Case Title: Apodaca v. Wilson

Citation: 525 P.2d 876, 86 N.M. 516

Docket Number: 

State: new-mexico

Court: New Mexico Supreme Court

Date: 1974-08-23T00:00:00Z

Document:
525 P.2d 876 (1974) 86 N.M. 516 Erlinda APODACA, James Duane Ames, Anita Edmon, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. Richard WILSON, City Manager, Montrose Simms, Assistant City Manager, and John Apodaca, Supervisor of Customer Accounting, Individually and as those responsible for water and sewer service charge collections for the City of Albuquerque; Harry E. Kinney, Ray Baca, Nancy Koch, Louis Saavedra and Robert Poole, Individually and as members of the City Commission of the City of Albuquerque; their agents, employees and successors, Defendants-Appellees. No. 9586. Supreme Court of New Mexico. August 23, 1974. *878 William G. Gilstrap, Peter C. Mallery, Stephen G. Durkovich, Albuquerque, for plaintiffs-appellants. Rodey, Dickason, Sloan, Akin & Robb, William C. Schaab, Albuquerque, Frank Mims, Asst. City Atty., Albuquerque, for defendants-appellees. MONTOYA, Justice. On August 2, 1971, the Albuquerque City Commission adopted Ordinance 102-1971 which increased sewer and water service charges over those charged under the superseded ordinance. On the same day, the City Commission adopted Budget Resolution No. 2, where by its terms, the City requests approval by the Attorney General and the Department of Finance and Administration for budget transfers and increases enumerated in schedules attached to the resolution. The schedules indicated that water and sewer revenues increased by the amount of $1,505,233, and that from such amount $1,129,903 was to be appropriated to the general fund of the City and appropriated from the general fund to cover budget increases for various departments of the municipality. *879 Plaintiffs Apodaca, Ames and Edmon filed a complaint against the City of Albuquerque and its agents (City) on January 14, 1972, on behalf of themselves and all others similarly situated, seeking to enjoin the City from collecting increased sewer and water service charges under the city ordinance. The plaintiffs also sought an order invalidating City Ordinance 102-1971 as being in violation of state law and the New Mexico Constitution, and directing the refund of any service charges previously collected under the ordinance. Subsequently, the Albuquerque Consumer Federation and New Mexico Taxpayers Association intervened as party-plaintiffs, seeking the same relief as the original plaintiffs. On May 12, 1972, the court, sitting without a jury, dismissed plaintiffs' complaint and entered judgment for the City. This appeal ensued. Plaintiffs advance five contentions seeking reversal of the trial court's decision. First, they argue that Ordinance 102-1971 violated New Mexico law. Article X of the New Mexico Constitution was amended by the adoption of § 6 on November 3, 1970. This section, known as the municipal home rule amendment, states in pertinent part: Pursuant to art. X, § 6, the charter of the City of Albuquerque was amended at a special election on June 29, 1971, to adopt the home rule powers set out above. Thereafter, the City adopted Ordinance 102-1971. Plaintiffs argue that §§ 14-26-4 and 14-25-2, N.M.S.A., 1953 (Repl. Vol. 3, 1968), set out the limitations which are to be adhered to by the City in the formulation of any service charge rates. Section 14-26-4, supra, states in pertinent part that: Section 14-25-2(A), supra, provides that: The initial hurdle then is whether the City's rate increase (Ordinance 102-1971) is to be confined by the limitations set forth in §§ 14-26-4 and 14-25-2(A), supra, or whether by virtue of its home rule status, compliance with these statutes is not required. Article I of the Albuquerque City Charter provides as follows: The provisions of N.M. Const., art. X, § 6, and art. I of the City Charter enable the City, as a municipal corporation, to exercise all legislative powers and to perform all functions not expressly denied by the City Charter or general state law. This case involves the first interpretation to be made by this court of the constitutional amendment conferring "home rule" upon municipalities in New Mexico who have adopted a city charter under the authority of such constitutional amendment. The pertinent provisions of such amendment, N.M. Const., art. X, § 6(D), enable the City as a municipal corporation to "exercise all legislative powers and perform all functions not expressly denied by general law or charter." Subsection (E) of the amendment states that its purpose is to provide for maximum self-government, and that a liberal construction shall be given powers of municipalities. Other jurisdictions having home rule, through either constitutional authority or legislative enactment, have considered the question of the extent of home rule power. Broadly stated, it is of considerable significance to municipalities as being first, a source of municipal power and second, as a limitation upon legislative control. Its effect as a source of such municipal power varies greatly in those states having adopted home rule. An excellent statement as to the purpose of such a constitutional amendment was made by the California Supreme Court in Fragley v. Phelan, 126 Cal. 383, 387, 58 P. 923, 925 (1899), as follows: In commenting upon the interpretations placed on home rule powers, Antieau in Vol. 1, Municipal Corporation Law, Home Rule § 3.03 at 100 (1973), says the following: It would appear that the grant of power under the California amendment is as broad as the New Mexico amendment, which permits municipalities in our state to "exercise all legislative powers and perform all functions not expressly denied by general law or charter." There is no question that by the terms of the amendment the charter provisions are self-executing in the sense that no further legislative act is necessary. In interpreting the power of Texas municipalities to regulate under the Texas home rule amendment, which contains the clause that it is "subject to such limitations as may be prescribed by the legislature," the Texas Court of Civil Appeals, in Pitre v. Baker, 111 S.W.2d 359, 361 (Tex.Civ.App. 1937), said: An example of such specific denial of power is contained in § 72-4-1.1, N.M.S.A., 1953 (Repl. Vol. 10, pt. 2, 1973 Pocket Supp.) whereby, unless otherwise provided by law, municipalities are prohibited from imposing an income tax or an ad valorem property tax, and then, with some exceptions, are authorized to levy certain excise taxes if the ordinance imposing such a tax is approved by the majority vote in the municipality. We believe that in New Mexico, as in Texas, a home rule municipality no longer has to look to the legislature for a grant of power to act, but only looks to legislative enactments to see if any express limitations have been placed on their power to act. To adopt any other interpretation in New Mexico would make the home rule amendment meaningless. We now turn to the argument advanced by plaintiffs, that §§ 14-26-4 and 14-25-2, supra, set forth the criteria which the City must follow in establishing rates, and that the funds received therefrom can only be used for system costs, including maintenance, construction, enlargement and repair of the system facilities, and to pay the principal and interest on revenue bonds issued for construction of the system. This contention by plaintiffs might be valid in the absence of the home rule amendment. There is nothing in either of these two statutes that in any way limits or prohibits the application of the revenues from the sewer or water system operated by the City to other municipal purposes. Under the authority of the home rule provisions of our Constitution, and in accordance with the provisions of the City Charter, the City legislated by passing an ordinance increasing the charges for both services. The only limitation, as in the case of any legislative action or function by the City, is that it exercise its authority in a reasonable manner and act pursuant to constitutional authority. We need to determine what is meant by the clause "not expressly denied by general law or charter." In this contention, it may be stated that the term "general law" can only be interpreted to mean a law that applies generally throughout the state, or is of statewide concern as contrasted to "local" or "municipal" law. The words "not expressly denied" must be given some meaning, and we take it to mean that some express statement of the authority or power denied must be contained in such general law in order to be applicable, as in § 72-4-1.1, supra, or otherwise *882 no limitation exists. It has been stated that under home rule powers, to control or limit municipal enactments, the general law must be of general concern to the people of the state. We believe the Supreme Court of the State of Oregon ably stated the proper rule, which we adopt, in the following language: City of Portland v. Welch, 154 Or. 286, 296, 59 P.2d 228, 232 (1936). Again in the same case, the court in further discussing home rule powers, said: It is to be observed that there is some uncertainty in court decisions as to when an enactment of the legislature is of statewide concern. The Arizona Supreme Court noted in City of Tucson v. Arizona Alpha of Sigma Alpha Epsilon, 67 Ariz. 330, 336, 195 P.2d 562, 566 (1948): However, the Arizona Supreme Court had indicated the test to be applied is whether or not the performed activity is proprietary. In City of Tucson v. Tucson Sunshine Climate Club, 64 Ariz. 1, 8, 164 P.2d 598, 602 (1945), the court expressed itself as follows: While judicial interpretation may be necessary as to the meaning of "municipal affairs" in many cases, the instant case presents no problem in that regard. It is clear that the City was acting in a proprietary capacity in operating its sewage and water systems. In Southern Union Gas Company v. City of Artesia, 81 N.M. 654, 657, 472 P.2d 368, 371 (1970), this court stated: Of what concern is it statewide what the City's users of those systems must pay for such service and how the monies derived from them are to be expended? Moreover, it has been held that the management of municipally-owned utilities is a local affair which home rule municipalities control rather than state legislation. The supplying of water to its population has been determined to be a municipal affair in home rule municipalities in both California and Oklahoma. In those states it was decided that state law had no application to rates to be charged or the application of revenues derived therefrom. See City of Pasadena v. Charleville, 215 Cal. 384, 10 P.2d 745 (1932); Pitts v. Allen, 138 Okl. 295, 281 P. 126 (1928). In New Mexico, N.M.Const., art. IX, § 13, authorizes contracting of debts for the construction or purchase of a system for supplying water, or of a sewer system for cities, and authorizes the limitation imposed by that section may be exceeded for such purposes. Legislative enactments authorizing such activities are contained in § 14-22-5, N.M.S.A., 1953 (Repl. Vol. 3, 1968). In support of their position that the City lacks power to apply sewer and water system revenues for general governmental purposes, plaintiffs rely on City of Cincinnati v. Roettinger, 105 Ohio St. 145, 137 N.E. 6 (1922). That case is clearly distinguishable on two grounds. First, the charter of the City of Cincinnati contains the following provision (105 Ohio St. at 159-160, 137 N.E. at 10): Second, the Ohio Supreme Court held that § 3959, General Code, is constitutional, and operates as a valid limitation upon the uses and purposes for which revenues derived from municipally owned waterworks may be applied. By virtue of the provisions of that section, surplus revenues derived from water rents may be applied only to repairs, enlargement or extension of the works, or of the reservoirs, and to the payment of the interest of any loan made for their construction, or for the creation of a sinking fund for the liquidation of the debt. We have no comparable statute in New Mexico limiting the use of utility system funds in the manner that the Ohio statute specifically restricts the use of waterworks revenues by a municipality. Plaintiffs overlook the ruling by the same Ohio Supreme Court in City of Niles v. Union Ice Corporation, 133 Ohio St. 169, 12 N.E.2d 483 (1938), which held that funds derived from the city-owned electric utility can be used for general governmental purposes. We consider § 14-22-4, N.M.S.A., 1953 (Repl. Vol. 3, 1968), which authorizes municipalities to transfer to the general fund income derived from the operation of a city-owned utility that has funds derived from revenue bonds, after paying expenses for maintenance and deposit of 125% of the interest and sinking fund requirements for that current year, to be dispositive of the issue in New Mexico. This statute by its terms is permissive and the City not having legislated on the subject can certainly take advantage of its permissive authority. Plaintiffs also contend that "the City's sewer and water rate increase is not a just and reasonable service charge," arguing that the charges in order to be so classified must be measured in terms of what is required for maintaining, extending, *884 enlarging the systems, and paying principal and interest on revenue bonds, as provided in §§ 14-25-2 and 14-26-4, supra. We have already discussed the effect of the home rule amendment on those statutes and how they contain no express denial of authority to the City to fix water and sewer rates based only on the criteria provided by those statutes. We do, however, agree that the rates must be reasonable. Admittedly, here the rates fixed by the ordinance produced more revenue than needed to satisfy the cost of operating the system and the requirements for the payment of principal and interest on revenue bonds issued. The proper general rule to be applied here is that the City, by owning and operating its water and sewer system, is acting in a business or proprietary capacity rather than in a governmental capacity. Therefore, the obligations resting upon it are identical to those of a private utility company operating under a municipal franchise, insofar as the determination of the reasonableness of its rates is concerned. In Holton Creamery Co. v. Brown, 137 Kan. 418, 420-421, 20 P.2d 503, 504-505 (1933), the Supreme Court, in a case involving the excessiveness of rates imposed by the city operatng its own utility, quoted the following with approval: See also Raton Public Service Company v. Hobbes, 76 N.M. 535, 417 P.2d 32 (1966); McMurtry v. City of Raton, 66 N.M. 277, 347 P.2d 168 (1959); City of Niles v. Union Ice Corporation, supra; Shirk v. City of Lancaster, 313 Pa. 158, 169 A. 557 (1933); Twitchell v. City of Spokane, 55 Wash. 86, 104 P. 150 (1909). There was evidence at trial as to the reasonableness of the rate increases and as to the fact that Albuquerque rates compared favorably with amounts received by private utility companies. We note that § 14-17-1(H), N.M.S.A., 1953 (Repl. Vol. 3, 1968, 1973 Pocket Supp.), specifically gives a municipality power to Although the instant case was filed prior to June 1972, the effective date of this statute, it expresses current legislative policy and is consistent with our holding as to the City's power to set reasonable rates in excess of actual expenditures in furnishing municipally-owned utility services, if such rates compare favorably with those received by private utility companies. The trial court, in its finding No. 23, stated: This finding is supported by substantial evidence. We next consider plaintiffs' second contention, that the sewer and water service charge increase is a tax and, as such, is in violation of law and the New Mexico Constitution. The home rule amendment provides that the City may not impose a tax until approved by a majority vote, excepting therefrom a tax authorized by general law. In addition, the Charter Municipality *885 Tax Act, § 14-14-1, N.M.S.A., 1953 (Repl. Vol. 3, 1968, 1973 Pocket Supp.), under its temporary provisions in force when Ordinance 102-1071 was adopted, prohibited any charter municipality from adopting any tax to become effective July 1, 1973, unless such tax was authorized by general law. We have heretofore made reference to the provisions of § 72-4-1.1 limiting the tax powers of home rule cities. The question to be resolved is whether the increased sewer and water charges can be construed to be a tax. In City of Clovis v. Crain, 68 N.M. 10, 16, 357 P.2d 667, 671, 88 A.L.R.2d 1250, 1259 (1960), where the collection of garbage and sewer assessments was in question, we said: Here, plaintiffs again rely on City of Cincinnati v. Roettinger, supra, in support of their position, contending that water or sewer charges become a tax when the revenues or a portion thereof are used for general governmental purposes. We disagree with the conclusion reached in the Roettinger case, and agree with the Ohio Supreme Court's later decision in City of Niles v. Union Ice Corporation, supra, when it said (133 Ohio St. at 181-183, 12 N.E.2d at 488-489): Likewise, in Twitchell v. City of Spokane, supra, the Supreme Court of Washington *886 passed on this very point and disposed of it in the following language (55 Wash. at 89, 104 P. at 151): We therefore hold that the water and sewer charges in the instant case are not "taxes" irrespective of the application of the revenues derived from such charges. The next point advanced by plaintiffs is that the approval of the Attorney General and the Director of Finance and Administration is required before revenues generated from the increased service charges can be used for a budget increase under the provisions of § 11-2-57(H), N.M.S.A., 1953 (Repl. Vol. 2, pt. 2, 1974). The City contends that this statute does not prohibit the home rule City's powers to transfer revenues and increase or decrease its budget without regard to state approval, and then argues that Ordinance 102-1971 and Budget Resolution No. 2 were adopted in exercise of home rule powers. The City's Charter, by the terms of art. I, states the City We have held that Ordinance No. 102-1971 was proper legislation by the City. Assuming that Budget Resolution No. 2 can be considered legislation to implement the appropriation of the monies raised by the Ordinance, the Budget Resolution, by its very terms, requests approval of the Attorney General and the Department of Finance and Administration. In the present posture of the case, we can only say that the City is bound by its own resolution in requesting such approval, since it proceeded to "act in the manner provided by law." The Resolution is the only official action by the City, other than the Ordinance itself that is before us, and we cannot change its wording or effect. However, it is evident that approval of budget increases was withheld by the Attorney General and action deferred by the Department of Finance and Administration under the mistaken opinion that the budget increases were illegal because not authorized by statute, and on the further ground, as stated in Attorney General's brief submitted to the trial court, that the rate increases were illegal because they constituted a tax promulgated in violation of N.M.Const., art. X, § 6. Those two grounds have been decided in this opinion as not being correct. Furthermore, the City had properly met the standards set out in § 11-2-57(H), supra, which reads as follows: *887 Accordingly, approval by the Attorney General and the Department of Finance and Administration should have been granted, and the City is not to be precluded from using the revenues realized under Ordinance 102-1971, as provided in the schedules attached to Budget Resolution No. 2. Under the circumstances present herein, and the terms of Budget Resolution No. 2, we are not prepared to hold that the trial court was correct in its conclusion No. 16, which reads: In view of the disposition we have made of the applicability of § 11-2-57(H), supra, the question of control needs no further discussion. The fourth point argued by plaintiffs is that the home rule amendment does not apply to the issues of this case. The discussion under the previous points raised by plaintiffs has resolved the issue raised under this point. The same disposition applies to the fifth point raised by plaintiffs, that injunctive relief is proper in this case. In view of the foregoing, the decision of the trial court is affirmed, excepting that portion of the decision holding that approval of the Attorney General and the Department of Finance and Administration was not required under the provisions of § 11-2-57(H), supra. The cause is remanded to the trial court with instructions to amend its decision in conformance with the view herein expressed, and to enter its judgment accordingly. No costs are to be assessed against plaintiffs in view of the order of the trial court declaring plaintiffs to be indigent. It is so ordered. McMANUS, C.J., and STEPHENSON, J., concur.