(1) The Legislative Assembly finds that, when general obligation bonds are issued by a government unit to finance the cost of capital construction or improvements, subjecting the taxes imposed to pay the principal and interest on that bonded indebtedness to the limits of section 11b (1), Article XI of the Oregon Constitution, reduces the credit quality of the bonds, injures bondholders and increases the cost of borrowing for all local governments in Oregon. The Legislative Assembly also finds that it is in the best interests of the State of Oregon and local governments in Oregon to ensure that, if a local government body expends proceeds from such bonds for other than capital construction or improvements, the holders of the bonds, who are innocent with regard to such expenditure, will not suffer impairment of their security and interest in the bonds as a result.
(2) It is the policy of the State of Oregon and a matter of statewide concern that, notwithstanding ORS 305.587 (1) and 305.589 (8), if in a proceeding commenced under ORS 305.583 or 305.589, the Oregon Tax Court finds that the proceeds of general obligation bonds issued for capital construction or improvements under section 11b (3)(b), Article XI of the Oregon Constitution, have been expended for purposes other than capital construction or improvements, the court shall endeavor, to the fullest extent practicable and consistent with equitable principles, to fashion a remedy that does not impair the security or value of the bonds to the bondholders and does not prejudice the ability of the local government body to satisfy its obligations under the bonds.
(3) In addition, the court shall fashion any remedy in a manner that takes into account the financial capacity and practical alternatives available to the local government body, and shall ensure that the remedy is proportional to, and restricted to correcting the amount of, any unlawful expenditure of bond proceeds. To the fullest extent possible, the court shall avoid any remedy that either invalidates, in whole or in part, the bonds or taxes levied or to be levied for payment of the bonds, or that makes any amount of the bonds for which the proceeds lawfully were expended subject to the limits of section 11b (1), Article XI of the Oregon Constitution. [1997 c.171 §5]
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