights to a government republican in form and substance and against laws that abridge plaintiffs’ privileges and immunities.

FIFTH CLAIM

STATE FINANCE LAW SECTION 123-b(1)
IS UNCONSTITUTIONAL

56. State Finance Law Section 123-b(1) reads:

"1. Notwithstanding any inconsistent provision of law, any person, who is a citizen taxpayer, whether or not such person is or may be affected or specially aggrieved by the activity herein referred to, may maintain an action for equitable or declaratory relief, or both, against an officer or employee of the state who in the course of his or her duties has caused, is now causing, or is about to cause a wrongful expenditure, misappropriation, misapplication, or any other illegal or unconstitutional disbursement of state funds or state property, except that the provision of this subdivision shall not apply to the authorization, sale, execution, or delivery of a bond issue or notes issued in anticipation thereof by the state or any agency, in anticipation thereof by the state or any agency, instrumentality or subdivision thereof or by any public corporation or public benefit corporation." (plaintiffs’ emphasis).

State Finance Law 123-b(1)

57. The original N.Y. Constitution reads in relevant part:

58. The N.Y. Constitution reads in relevant part:

"No law shall be passed abridging the rights of the people peaceably to assemble and to petition the government, or any department thereof...."

Article I, Section 9.1
NY Constitution

59. The U.S. Constitution reads in relevant part:

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press or of the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

First Amendment
U.S. Constitution

"The United States shall guarantee to every state in this union a republican form of government...."

Article IV, Section 4
U.S. Constitution

"No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States."

Section 1, Clause 2
Fourteenth Amendment

60. SFL 123-b(1) is violative of the N.Y. Constitution, Article I and the U.S. Constitution, Article IV and the First and Fourteenth Amendments.

61. SFL 123-b(1) is designed to prohibit citizens of the State of New York from petitioning their government for a redress of grievances, even grievances rooted in the New York or U.S. Constitutions, if the matter involves the contracting of public debt. This is a violation of the First Amendment to the U.S. Constitution and Article I of the N.Y. Constitution.

62. Because SFL 123-b(1) violates the will of the people as expressed in the N.Y. and U.S. Constitutions, SFL 123-b(1) is violative of plaintiffs’ fundamental civil rights to a government republican in form and substance and against laws that abridge plaintiffs’ privileges and immunities.

PLAINTIFFS ARE ENTITLED TO INJUNCTIVE RELIEF

63. Plaintiffs have a strong likelihood of success on the merits. Defendant Counties are using public funds to pay the obligations of a public corporation and are doing so in aid of a private undertaking. The counties have undoubtedly pledged their funds and their credit to a public corporation. Warren County is now borrowing money to service the debt obligations of the IDA. The Counties are in the process of asking the State Legislature to join them in sacrificing the fundamental rights of the people on the alter of the money gods by passing a special act which would include a State pledge to pay the IDA’s obligations out of funds under the care and management of the State Comptroller without appropriations by law.

64. Plaintiffs’ injuries fall within the zones of interest to be protected by the stated provisions of the New York and US Constitutions.

65. Without injunctive relief, plaintiffs’ injuries will be immediate and irreparable. Another $800,000 or $900,000 of taxpayer funds are scheduled to be paid out of public funds within days to service the debt obligations of the IDA. Warren County’s share of the debt service payments will be illegally borrowed.

66. On the other hand, an injunction is issued, the IDA will not suffer any immediate harm. The IDA has a debt service reserve fund with more than enough money in it to service its debt for the next twelve months. Also, on information and belief, the IDA has another reserve account with a few million dollars in it that came from the proceeds of its bond issue.

67. A balancing of the equities argues in favor of a granting of the request for injunctive relief.

DATED: June 12, 1998

JOHN SALVADOR, JR.                                                                 ROBERT L. SCHULZ
Pro Se                                                                                              Pro Se
2999 State Route 9L                                                                        2458 Ridge Road
Lake George, NY 12845                                                                 Queensbury, NY 12804
(518) 656-9242                                                                               (518)656-3578

STATE OF NEW YORK
SUPREME COURT - ALBANY COUNTY
________________________________________________
ROBERT L. SCHULZ and JOHN SALVADOR, JR.

Plaintiffs-Petitioners,

AFFIDAVIT

- against -

Index No. 3271-98

THE NEW YORK STATE LEGISLATURE,
JOSEPH BRUNO, SENATE MAJORITY LEADER,
SHELDON SILVER, ASSEMBLY SPEAKER;
THE WASHINGTON COUNTY BOARD OF
SUPERVISORS, PETER TELISKY, CHAIRMAN;
THE WARREN COUNTY BOARD OF SUPERVISORS,
LOUIS TESSIER, CHAIRMAN and THE WARREN
WASHINGTON COUNTIES INDUSTRIAL
DEVELOPMENT AGENCY, BRUCE FERGUSON,

CHAIRMAN,

Defendants-Respondents.
________________________________________________

Robert L. Schulz and John Salvador, Jr., being duly sworn depose and say:

We are the plaintiffs in the matter captioned above and we make this affidavit in opposition to defendants' motion to dismiss.

POINT I

THIS ACTION IS NOT BARRED BY THE
DOCTRINES OF RES JUDICATA OR
COLLATERAL ESTOPPEL

The rights, questions and facts in issue in the instant case are distinguishable from those in other actions. Therefore, res judicata, the doctrine precluding re-litigation of same facts or iss es, is no bar to this action.
Material facts and questions at issue in the instant case were not admitted or judicially determined in any other case. Therefore, collateral estoppel, the doctrine precluding re-litiga ion of issues of ultimate fact, is no bar to this action.
Plaintiffs have challenged the constitutionality of Chapter 682 of the Laws of 1985 under Article IX, X and VIII of the N.Y. Constitution. These questions have never been raised, presented or d termined in a court of law.
Among its claims, plaintiffs have challenged the constitutionality of the 1988 "debt service" contracts under the provision of Article X, Section 5 of the N.Y. Constitution which prohi its the use of county funds to pay the debt obligations of the IDA, a public corporation, and Article VIII, Section 1, which prohibits the county from giving or lending its credit to a public corpor tion. Contrary to defendants' allegations these questions have not been determined by a court of law. This case is distinguishable from Schulz v State of New York, 198 AD2d 554, a case in w ich the Supreme Court for Washington County refused to issue a Memorandum-Decision along with its Order dismissing the case and the Appellate Division framed the questions it decided as follows: &qu t;Petitioners next contend that Washington and Warren Counties' use of taxpayer funds to pay the monthly waste disposal fee to the IDA violates N.Y. Constitution, Article VIII, Section 1, which prohibits a county from giving or loaning money to aid a private undertaking, N.Y. Constitution, Article X, Section 5, which prohibits use of a county's money to aid a public corporation...." In the instant case, plaintiffs are not questioning the giving or lending of taxpayer funds under that clause of Article VIII, Section 1, which prohibits the counties from usin taxpayer funds in aid of a private undertaking. Instead, plaintiffs' Article VIII, Section 1 challenge is lodged under that provision which prohibits the counties from giving or lending their credit to the IDA, a public corporation. By agreeing to pay all commercial costs, including all debt-service, the counties have given their credit to the IDA whose bonds would not have bee creditworthy -- would not have been purchased -- had the counties not put their credit behind the bonds.
This case is distinguishable from Schulz v. State of New York, 198 AD2d 554 in yet another important way. Here, plaintiffs' Article X, Section 5 claim is not a claim questioning the givi g or lending of taxpayer funds as a gift in aid of a public corporation. Instead, plaintiffs' Article X, Section 5 claim challenges the use of taxpayer funds to pay the debt obligations of a public corporation.
The facts have changed substantially since 1992 making it easier for plaintiffs to show that the financing scheme is constitutionally invalid. New evidence shows that what may hav seemed more like a waste disposal service contract with a relatively minor debt service "cost component" in 1992 is now clearly seen as a debt service contract with a minor waste disposal cost component. New evidence shows that the amount of money the Counties are paying to the IDA to service the bonds in 1998 ($9,442,000) far exceeds all other expenses of the project ombined. New evidence shows that the constitutionally obnoxious contracts the Counties entered into in 1988 require the taxpayers to pay about $10 million for debt service, for each y ar, for twenty years for a total of nearly $200 million. The contract has 14 more years to run, at $10 million per year that's $140 million!
New evidence demonstrates the extreme measures the counties are forced to take, not to pay for waste disposal costs but to service the IDA's debt: 1) they have begun to issue budge notes to borrow the money to pay the monthly debt service invoices received from the IDA; they have also had to beg the State Legislature for $3.5 million in emergency State aid for 1998 because th ir trash plant debt service payment obligation has meant millions of dollars were not available for needed county services; and they have decided to join the ranks of the near bankrupt cities of Uti a, Troy and NYC by requesting special State legislation authorizing the State Comptroller to intercept the Counties' sales tax revenues to pay the IDA's debt obligations.
New evidence shows that after paying $200 million for the plant, with taxpayer funds, the IDA, a political subdivision of the State will give the plant to the private developer in iolation of the no-gifting provision of the Constitution.
New evidence shows that Chapter 682 of the Laws of 1985, a special act which set the stage for the obnoxious contracts, was itself enacted in violation of the home rule prohibition of the Constitution.
Finally, there is new evidence that the IDA bonded a construction cost that was grossly inflated and that the contractor's "equity contribution" is not equity at all but oney that came from the proceeds of the IDA's bond issue and which the taxpayers are paying back with interest.
The burden of demonstrating that the evidence and questions in issue in a later proceeding are the same as those determined in prior litigation is on the party seeking the benefit of collateral stoppel or res judicata. Capital Tel. Co. v. Pattersonville Tel. Co. (1982) 56 NY2d 11. Defendants have not and are unable to demonstrate that a court of competent jurisdiction has determin d the questions raised in this case.
A judgment in a former action does not operate as a bar to a subsequent action where the facts and the cause of action are not the same although the action relates to the same subject matter. < >Cool v Conners (1915) 215 NY175.
Res judicata applies only as to the matters actually litigated in the prior suit and does not prevent the court from passing on the merits of contentions not previously advanced. Murphy v. E ie County (1971) 28 NY2d 80. To hold otherwise would result in undermining the solitary purpose of taxpayers' actions in providing a check on the abuse of official power since an ineffectual su t could be brought first and then be considered a bar to any further challenge. Murphy v. Erie County (1971) 28 NY2d 80.
Alternatively, the competence and experience of pro-se plaintiffs in prior cases and the availability of new evidence argue for granting plaintiffs the opportunity to contest any decision claimed to be controlling.
Alternatively, there are compelling circumstances that make it appropriate that the plaintiffs be permitted to re-litigate the issue. Koch v. Consolidated Edison Co. (1984) 62 N 2d 548. With this year's $3.5 million state grant to the two counties to help them pay the IDA's debt service obligations, the taxpayers across the State have begun to shoulder the burden of this p oject. This project is an extremely dangerous precedent, threatening to completely undermine the debt limits placed on local governments by Article VIII, Section 4.
Issue preclusion refers to discrete issues of fact or law rather than to claims or causes of action. American Ins. Co. v. Messinger (1977) 43 NY2d 184. Clearly, this case rests n discrete issues of fact and law different from those of any prior case.
Collateral estoppel is a flexible doctrine which should not be rigidly or mechanically applied. Gilberg v. Barbieri (1981) 53 NY2d 285.
The reasons given rise to the doctrine of res judicata also indicate the limit of the field in which the principle applies. NYS Labor Relations Bd. v. Holland Laundry Inc. (1945 294 NY 480.
The doctrine of res judicata or "claim preclusion" is that an existing final judgment rendered upon the merits without fraud or collusion, by a court of competent jurisdiction, is conclusive of the rights, questions and facts in issue, as to the parties and their privies in all other actions in the same or any other judicial tribunal of concurrent jurisdiction. Plaintiffs have raised constitutional rights, questions and facts which were not in issue in prior cases prosecuted by pro se plaintiffs.
The doctrine of collateral estoppel, or "issue preclusion" bars re-litigation of issues of ultimate fact between the same parties when those issues have been determined by a prior, val d final judgment. Material facts or questions which were in issue in a former action, and were there admitted or judicially determined, are conclusively settled by a judgment rendered therein and m y not be litigated in a subsequent action. There must be an identity of issue which has necessarily been decided in the prior action and is decisive of the present action. Plaintiffs have raised co stitutional rights questions and facts which were not in issue in prior cases prosecuted by pro se plaintiffs.
There must have been a full and fair opportunity to contest the decision claimed to be controlling. A determination whether a party has had his day in court includes the following consideration : the competence and experience of counsel and the availability of new evidence. Gilberg v. Barbieri (1981) 53 NY2d 285; Schwartz v. Public Admr. Of County of Bronx (1969); Dusonic v. N.J. Transit Bus Operations (1986, 2^nd Dept), 124 AD2d 634. Not only has new evidence become available but the competence and experience of pro se plaintiffs in the 992 case must be taken into consideration.

New Evidence: The Comptroller's Report
On May 1, 1998, plaintiffs received a copy of the Report of Examination of the Warren-Washington IDA by the Office of the State Comptroller, issued December 20, 1996. Exhibit A heret is a copy.
On page 4 of the Report, the Comptroller refers to the IDA's issuance of Revenue Bonds to finance construction of the Hudson Falls Solid Waste Disposal Facility as "an arrangement uni ue in that certain costs of the commercial operation of the
facility are guaranteed by the Agency and their sponsoring municipalities." The commercial costs referred to, of course, includes nearly $10 million per year for debt service. As t e experts at the Comptroller's office stated, the agreement of the IDA and the counties to guarantee the debt service was unique in New York State. Again, the Constitution must be construed in its ntirety including the debt limiting restrictions of Article VIII, Section 4 as well as Article VIII, Section 1 and Article X, Section 5.
On page 29 of the Report, the Comptroller states, "The IDA's contractual responsibilities associated with this project differed significantly from its arrangement with other bond proj cts. For the majority of other bond projects, once the construction or acquisition phase was completed, the IDA's responsibilities were limited to monitoring compliance with debt payment provisions PILOT agreements and certain other matters. For the ARRA project, the IDA was contractually obligated to provide disposal fees sufficient to cover certain agreed upon costs of operation less credi s for electricity sales, equity contributions, outside disposal fee revenues and other items. This obligation was commonly referred to as the `Put or Pay' provision. To provide sufficient funding or this obligation, the IDA entered into an agreement with the County of Washington WHICH GENERALLY TRANSFERRED THESE RESPONSIBILITIES TO THE COUNTY. The County of Washington subsequently entered i to an agreement with the County of Warren to share a portion of these financial responsibilities. In general, as a result of all these agreements, if costs of operating the facility, including the ayment of debt service, are not paid for by revenues generated from tipping fees, the Counties of Warren and Washington are obligated to make up the difference from other sources."(Plaintiffs' emphasis)
The Comptroller's Report clearly states that the IDA's agreement to guarantee the costs of the commercial operation of the project was unique, that the IDA was
contractually obligated and that the IDA transferred its obligations to the counties -- an act clearly prohibited by Article X, Section 5 and Article VIII, Section 1 of the New York Constitution and an act in circumvention of Article VIII, Section 4 (b).
The Comptroller's Report also provides information which supports plaintiffs' claim of fraud. The "contractor's equity" payments appear not to have come from the contractor's overall orporate earnings but from money included in the proceeds from the bond sale, i.e., from money the IDA borrowed and is having the county taxpayers pay back with interest.

New Evidence: The Lynch Report
In May, 1998, plaintiffs obtained a copy of the report by R.S. Lynch & Company, Inc. (financial consultants to the IDA), entitled "Solid Waste Analysis For Warren & Washington C unties." Exhibit B hereto is a copy.
The report reveals, publicly, for the first time, some truths about the project, including:

The plant has been operating at or above design capacity for several years, dispelling the myth that the counties had to make payments from their general fund treasuries because of shortfall in he amount of trash delivered to the project.
The IDA's debt service obligation (which the Comptroller's Office agrees has been unconstitutionally transferred from the IDA to the county taxpayers), is nearly $10 million per year for 20 year or $200 million.
The IDA's debt-service obligation exceeds all other expenses associated with the project, combined, by over $1 million per year.

Also, from Mr. Lynch, the plaintiffs learned (in May, 1998) that while the IDA transferred its $200 million, 20 year debt-service obligation to the taxpayers of the two counties, the IDA will no transfer ownership of the project to the two counties at the end of that period. The IDA will, instead, transfer full ownership of the project to the contractor. This is an obvious iolation of the no gifting provision of Article VIII, Section 1 of the N.Y. Constitution, giving rise to a new claim in this proceeding.

New Evidence: The Memo By Robert C. Daly

In May, 1998 plaintiffs received a copy of a memo by Robert Daly, dated April 2, 1991. See Exhibit C hereto. It contained information about Chapter 682 L85 which they did not have b fore then, including the fact that there was no local home rule resolution and that the State Comptroller's office was in opposition to the statute because it is "not in the public interest to ermit a municipality to circumvent public bidding or related statutes by contracting with an IDA to perform what would otherwise be a municipal project."

POINT II

THIS ACTION IS NOT BARRED BY THE
STATUTE OF LIMITATIONS OR LACHES

There is no statute of limitations on constitutionality! And, laches is not available to bar a challenge to the constitutionality of acts of the Legislative or Executive branches as in the ase at bar. A public body cannot acquire a non-existent power even if it were true that plaintiffs' resistance to the exercise of the power was long delayed. Locust Club of Rochester v. Rochest r (1965), 48 Misc. 2d 763, rev'd on other grounds (4^th Dept.), 29 AD2d 134, aff'd 22 NY2d 802, remittitur amd 22 NY2d 741, app dismd 393 US481, 21 L Ed2d 688, 89 S. Ct. 708.
Alternatively, laches should not be a bar to a determination on the merits of the alleged constitutional violations, which are continuing in nature because of their long-term fiscal impa t and because the authority remains under Chapter 682 L85 and under the 1988 contracts to incur additional debt and to pass through additional costs to the citizens.
Plaintiffs' allege an unconstitutional and continuing wrong of such magnitude that it will extend far into the next century.
Since the alleged violations are constitutional and continuing with respect to the payment by the counties of the IDA's debt-service obligations and the possibility of further debt incur ing actions pursuant to the challenged legislation, contracts, and resolutions, there is a dual basis for rejecting the laches defense (see, Mtr. Of Burke v. Sugarman, 35 NY2d 39, 45 (1974), laches inapplicable because the "failure to comply with constitutional requirements for making appointments of eligibles to competitive positions is a continuing and constitutional wrong"] .
In rejecting the application of laches in Burke v. Sugarman, the Court of Appeals stated that "though made in good faith [these actions] ought to be open to attack by the petitioners because as citizens and taxpayers they are entitled to an opportunity to insist upon the construction which this Court placed upon the...State Constitution" (Matter of Cash v. Bates, 30 NY 258, 261). See also Cabiel v. Public Svc. Com'n, 113 AD2d 603, 606 (3^rd Dept.), aff'd 69 NY2d 265 (1986) cert. denied, 484 US 380 (1987). A contract void ab initio for illegality cannot become legal merely by the passage of time. See Strauss Linstyping Co. v. Schwalbe, 159 AD 347 (1^st Dept. 1913) ["the agreement is void in its inception and thereafter continues to be void"]; Serkin v. Fourteenth St. Store, 124 AD 284, 391 (1^st Dept. 1908) ["public policy of our state forbids the ratifica ion, as well as the making, of such a contract procured through illegal payments to the agent"] (emphasis by the court).
State defendants, relying on Schulz v. State of New York, 81 NY2d 336 (1993), argue that to void Chapter 682 L85 and to declare the contracts a nullity would be destabilizing, would undou tedly have a negative impact on the important public interest of solid waste disposal in Washington and Warren Counties, and would adversely affect the settled expectations of the bondholders who pu chased the IDA bonds in reliance on the validity of the contracts.
In fact, the investors relied on the legal opinion provided (on information and belief) by the Glens Falls law firm of Miller, Mannix, Lemery and Pratt, that the bonds were issued in full compli nce with the NY Constitution and its constitutional laws. The law is clear, if a public corporation issues bonds in spite of constitutional restrictions, the investors can look to bond counsel [and their malpractice insurance company], bond underwriters and other private parties who put the deal together to get their money back but they have no recourse against the issuer.
In fact, Justice Bellacosa wrote the decision in Schulz v. State of New York, 81 NY2d 336 (1993), which involved a constitutional challenge under Article VII, Section 11, Article VII, Sec ion 8 and Article X, Section 5, to an Act of the Legislature which authorized UDC to issue $285 million in bonds to buy Attica prison from the State. The Court did not address plaintiffs' First Ame dment attack on the constitutionality of SFL 123-b(1), yet dismissed plaintiffs' Article X, Section 5 and Article VII, Section 8 claims for lack of standing under SFL 123-b(1). The Court dismissed laintiffs' Article VII, Section 11 (voter referendum claim for laches). The instant case does not involve a claim under Article VII, Section 11. Judge Bellacosa, together with Chief Judge Kaye and Judges Simons, Titone and Hancock concurred. Judge Smith dissented in an opinion. The Court's attention is directed to the fact that Judges Bellacosa, Kaye, Simons and Hancock were heavily conflic ed in deciding Schulz v State of New York, 81 NY2d 336 (1993). Not only were they heavily invested in bonds issued by State and local public corporations, including the UDC, Judge Kaye's hus and was a partner in a law firm which listed numerous public authorities and corporations on its list of clients. See Exhibit D hereto which is new evidence which has come to light since 199 .
In fact, any apprehension that a finding for plaintiffs would have "a negative impact on the important public interest of solid waste disposal in Washington and Warren Counties" is unf unded. A victory by plaintiffs would not equate to a plant shutdown. Even if that were to happen, the waste generated in the two counties would simply be transported to another of the many approve disposal sites in the State or in a neighboring state. A victory by plaintiffs would merely mean that the IDA could no longer rely on the taxpayers for payment of the money the IDA needed to pay i s debt service obligations.
If a court may not apply laches, waiver or estoppel against the government when it seeks to enforce public rights or to protect the public interest [Utah Power & Light Co. v. United State , 243 US 389, 409 (1917); Cortlandt Nursing Home v. Axelrod, 66 NY2d 169, 178 n.2, (1985), cert. denied, 476 US 1115 (1986)], a court cannot apply laches, waiver or estoppel against citizens when they seek to enforce individual constitutional rights and to protect the public interest. As the Court of Appeals explained, this limitation on laches, waiver and estoppel &qu t;stems from considerations of sovereign immunity (here, the people are the sovereign), protection of the public fisc and separation of powers." Cortlandt at 178, n.2, citing inter

alia Daleview Nursing Home v. Axelrod, 62 NY2d 30 (1984) (refusing to estop even though delay prejudiced defendant).

There are no vested rights in an illegal contract and estoppel will not create a right where none exists. See Owens v. McGuire, 121 AD2d 292 (1^st Dept. 1986); McLaughlin v. Berle, 71 Ad2d 707 (3^rd Dept. 1979), (estoppel "should not be applied when failure to do so would operate to defeat a right legally and rightfully obtained. It cannot operate to create a right"), aff'd on opinion below 51 NY2d 917 (1980).
Plaintiffs seek, inter alia, a declaration that the County's obligation under the subject contracts are unconstitutional and void and have never been of any legal force and effect. That is what New York law requires a court to hold when a contract is entered into in violation of the State Constitution.
The fact that the plant is already built, and the investor's funds disbursed, does not minimize the transaction from challenge and does not legalize contracts that are void ab initio

Laches cannot be applied to enforce an unconstitutional statute or contract.
Laches is nothing more than a form of equitable estoppel, Weiss v. Mayflower Doughnut Corp., 1 NY2d 310, 318 (1956) and equity is not available to imply a contract that the constitution h s expressly prohibited: "equitable powers of the courts may not be invoked to sanction disregard of constitutional safeguards and restrictions." Seef, 286 NY at 388. The federal c urts in New York, too, have not been willing to lend their equitable powers to sanction tainted contracts. See Genesco Entertainment, A Division of Lymutt Indus., Inc. v. Koch, 593 F.Supp 74 , 748 (S.D.N.Y.).

POINT III

DEFENDANTS ACTIONS WERE ULTRA VIRES

Without identifying the law(s), defendant Warren County argues that the County actions under challenge were authorized by State law and/or County law.
In fact, any act of the legislature that is repugnant to the will and intent of the people as expressed in the New York Constitution is a nullity. The people enjoy popular sovereignty. The people have the ultimate power. The Constitution is the supreme organ of law. See, for instance, the N.Y. Constitution, Article I, Section 14 and the Preamble.
Defendants had no authority: 1) to enact Chapter 682 of the Laws of 1985; 2) to enter into the debt service agreements with the IDA in 1988; 3) to borrow $2 million in May and June 1998, to fund nine 1998 monthly operating deficits deliberately created by Warren County by knowingly failing to provide tax revenues for the monthly invoices which were foreseen in 1997 during the County's 1998 udget adoption process; 4) to enact resolutions calling on the State legislature to pass legislation that would be repugnant to the New York and United States Constitutions; or 5) to enact SFL 123-b 1) which deprives citizens of their fundamental right to petition the government for a redress of grievances if the matter involves public borrowing.

POINT IV

PLAINTIFFS HAVE STANDING AND LEGAL
CAPACITY TO SUE: THE ACTION IS JUSTICEABLE
Standing rises to a constitutional right on matters constitutional. All plaintiffs have constitutional standing. In 1975, the N.Y. Court of Appeals affirmed the fact that sta ding rises to a constitutional right on matters constitutional. That is, that citizen-taxpayers have "standing to challenge enactments of our State Legislature as contrary to the mandates of or State Constitution." Boryszewski v Brydges, 37 NY2d 361.
Plaintiffs have early and expressly challenged the exception in SFL 123-b(1) on its face, as violative of plaintiffs' fundamental, constitutional right to petition their government for redress of grievances as expressly provided by Article I, Section 9.1 of the New York Constitution and as expressly provided by the First Amendment of the United States Constitution.
Plaintiffs have a long history of challenging the exception in SFL 123-b(1) as unconstitutional in its application because it was being used to bar citizens from seeking the protections and guar ntees provided by Articles III, VII, VIII, X, etc. of the New York Constitution and under Article IV and the 14^th Amendment to the U.S. Constitution if the matter involves public bo rowing.
Arbitrarily and capriciously, N.Y. Unified Court System has a long and deplorable history of sidestepping plaintiffs' claim that SFL 123-b(1) is unconstitutional. Rather, the courts have been b ilding a daisy chain of decisions on the subject by citing Wein v Comptroller, 46 NY2d 394 and either dismissing claims for lack of standing of SFL 123-b(1) or by ruling that plaintiffs' SFL 23-b(1) 1^st Amendment claim was barred by the doctrines of res judicata and stare decises.
For instance, Schulz v State of New York, 185 AD2d 596 (3^rd Dept. 1992); Schulz v State of New York, 81 NY2d 336 (1993); Schulz v State of New York, 193 Ad2d 171, 177 (3^rd Dept. 1993), aff'd 84 NY2d 231 (1994); Schulz v N.Y.S. Executive, 233 AD2d 43 (3^rd Dept. 1997) affirmed __ NY2d __ (June 9, 1998). None of these decisions have been responsive to or fully encompassed the constitutional challenges to SFL 123-b(1).
In fact, the question of the constitutionality of SFL 123-b(1) was not presented, raised or determined in Wein v Comptroller, 46 NY2d 394 (1979). It never came up!
56. Therefore, it cannot be fairly argued that the Third Department’s decision in Schulz v State of New York, 185 Ad2d 596 (1992) responded to and fully encompassed the question of the constitutionality of SFL 123-b(1) which was properly before the court. In dismissing the constitutional attack on SFL 123-b(1) the Third Department merely cited Wein v Comptroller, 46 NY2d 394 (1979) which, as argued in the preceding paragraph, was a case in which the question of the constitutionality of SFL 123-b(1) was not raised, presented or determined.

57. Therefore, it cannot be fairly argued that the decision by the Court of Appeals in Schulz v State of New York, 81 NY2d 336 (1993) responded to and fully encompassed the question of the constitutionality of SFL 123-b(1), which was properly before the court. The court simply did not address the merits of the question.

58. Therefore, it cannot be fairly argued that neither the Third Department’s nor the Court of Appeals’ decisions in Schulz v N.Y.S. Executive, 233 AD2d 43 (3rd Dept. 1997) aff’d __ NY2d __ (June 9, 1998) responded to and fully encompassed the question of the constitutionality of SFL 123-b(1). In dismissing the constitutional attack on SFL 123-b(1) the Third Department and the Court of Appeals merely cited decisions in Schulz v State of New York, 185 AD2d 596 (1992), af’d 81 NY2d 336 (1993), which, as argued above, merely cited Wein v Comptroller, 46 NY2d 394 (1979) which, as argued above, was a case in which the question of the constitutionality of SFL 123-b(1) was not raised, presented or determined.

59. Also, contrary to Mr. Siegfried’s assertion, in Schulz v State of New York, 960 F.Supp. 568 (N.D.N.Y. 1997) the federal court did not respond at all to the question of the constitutionality of SFL 123-b(1), much less fully encompass the question in its deliberations and decision. As argued on pages 16-19 of their Reply Brief to the Federal Court of Appeals for the Second Circuit (copy attached as Exhibit E hereto), the District Court simply failed to address plaintiffs’ First Amendment "right to petition" claim against SFL 123-b(1) and applied the wrong "privileges and immunity" clause to the claim against SFL 123-b(1). Exhibit E hereto is a copy of the relevant pages from plaintiffs’ Reply Brief to the Second Circuit, which, along with Judge McAvoy’s decision itself, demonstrates that the question of the constitutionality of SFL 123-b(1), while properly before that Court, was not addressed much less determined in Schulz v State of New York, 960 F.Supp. 568 (N.D.N.Y. 1997). The Second Circuit dismissed for lack of standing under Article III of the U.S. Constitution.

60. Contrary to defendant’s assertion, SFL 123-b(1) cannot be used to deny plaintiffs’ their fundamental right to assert their constitutional claims. To do so means the exception in SFL 123-b(1) is unconstitutional as violative of plaintiffs’ right to petition the government for a redress of (constitutional) grievances. Plaintiffs have a fundamental right to defend in court each and every provision of the New York Constitution against transgression/abuse by government officials, whether or not the matter involves public borrowing.

61. Contrary to defendants’ assertion, plaintiffs’ constitutional right to defend each and every provision of the Constitution is not limited by their status as voters.

62. No State constitutional protection can be effectively nullified by an Act of the State Legislature which legislative Act directs the Judiciary to throw out of court any citizen seeking the protection of that provision of the Constitution from an act of the Executive or Legislative which is in conflict with it.

63. Under our system of governance the people are to enjoy the republican principles of popular sovereignty, self-government, and a government which derives its powers from the consent of the governed as expressed in their Constitution.

64. The acts complained of have injured plaintiffs (loss of sovereignty, erosion of liberty, annual payment of tax revenues, increased local indebtedness, use of public funds to pay debt obligations of a public corporation, violative of home rule protections, borrowing for a period of time longer than the probable usefulness of the object of the borrowing, etc.) These injuries lie within the zone-of-interest to be protected by the Constitution in general and specifically by said sections of Articles VII, VIII, IX and X.

65. While the Wein court denied standing to Professor Wein, citing SFL 123-b(1), the Wein court was not asked to consider the constitutionality of such a door closing statute -- a statute written to prevent citizens from asserting their constitutional rights in any forum.

66. Plaintiffs have a right to challenge the validity of acts by the state as violating plaintiffs’ interests that fall within the zone-of-interests to be protected by the Constitution. Where, for instance, a bond issue affects constitutional interests of the litigant, for example, the right to vote arising under Section 11 of the Article VII of the New York Constitution, the courts have recognized standing (see e.g., Matter of Schulz v State of New York, 81 NY2d 336.

67. Contrary to defendant Warren County’s unsupported assertion, plaintiffs have not lodged a claim which is not ripe for judicial review, or a claim which is moot, or a claim for which plaintiffs failed to exhaust administrative remedies.

POINT V

PLAINTIFFS’ CLAIMS ARE VALID CAUSES OF
ACTION FOR WHICH RELIEF CAN BE GRANTED

68. Plaintiffs have lodged valid constitutional claims. Chapter 682 L85 is violative of Articles IX, X and VII of the New York Constitution and, thus, Article IV, Section 4 of the U.S. Constitution and Clause 2 of the 14th Amendment thereto. The Court is asked to declare Chapter 682 unconstitutional, null and void.

69. The debt service contracts between the counties and the IDA are violative of Articles X and VIII of the New York Constitution, and, thus, Article IV, Section 4 of the U.S. Constitution and Clause 2 of the 14th Amendment thereto. The Court is asked to declare the contract unconstitutional, null and void.

70. The budget notes issued by Warren County are violative of Articles VIII and X of the New York Constitution, and, thus, Article IV, Section 4 of the U.S. Constitution and Clause 2 of the 14th Amendment thereto. The Court is asked to declare the notes unconstitutional, null and void.

71. The debt service home rule resolutions of 1998 by Warren and Washington County are violative of Article VII and X of the New York Constitution, and, thus, Article IV, Section 4 of the U.S. Constitution and Clause 2 of the 14th Amendment thereto. The Court is asked to declare the resolutions unconstitutional, null and void.

72. SFL 123-b(1) is violative of Article I of the New York Constitution and the 1st Amendment of the U.S. Constitution and, thus, Article IV, Section 4 of the U.S. Constitution and Clause 2 of the 14th Amendment thereto. The Court is asked to declare SFL 123-b(1) unconstitutional, null and void.

POINT VI

ALBANY COUNTY IS THE PROPER VENUE

73. Two of plaintiffs’ five causes of action challenge the constitutionality of two separate acts of the State Legislature. The first of these (Chapter 682 L85) set the stage for the Hudson Falls Trash Plant project and unconstitutionally "authorize" the challenged contracts and budget notes. The second [SFL 123-b(1)] unconstitutionally "authorizes" the judiciary to throw out of court any case the subject matter of which involves public borrowing.

74. The State Legislature is a defendant and must defend the constitutionality of its acts.

75. State departments must be sued in the county where their principal offices are located.

POINT VII

GOOD FAITH, LACK OF MALICE AND SEVERE
HARDSHIP DEFENSES ARE IMMATERIAL
AND/OR UNFOUNDED

76. Neither legislative nor executive acts done in good faith or with lack of malice can change the Constitution.

77. The primary role of the judiciary is to apply and enforce the will of the people as expressed in the people’s constitution even if this results in considerable practical difficulty. Bethlehem Steel Corp. v Bd. of Education, 44 NY2d 831.

78. Public commitments to pay the debt obligations of a public corporation must, of course, be made under statutes and contracts which do not violate the State Constitution, and a legislative Act or contracts authorizing the payments of such obligations is invalid if it is prohibited by the State Constitution, and such prohibition may not be evaded no matter how worthy the cause. See People v. Westchester County Nat’l. Bank (1921) 231 NY 465.

79. However important, however useful the objects designed by the Legislature and the counties and the IDA, they may not be accomplished under the N.Y. Constitution, by lending the counties’ credit to a public corporation or by assuming the liability of the debt obligations of a public corporation. Id, 475. A finding of unconstitutionality renders invalid all such commitments made by the counties under the Act and the contracts.

80. The Court’s attention is directed to the fact that purchasers of bonds, before purchasing them, must inform themselves at their personal peril with respect to the power of the public body to issue the bonds, for they are chargeable with having knowledge of the absence of such power on the part of the public body if the bonds are issued without authority or in violation of express restrictions, and holders of bonds so issued are not innocent holders. There can be no bona fide holder of public bonds which are void in their inception. Where there is an absolute want of power in a public body to issue bonds, every holder thereof is charged in law with notice of that fact, and no holder can have recourse thereon to the public body in whose name they were issued, for in such case power cannot be created by mere recitals in the bond, Wilkes County v. Coler, 190 US 107, 47 L Ed 971, 23 SCt 738, and Bates County v. Winters, 97 US 83, 24 L Ed 933, or, for instance, where they are issued under an unconstitutional law, School Dist. V. St. Joseph, F&M Ins. Co., 103 US 707, 26 L Ed 601, or without authority, Brenham v. German-American Bank, 144 US 173, 36 L Ed 390, 12 S Ct. 559.

81. Even though it has been held that bonds issued by a public body ultra vires are absolutely void, even in the hands of an innocent holder, Northern Bank v. Porter Twp., 110 US 608, 28 L Ed 258, 4 S Ct 254, no one can be an "innocent holder" of such bonds since purchasers and holders of public bonds are held in law to know, and to be chargeable with constructive knowledge of constitutional and statutory provisions, restrictions, limitations and requirements bearing on the authority to issue bonds. Barnett v. Denison, 145 US 135, 36 L Ed 652, 12 S Ct 819; Nesbitt v. Independent Dist., 144 US 610, 36 L Ed 562, 12 S Ct 746; Bd. of Ed. V. Blodgett, 155 Ill 441, 40 NE 1025; Swanson v. Ottumwa, 131 Iowa 540, 106 NW9; Suffolk Sav. Bank v. Boston, 149 Mass 364, 21 NE 665 (recognizing rule); Gibbs v. School Dist., 88 Mich 334, 50 NW 294; Union Bank v. Oxford, 119 NC 214, 25 SE 966; Catholic Order of Foresters v. State, 67 ND 228, 271 NW 670, 109 ALR 979, Cert den 301 US 665, 81 L Ed 1331, 57 S Ct 796; Bolton v. Wharton, 163 SC 242, 161 SE 454, 86 ALR 1101; National L. Ins. Co. v. Mead, 13 SD 37, 342, 82 NW 78, 83 NW 335.

82. It was the duty of every potential bond holder to ascertain the existence of constitutional restrictions and authority in the IDA to issue bonds for the purpose appearing on their face, and the extent of and any limitations upon, such authority. Notwithstanding the legal opinions in the official statement used to induce the investor to buy the bonds, he or she is presumed to have cognizance of the constitution relied upon by the Legislature and the public corporations as authority for issuing bonds, and to know the power conferred thereby on the public corporations’ officers or board, and it is his or her duty to compare the bonds so issued with the Constitution, and ascertain therefrom, at his or her peril, whether or not power exists in the corporation to issue the bonds. National L. Ins. Co. v. Bd. of Ed., (CA8SD) 62 F 778, Cert. den 159 US 262, 40 L Ed 147, 15 S Ct 1041.

83. If public bonds are void because there was want of power for their issuance, no one can be a bona fide purchaser, regardless of payment for value, lack of knowledge, etc.

84. Securities issued without legal authority, because of the absence or invalidity of an enabling statute, or the failure to comply with conditions precedent or jurisdictional requisites, are generally invalid and unenforceable against the political subdivision issuing such bonds. Brownell v. Greenwich (1889), 114 NY 518.

POINT VIII

DEFENDANTS ACTS ARE VIOLATIVE OF
SECTION 1, CLAUSE 2 OF THE FOURTEENTH
AMENDMENT TO THE US CONSTITUTION

85. Contrary to State defendants’ allegations, plaintiffs 14th Amendment claims were not settled in Schulz v. NYS Executive, 960 F. Supp 568, 574-476 (N.D.N.Y. 1997). As argued above and in Exhibit E hereto, the District Court applied the wrong "privileges and immunities" clause in dismissing plaintiffs’ claims. The District Court incorrectly applied the privileges and immunities clause of Article IV, Section 2, Clause 1 of the US Constitution. In fact, plaintiffs’ claims were based on violations of the privileges and immunities clause of the Fourteenth Amendment, Section 1, Clause 2. The Second Circuit dismissed for lack of standing. It did not reach the merits of plaintiffs’ privileges and immunities claims.

86. Section 1, Clause 2 of the Fourteenth Amendment prohibits the State from denying or abridging privileges or rights of plaintiffs as citizens of the United States. State v Johnston, 1969, 456 P.2d 805, 51 Haw. 195, 259, appeal dismissed 90 S.Ct. 1152.

87. Section 1, Clause 2 of the Fourteenth Amendment furnishes an additional guarantee against any encroachment by the state upon fundamental rights which belong to every citizen as a member of society. U.S. v. Cruikshank, La. 1876, 92 U.S. 554. SFL 123-b(1) is such an encroachment.

88. The Fourteenth amendment’s provision that no state shall make or enforce any law which shall abridge privileges or immunities of citizens of the United States, nor deprive any person of life, liberty or [money] property without due [constitutional] process of law are limitations on the power of the States. Peoples Cab Co. v Bloom, D.C. PA 1971, 330 F. Supp. 1235, affirmed 472 F.2d 163. Defendants acted outside of their power in committing the acts complained of.

89. The purpose of the Fourteenth Amendment, Section 1, Clause 2, 28 USC Section 1331 and the civil rights statute, 42 USCA Section 1983, are to preserve and enforce, as against state action, those rights, privileges and immunities secured by the constitution and the laws, including the fundamental right of plaintiffs to a government republican in form and substance. Golden v Biscayne Bay Yacht Club, C.A. Fla. 1976, 530 F.2d 16, certiorari denied 97 S. Ct. 186.

90. The adoption of section 1, clause 2 of the Fourteenth Amendment implied that there are matters of fundamental justice that the citizens consider so essentially an ingredient of human rights as to require restraint on action on behalf of any state that appears to ignore them. Orleans Parish School Bd. v Bush, C.A. La. 1957, 242 F.2d 156, certiorari denied 77 S.Ct. 1380.

91. The Fifth Amendment and Section 1, Clause 2 of the Fourteenth Amendment are designed to protect plaintiffs from invasion of their rights, privileges and immunities by the federal and state governments respectively. Schatte v Int’l Alliance of Theatrical Stage Emp. et. al., D.C. Cal 1947 70 F. Supp. 1008, affirmed 165 F.2d 216 Certiorari denied 68 S.Ct. 1018.

92. In the constitution and laws of the United States the word "citizen" is generally, if not always used in a political sense to designate one who has the rights and privileges of a citizen of the State or of the United States and it is so used in Section 1, Clause 2 of the Fourteenth Amendment. Baldwin v Franks, Cal 1887, 7 S.Ct. 656. Plaintiffs are citizens of the United States and of New York State.

93. Amendments 1 to 8 to the U.S. Constitution were intended as restrictions upon the federal government, but Section 1, Clause 2 of the Fourteenth Amendment constitutes a limitation upon the States. Beauregard v Wingard, D.C. Cal. 1964, 230 F. Supp. 167.

94. Protection of life, liberty, and property rests primarily with the states, and Section 1, Clause 2 of the Fourteenth Amendment furnishes an additional guaranty against any encroachment by the States upon those fundamental rights which belong to citizenship, and which the State Governments were created to secure. The privileges and immunities of the citizens of the United States are indeed protected by it. In re Kemmler, ____ N.Y.1890, 10 S.Ct. 930.

POINT IX

DEFENDANTS’ ACTS ARE VIOLATIVE OF ARTICLE IV,
SECTION 4 OF THE US CONSTITUTION

95. The actions that are the subject of this lawsuit are violative of the will of the people as expressed in the New York State Constitution and are thus violative of one of our most basic constitutional principles, "Governments are instituted among men, deriving their just powers from the consent of the governed." Declaration of Independence.

96. Contrary to State defendants’ assertions, plaintiffs guarantee clause claims under Article IV, Section 4 of the U.S. Constitution were not settled in Schulz v. NYS Executive, 960 F.Supp. 568 (N.D.N.Y. 1997). In another terrible act of injustice, the District Court dismissed plaintiffs’ guarantee clause claims because it could find no case law on the question. Rather than interpret the guarantee clause and apply it to the facts of the case, the District Court dismissed the claims for lack of jurisdiction. The Second Circuit dismissed for lack of standing. It did not reach the merits of plaintiffs’ Article IV, Section 4 claims. The courts have never held that a cause was not justiciable merely because it involved an interpretation of U.S. Constitution Article IV, Section 4. That would mean the framers had nothing in mind when they drafted the language of Article IV, Section 4 and that it was incorporated for no apparent reason.

97. Defendants have violated Article IV, Section 4 by committing the acts complained of.

98. Thus, one of the most welcome and important roles of the federal court is, in the interest of the Union, to protect the privileges and immunities of all its citizens from tyranny in any of its forms, especially governmental tyranny, no matter where in the Union it is found and challenged.

99. Most reluctantly and unfortunately, from the viewpoint of State’s rights, New York State plaintiffs are forced to turn to the federal courts for protection against governmental tyranny in the State of New York.

100. With respect to plaintiffs’ guarantee clause claims, the District Court has admitted in its Decision and Order: that "the guarantee clause has been an infrequent subject of litigation;" that "this Court is left with scant guidance [from the Circuit Courts and from the U.S. Supreme Court];" and that "Plaintiffs themselves provide little aid in the court’s resolution of this issue; they offer no further explanation of their argument nor do they cite any relevant case law in support of their position. The court can find few cases where the guarantee clause has been involved to invalidate the actions of the State itself." The Court’s attention is directed to the fact that plaintiffs’ argument included under Point X below was not before the District Court.

101. The purpose of Section 4 of Article IV, which guarantees to every state a republican form of government, is to protect the people against aristocratic and monarchical innovations, and to prevent the States from abolishing a republican form of government, in which the government governs based only upon the consent of the governed, whose will is expressed in the State Constitution. Van Sickle v Sharrahan, 1973, 511 P.2d 223, 212 Kan. 426.

102. The term "state" in section 4 of article IV is used in the idea of a people or political community as distinguished from a government, and is used in its geographical sense. Texas v White, Tex. 1869, 74 U.S. 700. Not even the people, acting through their elected representatives, can convert their system of governance from a republic form of government.

103. By the constitution, a republican form of government is guaranteed to every state in the Union and the distinguishing feature of that form is the right of people to choose their own officers for governmental administration, and pass their own laws in virtue of the legislative powers reposed in representative bodies, whose legitimate acts may be said to be those of the people themselves; but, while the people are thus the source of political power, their governments, national and state, have been limited by written constitutions. In re Duncan, Tex. 1891. 11 S. Ct. 573.

104. Section 4 of Article IV guarantees to every state in the Union a republican form of government, and every sentence and provision of the New York Constitution evidences principles of that form of government (including Articles VII, VIII, and X) declaring and guaranteeing liberties of the people. Harris v Shanahan, 1963. 387 P2d 771, 192 Kan.183.

105. The courts, as the final interpreters of the Constitution, pass upon the constitutional powers of the legislatures and executives of the nation, and of the states. When called upon, they must exercise their function and determine the validity of the acts of a State so far as they effect the constitutional rights of the citizens or the powers of the national government. Schulz v Williams, 44 F.3d 48 (2nd Cir. 1994).

106. The unconstitutionality of the acts of a state are equally within the jurisdiction of the courts, whether they be acts of the legislature or executive department or of the people themselves, adopting their constitutions or amending them.

107. Plaintiffs reliance on the "privileges and immunities" and "guarantee" clauses is supported by law and logic.

108. Logically, these two clauses are designed to reign in what plaintiffs refer to as "willfully wayward states". A very brief historical analysis confirms plaintiffs’ right to rely on these two clauses to restrain their State, which they argue has willfully become wayward.

109. In 1787, a full ten years after the sovereign people of the colony of New York created their government by adopting the New York State Constitution, New Yorkers agreed to become part of the Union of States and to distribute more of their power to those who would be responsible for running the day-to-day affairs of the Union. In so doing, the sovereign people of the State of New York agreed to the "one for all, all for one" principles enunciated in the federal Constitution, particularly in Article IV, Section 4 (the guarantee clause) and, later, in Section 1, Clause 2, of the Fourteenth Amendment thereto (the privileges and immunities clause).

110. These two clauses (as well as the Ninth and Tenth Amendments), give the courts the jurisdiction, on petition by any citizen of the United States residing in any one of the states, to protect that citizen from tyrannical governmental action designed and administered by a willfully wayward State government. Under Article VI of the U.S. Constitution, "This Constitution...shall be the supreme law of the land: and the Judges in every State shall be bound thereby, anything in the Constitution or the Laws of any State to the contrary notwithstanding."

111. In light of the human frailties of the love of power and money, plus the propensity of those wielding governmental power to innovate, it is entirely possible, in these United States, that, over time, the republicanism in one State would become a matter of form over substance, thus denying its true meaning and original intent. It is possible, in other words, for the people of a State to have a constitution which, by design: recognizes the people as the absolute sovereignty; obviously has the people distributing the power to govern; the distributed power is, by design, sufficient to govern but insufficient to oppress; and this power is distributed to three (by design) independent and co-equal branches.

112. However, notwithstanding these arrangements, it is possible for that State’s Constitution to be routinely ignored by those in the Executive, Legislative and Judicial branches as the branches cooperate in a "we know better" constructive conspiracy to govern in contravention to, and without respect for, the will of the people as expressed in the State Constitution, particularly when it comes to issues of public power, public debt and the use of tax revenues for purposes that are largely private.

113. It is possible in such a situation: for the people to lose control of their government; for governmental dependency to displace individualism, self-reliance and private charity; for the public debt to become overburdensome and oppressive; for the level of government-imposed taxes and fees to become the highest in the nation, eating out 60% or more of a laborer’s wages; and, for the State to drop from its position as a leading creditor state to a debtor state with the lowest credit rating in the Union.

114. Finally, it is possible for the forces in power to stay in power by making it virtually impossible for the people to achieve governmental reform through the use of the ballot. This is possible by restricting ballot access to those chosen by those forces -- the leading political parties -- particularly in a situation where the State Constitution is silent on the subject of ballot access. In such case, whoever controls ballot access controls the governors, the legislators and the judges. This vise-like control is exacerbated if the judges owe their advancement within the Judicial Department to the good will of the Governor and the Legislature, rather than to the people. Whoever controls ballot access controls the delegates to the State Constitutional convention.

115. It can be fairly stated that the situation portrayed in this list of "possibilities" is not an Orwellian fantasy; rather it fits the hand of government in New York State like a glove -- and the hand of government, being human, likes it that way and wants to keep it that way.

116. The Union now has, in New York, a willfully wayward state. We have three branches and a State Constitution, but for all intents and purposes, we do not have a constitutional republic – government based on the consent of the people as expressed in the State Constitution. The two major political parties are, in effect, the government of New York State and through their control over ballot access they control the governors, the legislators and the judges, many of whom have, since 1977, shown a propensity to turn a blind eye toward the will of the people as expressed in the Constitution of the State of New York. Moreover, the last (1967) constitutional convention was stacked with and controlled by delegates representing the three branches of the government and the state’s two major political parties. Small wonder the people rejected its product. It provided no discernible needed reforms.

117. By careful design, the "guarantee" clause and the "privileges and immunities" clause establish standards that are inescapable and that speak to the problem of the willfully wayward state. They mean no state will be permitted to scorn our most basic "founding" constitutional principles: government deriving their just powers from the consent of the governed; the separation of powers; checks and balances; maximum possible individual liberty and personal freedom; the pursuit of happiness; the right to petition and to free elections; equal protection of the law; and, no taking of property, including money property, through taxes and fees, without constitutional due process.

118. Plaintiffs are not claiming error in the exercise of delegated powers.

119. The court has jurisdiction to determine claims against state officials for alleged violations of the federal Constitution. U.S. Constitution, Article VI.

120. The court’s attention is directed to the fact that plaintiffs are not seeking retroactive relief or damages. Plaintiffs are seeking a declaratory judgment and injunctive relief.

POINT X

PACIFIC TELEPHONE & TELEGRAPH V. STATE
OF OREGON IS NOT DESPOSITIVE OF PLAINTIFFS’
GUARANTEE CLAUSE CLAIMS

121. This case is clearly distinguishable from Pacific Telephone and Telegraph Co. v. Oregon, 233 U.S. 118 (1912) and its prodigy. In Pacific Telephone the issue was whether an amendment to the Oregon Constitution for direct legislation violated: 1) the provisions of the Act of Congress admitting Oregon to the Union; or 2) Article IV, Section 4 of the U.S. Constitution guaranteeing a republican form of government.

122. The instant case is distinguishable from Pacific Telephone in at least two ways: (1) The New York Constitution has never been before the U.S. Congress for review or approval. Unlike Oregon’s, it was adopted long before the Union was formed. (2) Here, unlike Pacific Telephone, plaintiffs are not asking the Court to decide which of two State governments is the legitimate State government. In Pacific Telephone the court was asked to decide if the state government that existed in Oregon by act of Congress, and before its citizens added the citizen initiative and referendum amendment to the State Constitution in 1902, was the legitimate state government; or, if the government that existed under the Oregon Constitution as amended in 1902 was the legitimate government. The Pacific Telephone court made clear its view that if it found that the Oregon State Constitution, as amended in 1902, was violative of Article IV, Section 4’s guarantee clause, the validity of every statute passed on Oregon since the adoption of the initiative and referendum amendment to the State Constitution would be affected, and ultimately, the question of whether there was a legislative and judicial branch in Oregon would have to be answered. The court decided the matter was purely political and would have to be decided by Congress. It is interesting to note that the court went to great lengths to show how its decision was so conclusively established by a prior decision of the U.S. Supreme Court "as to cause the matter to be absolutely foreclosed." The court said the controlling case was Luther v. Borden, 7 How. 1, 12 L Ed 581, which the court said grew out of the Dorr Rebellion in Rhode Island. In Luther the court was asked to decide which of two state governments was the legitimate government: the government which grew out of a voluntary constitutional convention or the "Charter government." In Luther the U.S. Supreme Court found that to select the former would nullify all the laws, taxes, salaries and court judgments -- a disastrous effect. In the instant case the issue is not which of two State governments is the legitimate government but whether the State is acting legitimately -- observing the republican principles upon which the State government was founded. The question in the instant case is not a political question. Plaintiffs are not asking the court to decide which of two state governments is the legitimate government. Plaintiffs are asking the court to rein in the legitimate state government in New York which is "willfully wayward" in that it is violating the basic republican principles of popular sovereignty, government based on the consent of the people, and "separation of powers." In Pacific Telephone, the court ruled that the question before it was "purely political." It said, "Its essentially political nature is at once made manifest by understanding that the assault which the contention here advanced makes is not on the tax as a tax but on the state as a state. It is addressed to the framework and political character of the government by which the statute levying the tax was passed. It is the government, the political entity, which is called to the bar of this court, not for the purpose of testing judicially some exercise of power, assailed on the ground that its exertion has injuriously affected the rights of an individual because of repugnancy to some constitutional limitation, but to demand of the state that it establish its right to exist as a state, republican in form." Pacific Telephone & Telegraph Co. v. Oregon, 233 U.S. 118, 150 (1912). (Plaintiffs’ emphasis). Obviously, the case before the bar is distinguishable from Luther v. Borden, 7 How. 1, 12 L. Ed 581, and its prodigy, including Pacific Telephone & Telegraph Co. v. State of Oregon, 233 U.S. 118 (1912). Here, plaintiffs are calling the government of the State of New York to the bar for the purpose of testing judicial attitudes regarding the exercise of power, which is being assailed on the ground that its exertion has injuriously affected the rights of citizen plaintiffs because of repugnancy to certain constitutional limitations. Unlike plaintiffs in Luther and Pacific Telephone, plaintiffs are not in court to demand of the state that it establish its right to exist as a state.

123. Based on the above, plaintiffs respectfully request an order denying defendants’ motion to dismiss and directing them to answer the complaint within the minimal period allowed by law.

124. Plaintiffs merely seek a declaration that the subject statutes and legislative acts are unconstitutional, null and void and that the counties are not obligated to make payment to the IDA for any part of any debt obligations of the IDA. Such a declaration does not require the dismantling or shutdown of the plant, return of the bonds or repayment to the bondholders. The plant could, and would, continue to operate; the only difference would be that defendants would not have the taxpayers footing the bill for the debt service.

125. To the extent the bondholders are placed at greater risk – because they no longer have the taxpayers guaranteeing the return on their bonds – they have full indemnification and recourse against the underwriter who sold them the bonds, underwriters counsel and bond counsel. All were aware of the New York Constitution and the infirmities of Chapter 682 L85 and SFL 123-b(1). Nevertheless they went ahead with the deal and counsel expressly guaranteed the validity of the contracts and the bonds. Thus, the bondholders are amply protected and their plight need not defer the Court from providing the relief mandated by the Constitution and its constitutional laws.

DATED: July 16, 1998