Case Title: Bd. of Com'rs of La. v. ALL TAXPAYERS ETC.

Citation: 360 So. 2d 863

Docket Number: 

State: louisiana

Court: Louisiana Supreme Court

Date: 1978-06-19T00:00:00Z

Document:
360 So. 2d 863 (1978) BOARD OF COMMISSIONERS OF LOUISIANA MUNICIPAL POWER COMMISSION (LAMPCO) v. ALL TAXPAYERS PROPERTY OWNERS, AND CITIZENS of the State of Louisiana (including particularly the Citizens of the Municipalities of Franklin Morgan City, Natchitoches and Opelousas, the Creators of the Louisiana Muncipal Power Commission) and Non-Residents Owning Property or Subject to Taxation therein, and all other Persons Interested in or Affected in any way by the Issuance of Electric Revenue Bonds of the Louisiana Municipal power Commission. Nos. 61586, 61622. Supreme Court of Louisiana. June 19, 1978. Rehearings Denied July 26, 1978. *864 Daniel T. Murchison, Watson, Murchison, Crews, Arthur & Corkern, Natchitoches, Salvador L. Diesi, Richard B. Millspaugh, Opelousas, Harold B. Judell, William H. Beck, Jr., Foley, Judell, Beck, Bewley & Martin, John W. Cox, Cox, Osborne & Michaelis, Michael R. Fontham, Paul L. Zimmering, Ewell P. Walther, Jr., Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, Harmon F. Roy, Mouton, Roy, Carmouche, Bivins & Hill, Lafayette, for plaintiff-applicant. Alfred S. Lippman, Nicholas F. Larocca, Jr., Lippman, Mahfouz & Martin, Morgan City, Jack C. Caldwell, James R. McClelland, Aycock, Horne, Caldwell, Coleman & Duncan, Franklin, for defendants-respondents. Harmon F. Roy, Mouton, Roy, Carmouche, Bivins & Hill, Lafayette, for amici curiae for City of Lafayette. Kermit M. Simmons, Simmons & Derr, Winnfield, C. Jack Pearce, Wallace E. Brand, Pearce & Brand, Washington, D.C., for amici curiae for Cities of Winnfield, Vidalia and Jonesboro. Eddie N. Pullaro, Pullaro & Daigle, Houma, Hale M. Walker, Walker, Holstead & Smith, Ruston, for amici curiae City of Ruston and the Bd. of Commissioners of Electric Power Systems Authority. CALOGERO, Justice. We granted writs in this case upon application of plaintiff, Board of Commissioners of Louisiana Municipal Power Commission [hereinafter referred to simply as LAMPCO].[1] LAMPCO, a joint commission and agency/instrumentality of four Louisiana cities is a corporate political subdivision of the State of Louisiana created by virtue of an intergovernmental agreement among the governing bodies of Morgan City, Franklin, Opelousas and Natchitoches, and under the authority of R.S. 33:1321-1337, sometimes known as the local services law.[2] LAMPCO proposes to raise $90,000,000 by issuing revenue bonds under R.S. 33:1321-1337, the proceeds to be used to construct a type of electric generating plant referred to as a "115 MW synthesis-gas combined cycle" power plant. LAMPCO brought this action under R.S. 13:5121-5130 to obtain judicial validation of the bonds and certain power sales contracts. The power sales contracts entered by LAMPCO and each of the four cities are a primary source of security for the bonds. The district court declared, favorably to petitioner LAMPCO, that the bonds were *865 valid and would be legally binding obligations of LAMPCO, and that the power sales contracts were valid and binding obligations of LAMPCO and the four cities. Reversing the district court, the Court of Appeal dismissed plaintiff's petition holding that the power sales contracts and the proposed bonds were null and void because not authorized by the statute upon which plaintiff and the cities were relying and because violative of the Louisiana Constitution. 355 So. 2d 578 (La.App. 3rd Cir. 1978). We granted LAMPCO's application for writ of review to examine the correctness of these holdings. 356 So. 2d 1002 (La.1978). Each of the four member cities engages in the generation of electricity. The power plants are part of the respective utility systems operated by each of the cities. Natural gas or oil is the energy source for each of the generating plants. Because these fuels are subject to critical supply problems including diminishing reserves, the cities' electric utilities were threatened with curtailment of available supply and significant price escalations. A foreseen solution was the construction of a new type of generating plant which employs an alternate fuel. Feasibility studies confirmed that the new type of electric generating plant, the 115 MW synthesis-gas combined cycle power plant, would be a practical and workable solution to the problems of these cities and their respective electric utilities. Cost factors dictated a "joint action power program" such as that here undertaken. The legal facility for this joint action power program was the 1975 statutory addition and amendments to R.S. 33:1321-1337 which was apparently specifically passed to authorize just such a program. Under these statutes municipalities (or parishes) concluding an agreement under its provisions may by resolutions of their respective governing bodies create a joint commission as an agency and instrumentality of the municipal governing bodies. R.S. 33:1332. The commission so created is by law "a body corporate" (R.S. 33:1332) and a political subdivision of the State of Louisiana (R.S. 33:1334(D)) with, among other rights, powers and authority, the power to issue revenue bonds to finance the cost of the construction, acquisition or improvement of public projects, "including electric utility services." R.S. 33:1334(A). These revenue bonds are payable, "solely from the revenues derived from the operation of the public project constructed or acquired with the proceeds of such revenue bonds." R.S. 33:1334(A). Revised Statute 33:1334(C) provides that a municipality or parish "shall not in any event be liable for the payment of the principal or interest on any revenue bonds of the commission except as provided" in the statute. [R.S. 33:1334(A) authorizes the municipality to be an obligor on the bonds, with the bonds payable, as earlier mentioned, solely from revenues derived from operation of this public project.] Revised Statute 33:1334(C) goes on to provide that "in addition, the municipalities or the parishes may contract for services furnished by any joint facility constructed by the commission and the municipalities and parishes may obligate themselves to make payments for such term not exceeding forty years, and in such manner as may be provided in such contracts. . . ." Revised Statute 33:1334(C) concludes: "None of the bonds of the commission shall be construed to constitute an indebtedness of the municipality or parish for debt limit or other purposes within the meaning of any constitutional or statutory provisions whatsoever." R.S. 33:1334(C). These revenue bonds "may be issued without the necessity of securing the approval of the electorate at a referendum." R.S. 33:1336. Finally, for our present discussion in any event, R.S. 33:1337 provides that "these provisions shall be liberally construed, to the end that, through the use of arrangements and agreements provided for herein between one or more municipalities and/or joint commissions and/or one or more electric public utility companies greater economy and efficiency in the providing of electrical and energy services to the citizens may be achieved; and further to this end, the governing authority of the municipality and/or joint commission . . . shall be empowered to adopt such other ordinances *866 and resolutions, take such other actions and charge and collect such fees as may be contemplated or necessary by the said Contract. . . ." R.S. 33:1337. Constitutional provisions bearing on the case include Article 6, section 37(A) of the Louisiana Constitution by which the legislature is allowed to "authorize political subdivisions to issue bonds or other debt obligations to construct, acquire, extend or improve any revenue producing public utility or work of public improvement." That section goes on to provide that "bonds or other debt obligations may be secured by mortgage on the lands, buildings, machinery and equipment or by the pledge of the income and revenues of the public utility or work of public improvement." However, the section announces that "[t]hey shall not be a charge upon the other income and revenues of the political subdivision." [emphasis provided] Peripherally pertinent to the issues in this case is Article 6, section 33 of Louisiana Constitution which provides that "general obligation bonds may be issued only after authorization by a majority of the electors voting on the proposition at an election in the political subdivision issuing the bonds." Construing the pertinent statutory provisions in conjunction with the applicable constitutional articles we believe that it is evident that Revised Statute 33:1321-37 is constitutional. Under the statute the authorized revenue bonds are not a charge upon other income and revenues of the political subdivisions. In fact they are "payable. . . solely from the revenues derived from the operation of the public project." Article 6, section 37(A) is thus not offended. Similarly, the provision of the statute which says that the bonds may be issued without the necessity of securing the approval of the electorate at a referendum does not offend Article 6, section 33's requirement that general obligation bonds be issued only after authorization by a majority of the electors, for the reason that the revenue bonds are not general obligation bonds. It was apparently for these reasons that the Court of Appeal did not find unconstitutional any of the provisions of R.S. 33:1321-37. Rather, the Court of Appeal found the power sales contracts and the proposed bonds null and void as 1) not authorized by the statute purportedly authorizing them (R.S. 33:1321-37), and 2) in violation of Louisiana Constitution, Article 6, section 37(A) because the bonds purportedly represent a charge upon other income and revenues of the four cities. Before considering the propriety of these resolutions of the legal issues by the Court of Appeal we choose to restate some of the specifics concerning LAMPCO's proposed bond issue and the provisions of the power sales contracts here under attack. In essence the agent/instrumentality of the four cities, namely LAMPCO, is committed to build a $90,000,000 electric generating plant for the benefit and advantage of the four member cities and their respective electric utility systems. When the plant is completed and producing energy, each of the cities will have a proportionate call on energy produced, that is, each city will be entitled to purchase a percentage of the project's capability. Each city will be entitled to purchase power and also will be compelled to do so under a "take or pay" contract, although it is contemplated that unneeded capacity will be sold to outsiders or adjusted between the cities. Additionally, the Court of Appeal described the arrangement in the following way, with reference to plaintiff's exhibits: The Court of Appeal determined that, to the extent LAMPCO revenues securing the bonds will include receipts from the power sales contracts, such revenues will not be derived solely from the operation of the public project. Instead, the bonds will in effect be paid with income from the utility systems of the respective cities. It was for this reason that the Court of Appeal found the arrangement at issue here to violate that part of R.S. 33:1334(A) which provides that bonds are "payable . . . solely from the revenues derived from the operation of the public project constructed." We believe that this construction of the language of R.S. 33:1334(A) is much too narrow in light of the overall import of the statute and the specific provision of R.S. 33:1337. That section requires that the act's provisions be "liberally construed, to the end that, through the use of arrangements and agreements provided for herein between one or more municipalities and/or joint commissions, and/or one or more electric public utility companies, greater economy and efficiency in the providing of electric and energy services to the citizens may be achieved." Further, the same section empowers the cities and the joint commission "to adopt such other ordinances and resolutions, take such other actions and charge and collect such fees as may be contemplated or necessary by the said Contract, all for the purpose intended." In light of R.S. 33:1337 and other provisions of the statute, we conclude that "revenues derived from the operation of the public project" (R.S. 33:1334(A)) is intended to mean all LAMPCO revenues, including those to be derived from the power sales contracts between LAMPCO and the four cities, contracts which are authorized by R.S. 33:1334(C).[3] Contrary to defendants' position we believe that the specific power sales contracts and the provisions thereof obliging payment irrespective of completion of the project or ultimate delivery of project power are authorized by R.S. 33:1334(C). Construing that subsection with R.S. 33:1337's provision as to liberal construction and the purposes of the statute, it is evident that the contract for service contemplated by R.S. 33:1334(C) includes one under the terms of which LAMPCO, the agent/instrumentality of the four member cities, obliges itself to construct a $90,000,000 plant and, assuming successful completion thereof, to furnish *868 electric power in accordance with the terms of the agreement. [4] We likewise find erroneous the Court of Appeal's finding that the power sales contracts and the proposed bonds violate Article 6, section 37(A) of the Louisiana Constitution of 1974. That constitutional provision says in effect that bonds issued in connection with revenue producing utilities "shall not be a charge upon the other income and revenues of the political subdivisions." This provision quite obviously means that the bonds shall not be a charge upon the income and revenues of the political subdivision other than utility revenues, inasmuch as that section in its preceding sentence specifically provides that the bonds may be secured by "the income and revenues of the public utility." The Court of Appeal was no doubt influenced by its concern for the overall effect upon the cities' general revenue picture by virtue of committing for bond payments all utility revenues when, historically, net utility revenues have been transferred to the general funds of the cities. That concern may indeed be legitimate. Nonetheless as an appropriate policy determination it is properly the concern of the governing bodies of the cities, rather than the courts. The Court of Appeal found, erroneously in our view, that the power sales contracts "constitute a debt which can be enforced by a judgment against a member city's entire revenues and assets," and that the cities have an unconditional obligation to pay the monthly power costs and surcharges provided in the power sales contracts. This is simply not so. While there is an obligation to pay whether or not the project has been completed and project power and energy furnished, that obligation or debt is payable only from the revenues and receipts of the respective combined municipal utility systems of the four cities. See Arata v. Louisiana Stadium and Exposition District, 254 La. 579, 225 So. 2d 362 (1969); McCann v. Mayor of Morgan City, 173 La. 1063,139 So. 481 (1932). It is not payable from the member cities' entire revenues and assets, although conceivably customers of the utility may be exposed to increased charges, in the event the project fares worse than the feasibility studies suggest. Nonetheless, the general or "other income and revenues of the political subdivision" (La.Const. art. 6, § 37(A)) can in no way be charged or burdened with payment of the revenue bonds at issue. Similarly, possible loss to the cities' general funds of net utility revenues, while perhaps affecting solvency (or indirectly requiring generation of additional general income or revenues), does not convert a charge against utility revenues to a charge against other income and revenues. The power sales contracts and the proposed bonds do not violate Article 6, § 37(A) of Louisiana Constitution of 1974. We thus conclude that the power sales contracts and the proposed bonds are authorized by R.S. 33:1321-1337, in particular 33:1334(A) and (C), and do not violate Article 6, § 37(A) of the Louisiana Constitution of 1974. The judgment of the Court of Appeal is reversed; the judgment of the district court declaring the bonds and power sales contracts valid and legally binding is ordered reinstated. All costs of these proceedings are to be assessed against Louisiana Municipal Power Commission. COURT OF APPEAL JUDGMENT REVERSED; DISTRICT COURT JUDGMENT REINSTATED. MARCUS, J., dissents and assigns reasons. La.Const. art. VI, § 33, Political Subdivisions; General Obligation Bonds La.Const. art. VI, § 37: Revenue-Producing Property R.S. 33:1332: Administration of agreements; joint commission R.S. 33:1334: Issuance of revenue bonds by commissions; prescriptive period R.S. 33:1335: Energy Resource Contracts R.S. 33:1336: Financing agreements R.S. 33:1337: Liberal construction *872 MARCUS, Justice (dissenting). Under the terms of the power sales contracts entered into by LAMPCO and each of the four member cities, "[t]he obligations of the [c]ity to make the payments required. . . payable as an operating expense of its combined municipal utility system, payable solely from the revenues and receipts of such combined municipal utility system . . . shall be made whether or not the project has been completed, is then operable or is operating, and . . . shall not be conditioned upon the performance or nonperformance by LAMPCO . ." and ". . . non-delivery of Project power and energy on account of Uncontrollable Forces or for any other reason shall not relieve the [c]ity from its obligation to make its payments required. . . ." The issue presented is whether the power sales contracts and the proposed bonds are authorized by law. La.R.S. 33:1334 A provides in pertinent part: Clearly, the bonds issued by LAMPCO for the construction of a 115 MW synthesis-gas combined cycle power plant (type of electric generating plant) are not payable solely from the "revenues derived from the operation of the public project constructed or acquired with the proceeds of such revenue bonds." Rather, they are payable from the combined municipal utility system of each member city and must be paid regardless of whether the proposed project is completed and operable and whether or not power is delivered. Hence, I do not consider that the power sales contracts and the proposed bonds are authorized by La.R.S. 33:1334 A. Moreover, La.Const. art. VI, § 37(A) provides that the legislature by law may authorize political subdivisions to issue bonds to construct, acquire, extend or improve any revenue-producing public utility which bonds may be secured, inter alia, "by the pledge of the income and revenues of the public utility" and which "shall not be a charge upon the other income and revenues of the political subdivision." Since the proposed bonds issued by LAMPCO are payable from the revenues and receipts of each city's combined municipal utility system and are not payable solely from the income and revenues of the electric public utility, they constitute a charge upon the other income and revenues of the municipalities in contravention of La.Const. art. VI, § 37(A). Hence, I do not consider that the power sales contracts and the proposed bonds are authorized by law. Accordingly, I respectfully dissent. [1] In this Court LAMPCO has both timely sought writs (No. 61,586) and appealed (No. 61,622). Revised Statute 13:5128 which is found in the statute authorizing, and setting forth the procedure for, lawsuits to determine the validity of governmental bonds (R.S. 13:5121-5130) purports to grant a review by this Court by appeal. That statute would seem to be in conflict with Article 5, section 5(D) of the Louisiana Constitution which, setting forth the appellate jurisdiction of the Louisiana Supreme Court, provides that ". . . a case shall be appealable to the Supreme Court if (1) a law or ordinance has been declared unconstitutional; (2) the defendant has. been convicted of a felony or a fine exceeding $500 or imprisonment exceeding six months actually has been imposed." Article 5, section 5(D) does not apply to the present case because the Court of Appeal has not held any law or ordinance unconstitutional. Thus, we must dismiss the appeal in this case while realizing that identical contentions are now before us in the timely-filed application for writ of review. [2] The portions of R.S. 33:1321-1337 and those sections of the 1974 Louisiana Constitution referred to herein are set out more fully in an appendix attached to this opinion. [3] As we understand the situation, until such time as the plant is operative and surplus energy is being sold by LAMPCO to entities other than the four cities, there is no "LAMPCO revenue" or prospective revenue other than that which will be derived from the power sales contracts of four cities. [4] We deem it worth noting that, as structured, payment on the outstanding bonds does not begin until after the project's scheduled completion and the onset of energy production.