No. 12263 INTHE SUPREME COURT OF THE STATE OF 

### MONTANA

BURLINGTON NORTHERN INC,, successor toGreat Northern Railway Company, a corporation, Plaintiff and Appellant,

ETATHEAD COUNTY, 

### a political subdivision of the State of Montana etal., Defendants and Respondents.

Appeal from: District Court of the Eleventh Judicial District, Honorable Robert Sykes, Judge presiding. Counsel of Record: For Appellant: Gough, Booth, Shanahan and Johnson, Helena, Montana. Ward Shanahan argued, Helena, Montana

# . For Respondents : Baldwin and Jellison, Kalispell, Montana. M. Dean Jellison argued, Kalispell, Montana.

Submitted: April 

### 24, 1973

Filed

# :JfR13

## 1973

4 Decided: 

# 3v~ 

# IJI

# ri5

### Mr. Justice John ConwayHarrison delivered the Opinion of the Court.
This is an appeal from a summary judgment entered in the district court of the eleventh judicial district, Flathead County, in an action challenging a 1968 county airport levy. The trial courtheld for the county and plaintiff railroad companyappeals. The Board of County Commissioners of Flathead County in its 1968-69budget adopted the followingbudget for the county airport fund: "Taxable Valuation $41,987,688' 

### "#215 Airport Fund

tt



### Total Expenditures last year $29,833 Last Yeark budget $67,942 Receipts Last Year fromTaxes Estimated Expenditures this year $41,035 Capital Outlay $29,000 Less 119.13 OW Total $70,035 Cash in Fund $42,226.03 Estimated Receipts $ 

### 6,701 Total $48,808 Tax Levy -51 Mills required to raisebalance $21,227", At the time the budget was considered therewas an estimated expenditure of $41,035 and a capital outlay expenditure of $29,000. When the budget was adopted and the levy fixed, therewas cash on hand in the amount of $42,226.03 less an outstandingwarrant of $119.13, and estimated receipts of $6,701. The tax requirements for the following year were set at a levy of .51 mills (2 mills being the maximum) which raised the necessary $21,227 for the budget. The proposed capital outlay expenditure of some $21,227
was to be used in that fiscalyear to remodel an already existing airport building which,appellane argues, created a debt or liability exceeding the sum of $10,000 inviolation ofArt. XXZI, 

### Sec. 5, Montana Constitution,and sections 16-807and 16-1904,R.C,M. 1947. Appellant paid its taxesunder protest.Respondent county argues itmakes no differencewhether the capital outlay expenditurerelates toan existing facility (as the trial court found) or a new facility. Further, itmakes no differencewhether a part of the money proposed tobe expended in the 1968-69 budget was money left over from the previous year or money tobe raised by taxes during the current year, ifthe total amount proposed tobe spent was 

### less than the amount that would be raisedby the permissible milllevy during the current year. The only issue on appeal iswhether ornot the trialcourt erred indetermining that a capital outlay expenditure for an existing facilitycould be discharged by the county by applying "cash on hand" first to the expenditure, and then by using the available milllevy toraise the balance needed for the Flathead County airport operation for the fiscalyear ending June 30, 1969, We find the trial court erred inreaching its conclusion that the financing procedure followed by respondent county was proper. Clearly this type of budget procedure violates sections 16- 1901through 

### 16-1911, R.C.M, 1947, (County Budget System) enacted togive the taxpayer notice as tohow his taxes were tobe spent and protection from the improper use of taxmonies. Section 16- 1904(2) clearly provides that the cash balance inany fund must be applied firstagainst ordinary expenses inthe budget. "Funds

on hand" atthe end of a fiscalyear are tobe used to reduce the taxrequirements of the next fiscalyear. Capital outlay items must be singled out for taxpayers' consideration. Section 16-1902, R,C.M. 1947, requires: 

# "*** Expenditures for capital outlay shall set forth and describe each object of expenditure separately. 

# ** *" The procedure also violatesArt. 

### XIIL, Sec. 5, Montana Constitution, which provides inpertinent part:

I1

No county shallincur any indebtedness or liability for any singlepurpose toan amount exceeding ten thousand dollars ($10,000) without the approval of a majority of the electors thereof, voting atan election tobe provided by law",

### This constitutional provision has been executed by section 16-807,R.C.M. 1947,which provides: "Limit of Indebtedness. No countymust become indebted in anymanner for any purpose to an amount, including existing indebtedness, in the aggregate exceed-ingfive per centum of the val.ueof the taxable property therein, to be ascertainedby the last assessment for state and county taxes previous to the incurring of such indebtedness,and all bonds or obligations in excess of such amount givenby or onbehalf of such county arevoid. No countymust incur any indebtedness or liability for any singlepurpose to an amount exceeding ten thousand dollars without the approval of a majority of the electors thereof voting at an election to be provided by law." Here, there canbe no questionbut that the action taken by the Board of County Commissioners in contracting to remodel the airport building created an "indebtedness or liability"within the meaning ofboth the constitutional and statutoryprovisions, andwas for a "singlepurpose". State ex rel, Diederichsv. Board of Trustees, 91Mont. 300, 7 P.2d 

### 543; State ex rel. Ward

v. Anderson, 158Mont. 279, 491 P.2d 868. In effect, what was done here by respondent countywas to
over levy for the airport fund in 1967 and create a fund to which it made the necessary levy the followingyear and thereby accomplished the remodeling of the airport building without allowing the electors to vote on it. At that time Montana lawdid not allow any accumulation of a "reserve fund". Section 1-804,R.C.M. 1947,provided: "1-804. Tax levy for establishmentand operation of airports. For the purpose of establishing, constructing, equipping,maintaining and operating airports and landing fieldsunder the rovisions of this act the county commissioners of [or

# 'i the city or town councilmay each year assess and levy in addition to the annual levy for general administrative purposes, a tax of not to exceed two (2) 

### mills on the dollar of taxable value of the

roperty of said county,city or town, In the event of

jointly established airport or landing field, the county commissioners and the council. or councils involved shall determine in advance the levynecessary for such purposes and the proportion each political subdivision joining in the venture shall pay, based upon the benefits it is determined each shall derive from the project. Provided that if it be found that the levyhereby authorized will be insufficient for the purposes herein enumerated, the commissioners and councils acting are hereby authorized and empowered to contract an indebtedness on behalf ofsuch county, city or town, as the case may be, upon the credit thereof by borrowing money or issuingbonds for such purposes, provided that no money may be borrowed and no bonds may be issued for such purpose until the proposition has been submitted tothe taxpayers affected thereby, and a majority vote tobe 

### cast therefor," (Emphasis added). In 1969, section 1-804, 

### R,C.M, 1947, was amended toallow the creation of a "reserve fund" but only for the use by the county to "resurface, overlay, or improve existingrunways, taxiways and rampsft. Even under this amendment, the county could not have financed the remodeling of the administration building inthe manner which it did. There was, as shown previously, some $42,000 left over from the previous year, the total expenditure the previous year was $29,833 out of 

### a budget of $67,942. Very, very clearly, the county had created a "reserve fund" by the simple device of over-levying a tax. The county extended a levy against the taxpayers for a capital outlay expenditure and spread it over two years; and thus, by theirbootstraps picked themselves up and jumped over the constitutional limitationbf Art. XIII, Sec, 5, and the statutoryprovisions of sections 16-807 and 16-1904, R.C.M. 1947. This "bootstrap" operation then allowed the county, under the rationale of State ex rel. Diederichs v. Board of Trustees, 91Mont. 300, 

### 7 P.2d 543, toclaim that no "indebtedness or liabilityttwas created because the money was already on hand. InDiederichs, themoney on hand came from insurance proceeds as
a result of a firewhich destroyed the school building forwhich voters had already approved bond financing. In the instant case the funds on hand came about by violating the county budget laws. This decision isconsistent with the rationale of Cause No. 12390, Burlington Northern Inc. v, Richland County, decided this
same date.The judgment of the district court is reversed and it is directed to enter judgment for appellant.



### A ociate Justice 

# f?

/ /Chief Justice



# ................................. Associate Justices.Mr, Justice Gene B. Daly and 

### Mr, Justice Frank I. Haswell dissenting: We respectfully dissent to the view of the majority, The text of the majority opinion concludes with the statement: "This decision isconsistent with the rationale of Cause No. 12390, Eurlington Northern Inc. v. Richland County, decided this same date." We agreewith the rationale applied inthe Richland County case and that the rationale applied in the present case is consistent with that of the Richland County case, however, the facts of the present case areinno way consistent with those of the Richland County case. In the Richland County case an "indebtedness or liability" of $200,000 from the StateAeronautics Board was undertaken by the Sidney-Richland County Airport Commissi.on for the "single purpose1fof airport runway construction. Repayment of principal and interestwas tobe made by the county from the proceeds of a one and one-half milllevy tobe reapplied until repayment was complete, In the present case the Flathead County Board of Commissioners approved expenditure of about $70,000 for remodeling work

on the airport administrationbuilding. Funds remaining from previous years' budgets in the amount of about $42,000 and a one-half milllevy effected toprovide about $29,000 made up the total expenditure, The county ispermitted under section 1-804, R.C.E.I. 1947, to impose 

### a "permissive" two milllevy "for the purpose of establishing, constructing, equipping, maintaining and operating airports

# * *I1. (Emphasis supplied). The record indicates that had the maximum permissive two millairport levy been effected, over $80,000 would have been raised thereby. 

### The permissive one-half millairport levy which was effected, together with remaining funds, provided the total amount of authorized expenditure. Consequently, there was never any "indebtedness or liability" incurred by Flathead County within the meaning ofArt. XIII, Sec. 5, of the Montana Constitution. The application of the constitutional provision contained inArt. XIII, Sec. 5, by the majority in the present case, in

our view, is incorrect, aspointed out in Stateex rel. Diederichs v, Board of Trustees, 91Mont, 300, 305, 

### 7 P.2d 543, while quoting with approval language from State ex rel. Rankin v. Board of Examiners, 59 Mont. 557, 197 P. 988, 992:

11IIn construing our constitutional provision applicable, we have under consideration the meaning of thewords "debt or liability,

## " and inour view the prohibition intended by these words is the creation of a debt orobligation of the statein excess of cash on hand and revenue provided fort ;k +: %. 

# *** No provision of law has been made for submittina to the electors the question of the expen&ture of cash on hand raised for a definitepurpose, inexcess ~-00; and by the lawmakers this constitutional restrictionhas been interpreted as a restriction upon the borrowing of money, asby statutea method isprovided for the manner of submittine to the U people the question of borrowing money inexcess of $10,000." (Emphasis supplied). We would affirm the summaryjudgment entered by the district court.

Associate Justices.