## Facts

- Taxpayer plaintiffs sued the Unified School District of Antigo and related entities challenging a lease-purchase financing arrangement for construction of a new high school.
- The district contracted with a separate building/leasing corporation that would acquire land, construct the school, hold title, and lease the facility to the district for about 20 years.
- The district agreed to make annual rental payments and, after making all payments, would have an option to acquire title.
- The lease included a nonappropriation clause allowing the district each year to decline to appropriate funds for the next rental payment.
- If the district elected nonappropriation, the lease terminated and the district had no legal obligation for future rent and no liability for damages based on unpaid future rentals.
- The district did not levy a tax at the outset designed to cover the full stream of lease payments over the full term.
- The circuit court granted summary judgment to defendants; the court of appeals affirmed.

## Issues

1. Whether a lease-purchase agreement with a nonappropriation clause causes a school district to incur “indebtedness” under Wis. Const. art. XI, § 3 and Wis. Stat. chs. 67 and 120.
2. Whether the district had statutory authority to finance school construction through a lease-purchase arrangement with a special-purpose leasing corporation.

## Decision

- The Wisconsin Supreme Court affirmed summary judgment for the defendants.
- The court held the district did not incur “indebtedness” under the Wisconsin Constitution or applicable statutes by entering a lease-purchase containing an enforceable nonappropriation clause.
- The court held the district had authority under Wis. Stat. ch. 120 to use the leasing-corporation structure and the lease-purchase mechanism for school construction.

## Legal Principles

- “Indebtedness” for constitutional debt-limit purposes requires a legally enforceable obligation binding the governmental unit beyond the current fiscal period and available resources.
- A lease-purchase with a genuine nonappropriation clause, under which the governmental unit may terminate by declining to appropriate and owes no future rent or damages for future rent, is treated as a series of one-year obligations rather than a multi-year debt.
- When no constitutional “indebtedness” is created, constitutional tax-levy and debt-limit requirements applicable to debt do not apply to the full term of the lease at execution.
- School districts possess broad statutory authority to contract for school facilities and may use an intermediary leasing/building corporation to construct and lease a school facility, absent an express statutory or constitutional prohibition.
- The legal enforceability of the payment obligation, not the practical expectation that payments will continue, controls the debt-limit analysis.

## Conclusion

The court upheld the validity of a school district’s lease-purchase financing for a new school building, ruling that an enforceable nonappropriation clause prevented the arrangement from constituting constitutional or statutory “indebtedness,” and that the district had authority to use a leasing corporation to implement the project.


Dieck v. Unified Sch. Dist. of Antigo, 165 Wis. 2d 458, 477 N.W.2d 613 (Wis. 1991)