## Facts

- Fairfax County sought to build the Fairfax County Parkway using a financing agreement with the Northern Virginia Transportation District Commission.
- The Commission planned to issue revenue bonds and use County payments to fund debt service.
- The County’s payments were to come from general revenues and were expressly subject to annual appropriation by the Board of Supervisors.
- The agreement stated that no future Board was legally bound to appropriate funds and that bondholders could not compel County taxation or appropriations.
- If the County did not appropriate, the Commission could cease performance and pursue contract remedies (including terminating the project and disposing of project assets), but bondholders had no direct claim against the County’s taxing power.
- Taxpayers intervened in a statutory bond-validation proceeding, arguing the arrangement created unconstitutional County “debt” without required voter approval.

## Issues

1. Whether the County’s multi-year payment commitments under a subject-to-annual-appropriation financing contract constituted “debt” under Virginia’s constitutional local debt limitations and voter-approval requirement.
2. Whether the non-appropriation clause and the absence of creditor power to compel taxation or appropriations prevented the arrangement from creating constitutional “debt,” despite practical incentives to keep paying.

## Decision

- On rehearing, the Supreme Court of Virginia affirmed the trial court’s judgment validating the bonds.
- The court held the County did not incur constitutional “debt” because any payment obligation beyond a given fiscal year depended on a new, discretionary annual appropriation.
- The court found dispositive that bondholders had no legal right to compel future appropriations or the exercise of the County’s taxing power.
- The court rejected treating political and economic pressure to appropriate as the equivalent of a legally enforceable obligation.

## Legal Principles

- For constitutional debt-limit purposes, “debt” turns on a legally enforceable obligation to pay money in the future that binds the locality without further legislative action.
- A multi-year financing arrangement does not create constitutional local debt when payments after the current fiscal year are expressly contingent on annual appropriations and future governing bodies remain free not to appropriate.
- Disclaimers denying creditors any right to compel taxation or appropriations support classification of the obligation as year-to-year rather than a fixed long-term debt.
- Practical expectations that a locality will continue appropriations to protect its credit reputation do not convert a contingent, appropriation-dependent obligation into constitutional debt.

## Conclusion

The court upheld revenue-bond financing supported by annual, discretionary appropriations, holding that the County’s contract created no constitutionally restricted local “debt” because future payments were not legally enforceable absent yearly appropriations and creditors could not compel taxation or appropriations.


Dykes v. N. Va. Transp. Dist. Comm’n, 411 S.E.2d 1 (Va. 1991)