How key legal battles are impacting the industry

March 1, 2024 10:00 AM

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A power struggle over the governance of the Oklahoma Turnpike Authority, a university's claims of federal agency retaliation for suing the Department of Education leading to a Moody's ratings downgrade, and a Houston mayor ending a legal dispute with firefighters that could improve the city's Fitch rating are among the legal stories in muni finance that industry professionals are watching.

For more on these stories and other legal news, read our roundup below.

Kent Nishimura/Bloomberg

Utah oil railway decisions move to U.S. Supreme Court and Congress

The Seven County Infrastructure Coalition is turning to the U.S. Supreme Court and Congress for a review after an August U.S. Appeals Court ruling that derailed the Uinta Basin Railway.

"We're soliciting Supreme Court certiorari because this treads all over state's rights, interstate commerce," Coalition Executive Director Keith Heaton told Utah's Infrastructure and General Government Appropriations Subcommittee. "It would put an end to pretty much any energy or interstate transportation project of energy materials."

The federal appeals court previously found the U.S. Surface Transportation Board erred in approving an environment impact statement and biological opinion for the project in 2021.

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Fight for Utah oil railway moves to national stage

Oklahoma Legislature

Legal fight begins for control of the OTA

A separation of powers is at issue for the Oklahoma Turnpike Authority, which is requesting a judicial review of a 2023 state law that changed who has the authority to determine the makeup of its board, taking away the governor's power to appoint all six board members.

House Bill 2263, an expression of bill sponsor Rep. Danny Sterling's concern about one person having "singular control over the OTA board decisions," came into effect on Nov. 1, giving two appointments each to the governor, House speaker and Senate president pro tempore.

While Gov. Kevin Stitt's attempted veto was rebuffed by the legislature, the OTA itself is now going to court over the prospect of the legislature having the power to make the majority of board appointments, believing this to be in violation of the state's constitution.

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Oklahoma Turnpike Authority heads to court over governance law

Moody’s ratings downgrade rocks GCU

A number of adverse factors, including "weakened unrestricted liquidity" and "increased financial leverage through bank loans secured by restricted cash and investments" have resulted in a downgrade to negative for Grand Canyon University's junk bond rating from Moody's.

GCU believes that its financial position is strong, despite $1.3 billion of debt outstanding, and counters that it is being targeted for retaliation by federal agencies due to its ongoing lawsuit against the Department of Education for failing to recognize the university's nonprofit status.

While Moody's is unrepentant, all is not lost for GCU, with the ratings agency indicating that factors such enrollment and revenue growth as well as a positive end to the litigation could lead to a ratings upgrade.

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Grand Canyon University gets negative rating outlook from Moody's

Houston mayor negotiates with firefighters, and eyes ratings upgrade

The fate of Houston's AA Fitch rating is looking more positive after Mayor John Whitmire took steps to return to the negotiating table with firefighters over back pay and benefits by ending their legal conflict.

"I want the city to remove itself from the court process as much as possible and focus on resolving this long-standing dispute as fairly and quickly as possible," said Whitmire.

Fitch will be watching closely for a deal "that results in sustainable public safety spending" and "a strengthened expenditure framework assessment" which could lead to an improved rating for the city.

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Houston's new mayor halts legal battle with firefighters

Challenge to fossil fuel boycott law may open up bond underwriting

Oklahoma's Energy Discrimination Elimination Act of 2022, which forbids investment banks that boycott the oil and gas industry from underwriting certain municipal bond issues, is coming under fire once more in refiled litigation that questions the state's constitution.

Among the banks on Oklahoma state Treasurer Todd Russ's "boycott" list is Wells Fargo, which was accordingly obliged to resign as senior manager on a $500 million revenue bond issue for the Oklahoma Turnpike Authority in May last year.

The new case may lead to change, however, by highlighting that state pension funds should be invested exclusively for the benefit of the retirement systems. "By using pension funds for political warfare, the funds are no longer being used for the constitutionally mandated 'exclusive purpose,'" the lawsuit states.

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Revised litigation filed against Oklahoma's fossil fuel boycott law