No. 12731 INTHE SUPREME COURT OF THE STATE OF MONTANA 1974

LOUIS YOVETICH, on behalf of himself and all otherresidents and property owners inthe County of Yellowstone, Stateof Montana, similarly situated, Plaintiffs and Appellants, and 

### STEVE TRENKA and MABEL TRENKA, husband and wife, CLAYTON ORR, JOHN GLANTZ and MOLLY GLANTZ, husband and wife et al., Plaintiff and Appellant Intervenors, -vs

# - M. E. McCLINTOCK, A.S. ROBERTS etal, Defendants and Respondents KOBER CONSTRUCTION COMPANY, Yellowstone Electric Company, et al., Defendant and Respondent Intervenors, DAVID G. DRUM, WARREN F. VAUGHAN et al., Defendant and Respondent Intervenors.

Appeal from: District Court of the Thirteenth Judicial District, HonorableM. James Sorte, Judge presiding. Counsel of Record

### : ForAppellants: Larry D. Herman argued, Laurel, Montana Ralph Herriott argued, Hysham, Montana For Respondents: Harold F. Hanser, County Attorney, argued, Billings

Montana C. W. Jones argued, Billings, Montana Anderson, Symmes

## ,Forbes, Peete and Brown, Billings,

Montana Benjamin N. Forbes argued, Billings, Montana Crowley, Kilbourne, Hanson and Gallagher, Billings,

Montana Moulton, Bellingham, Longo and Mather, Billings, Montana William H. Bellingham argued, Billings, Montana

Submitted: June 14, 1974 Decided

### 'AW2'91974Mr. JusticeJohn C. Harrison delivered the Opinion of the Court.

This is an appeal froma judgment of the district court of Yellowstone County denying a petition for injunctive or declaratory relief against the Board of County Commissioners, Yellowstone County, for itsmethod of funding the multi-use building presently being constructed at the fairgrounds in Billings,Montana. The facts disclose that on November 2, 1971, the voters of Yellowstone County approved the sale of general obligation bonds in the sum of $3,000,000 for the purpose of constructing and equipping a multi-use building at the fairgrounds in the City of Billings. The ballot presented to and approved by the voters read: "Shall the Board of County Commissionersbe authorized to issue, negotiate and sell bonds of the County of Yellowstone in the amount of Three Million Dollars ($3,000.000.00) payable during a period of not to exceed twenty (20) years, redeemable on any interestdue date after five (5) years; for the purpose of constructing and equipping a Multi-Use Building at the Midland Empire Fairgrounds,Yellowstone County,Montana, with a seating capacity of at least 10,000and an arena of approximately 250 feet by 400 feet." When the bond issuewas approved, the county commissioners had no access to a cost estimate of the building based on plans and specifications. In October 1972,the county commissioners employed architects who submitted a schematic design which set forth the size, shape, and cost of the building. The schematic design estimated the total cost of the building to be

Toward the end of 1972, the county commissionersbegan to anticipate the receipt of federal revenue sharing funds. Consequently, the county commissioners made some refinements in and broadened the use of the building. These changes plus theexisting severe inflation served to increase the cost of the building beyond the sum originally anticipated by the county commissioners. Bids for the constructionof the multi-use building

were opened on November 28, 1973 and contracts were awarded to the defendant-intervenor construction companies on December

In January 1974, the county commissioners adopted a funding program which projected the cost of the building at $5,880,504.04. Three main sources of funds were to be utilized tomeet this obligation: 1. Proceeds from the bond sale and interest thereon--- 2. Principal and interest on fire insuranceproceeds resulting from the destruction of the previous building--- $ 358,591.26 3. Revenue Sharing Funds from the federal government, plus interest for entitlement periods one through six--- $2,009,188.68 TOTAL

## --- $5,896,410.83 Plaintiffs, as taxpayers and residents of Yellowstone County,protested the funding program and set forth three main issues for this Court to consider: 1. Does the funding program as adopted by the county commissioners of Yellowstone County violate section 16-807, R.C.M. 1947? 2. Is the county commissioners'action in contracting with defendant construction companies ultra vires because it limits future boards in the exercise of their governmental powers? 3. Is the use of federal revenue sharing funds for the purpose of funding themulti-use building improper? In the first issue,plaintiffs argue that the county commissioners, in using revenue sharing funds to finance the project,violated the terms of section 16-807,R.C.M. 1947, thepertinent part of which states: 

### " * 

## * * No county must incur any indebtedness or liability for any single purpose to an amount exceeding forty thousand dollars

($40,000)without the approval of a majority of the electors thereof voting at an election to be provided by law." In State ex rel. Diederichsv. State Highway Commission, 89 Mont. 205, 211, 296 P. 1033, this Court explained the purpose ofArt. XI11 § 2 of the 1889 Montana Constitutionwhich forbade the legislature from incurring a debt or liability in excess of $100,000without submitting the question to a vote of the people: "Knowing the tendency of governments to run in debt, to incur liabilities,and thereby to affect the faith and credit of the state inmatters of finance, thus imposing additional burdens upon the taxpaying public, the framers of the Constitution placed positive limitations upon the power of the legislative assembly to incur a debt or impose a liability upon the state beyond the limit prescribed, without referring the proposition to the electorate for its approval." Thus, the question to be decided here is whether the expenditure of revenue sharing funds creates an "indebtednessor liability"within themeaning of the statute thereby imposing additional tax burdens upon the residents of Yellowstone County. In State ex rel. Diederichsv. Board of Trustees of Missoula County High School, 91Mont. 300, 307, 

### 7 P.2d 543, the plaintiff sought to enjoin the Board of Trustees of Missoula County High School from applying fire insuranceproceeds to rebuild a high school. In holding that the expenditure of the fundsdid not constitute an "indebtednessor liability" this Court stated: "It seems plain that the constitutional limitation does not apply to the expenditure of cash on hand provided for a specific purpose; but rather to the creation of an obligation to be met and paid in the future by the taxpayers.

[Citing cases]

# ." Here, it isplain the revenue sharing funds are not an obligation to be "metand paid for in the future by the taxpayers".In State ex rel. Rankin v. State Board of Examiners, 59 Mont. 557, 197 P. 988,this Court held that the words "indebtednessor liability" meant the creation of a debt or obligation in excess of "cashon hand and revenues having a potential existence by virtue of existing revenue laws." See also: Graham v. State Board of Examiners, 116 Mont. 584, 155 P.2d 956. The expenditure of the federal revenue sharing funds does not incur an "indebtednessor a liability"of the county within the meaning of the statutory restriction. Section 16-807, R.C.M. 1947,was never intended to prevent the expenditure of

revenueprovided for a specific purpose as noted in Diederichsv. Board of Trustees of Missoula County High School, supra. Had the legislature intended that result, it would have used the term "expenditure"instead of the terms "indebtednessor liability". As stated, themanifest purpose of the statute is to prevent the taxpayers frombeing burdened with oppressive taxation. Here, the county commissioners are not obligating the taxpayers to pay any additional sums over and above the amount included in the bond issue to finance the project. The entire costs of construction are to be paid from the bond issue, insurance proceeds and

revenue sharing funds. Thus, the evil which the statute is designed to prevent,will never come into existence here. In the second issue plaintiffs argue the action of the county comrnissioners is ultra vires because it limits futureboards in the exercise of their governmental functions. We disagree. In Bennett v. Petroleum County, 87Mont. 436, 447, 288 P. 1018,a taxpayer brought suit to enjoin the county commissioners of PetroleumCounty from leasing a building to be used as a courthouse for a period of four years with an option to renew the lease for an additional four year period. The plaintiff contended, inter alia, that the lease was void because it extended beyond thetermsof officeof individualmembers of the board,of county commissioners. Atthe timethe leasewas entered into, Section 4465 Rev. Codes 1921, asamended by Chap 38, Laws of 1929 authorized the board tolease real property necessary forthe use of the county. This Court upheld the validity of the leasewith thesewords: "The statute specifically confers the power to so contractupon theboard of county commissioners, the body existing atthe time, and themere fact thatthe term of officeof a member of the body which so contractsmay expire before the contract, does not in any manner affect itsvalidity. Were the rule of law otherwise, the business of counties would be very greatly hampered and attimes, suspended, with resulting damage. The board of county commissioners functions for the municipal corporation in its authorized powers asa continuous body, and while thepersonnel of its membership changes, thecorporation continues unchanged. The county has power tocontract, and its contracts are the contracts of itsboard of county commissioners, not of the individual members thereof." We agree with thisreasoning. By statute, the board of county commissioners has thepower toerect a recreation center. Section 16-1008A, R.C.M. 1947. Since the board has thispower, it can enter intoconstruction contracts that extend beyond the terms of officeof the individualmembers of the board. Were the rule otherwise, the board would be unable toenter into long-term constructioncontracts toerectpublic buildings as contemplated by section 16-1008A, R.C.M. 1947. Such a result would be detrimental tothe residents of Yellowstone County. Plaintiffs cornerstonemuch of their argument on this issue inwhat thisCourt recently held inBurlington Northern v. Flathead County, 162 Mont. 371, 512 P.2d 710, 30 St.Rep. 684, and Burlington Northern v. Richland Co., 162 Mont. 364, 512 P.2d 707, 30 St.Rep. 691. The holding inthose two cases was based on an interpretation of section 16-807, R.C.M. 1947, which isrelied upon by theplaintiffs here. However, thiscase is factually differentthan the above cases for there the county commissioners attempted, by use of the taxing authority, tocircumvent Section 5, Article XI11 of the 1889 Montana StateConstitution and section 16-807, R.C.M. 1947, by budgeting excessively in order toobtain and expend

a built-up reserve in subsequent fiscalyears. Here, plaintiffs treat the revenue sharing fund payments asmoney budgeted and unexpended atthe end of the fiscalyear. Further, they argue that these funds should be placed inthe general fund tobe used to reduce taxes in subsequent years. To so hold would be forthis Court toeliminatemany, if not all, of the permissible expenditures allowed by Congress under section 31, C.F.R. 51.31. Too, it would

mean that revenue sharing funds, unless spent prior toJuly 1of each fiscalyear, would be used only toreduce taxes. To carry out thepurposes of the revenue sharing actitmust be given a more liberal interpretation. Itwas contemplated by Public Law 92-512 (revenue sharing statute) Section 103, and it was the expectation of the President and Congress inpassing and signingthe Act thatmany new capital improvements would be made by thevarious municipal and county governments throughout thecountry. We note that inpassing the Act, and settingaside trust funds through December 1976, and making necessary the expending of or obligating the funds within two years of receipt thereof, thatCongress intended thevarious governing units could and would rely on receiving same through December 1976. We can findno violation of section 16-807, R.C.M. 1947, nor is this finding contra toour holdings intheFlathead County and Richland County cases. Inthethird issue, plaintiffs argue that the expenditure of revenue sharing funds forthepurpose of financing a recreation center is illegalbecause the revenue sharing actforbidsthe capital expenditure of funds forrecreation-type buildings.The State and Local Assistance Act, P.L. 92-512, Section 103, 1972,more commonly known as the Federal Revenue Sharing Act, allocates federal revenues to state and local governments to be used only for "priority expenditures". The act has defined "priority expenditures" as ordinary and necessary maintenance and operating expenses for public safety, environmental protection, public transportation, health, recreation, libraries, social services for the poor or aged, financial administration, and ordinary and necessary capital expenditures authorized by law. 31 U.S.C.A. § 1222. To qualify for the funds a unit of local government must establish a trust fund to deposit all payments received and use the funds for "priority expenditures". A penalty of 110% of the amount expended is assessed against the local government if funds

are allocated in violation of the Act. See: 31U.S.C.A. 

### 5 1243(a) (3). The local government is also required to provide for the expenditure of the funds in accordance with the applicable laws dealing with the expenditure of its own revenues. See: 31 U.S.C.A. 

### 5 1243(a)(4)

# . Plaintiffs argue that the funds are illegally spentbecause a recreation center is not an "ordinaryand necessary capital expenditure authorized by law." We disagreewith such a restrictive reading of theAct. See Murphy v. McClintock, 160Mont. 355, 503 P.2d 1013, 29 St.Rep. 883; Skaggs Drug Centers v. Mont. Liquor Control, 146 Mont. 115, 404 P.2d 511. The word "ordinary"isdefined in Black's Law Dictionary (4th ~d.1as: "Regular;usual; normal; common; often recurring; according to established order; settled; customary; reasonable; not characterized by peculiar or unusual circumstances; belonging to, exercised by, or characteristic of, the normal or average individual."The word "necessary"is defined in Black's Law Dictionary (4thEd.) as: "Thisword must be considered in the connection in which it is used, as it is a word susceptible of various meanings. Itmay import absolute physical necessity or inevitability,or itmay import that which is only convenient, useful, appropriate, suitable, proper, or conducive to the end sought. It is an adjective expressing degrees, and may expressmere convenience or that which is indispensable or an absolutephysical necessity. Itmay mean something which in the accomplishment of a given object cannot be dispensed with, or itmay mean something reasonably useful and proper, and of greater or lesser benefit or convenience,and its force and meaning must be determined with relation to the particular object sought.

### " The Federal Revenue SharingAct is broad in scope with the purpose of aiding local givernments defray the cost of capital expenditures. It accordingly appears to us that the words "ordinaryand necessary" should be construed liberally and with latitude. It is our opinion that the multi-use building in question is "reasonable", "useful" and "proper",and within the terms of the Act. The judgment of the district court is affirmed.

Justice I

We concur: 

# (2'

L Hon. Paul Hatfield,

# ~~$,g~k~ Judge, sitting in plac Justice Frank 

### I. Haswell. Mr. Justice Thomas Dignan, District Judge, sitting in place of 

### Mr. Chief Justice James T. Harri~on~dissents.

District Judge