No. 83-324 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1983 

CITY OF SHELBY, a municipal 

corporation, 

Plaintiff and Respondent, 

GLORIA SANDHOLM, et al., 

Defendants and Appellants. 

APPEAL FROM: District Court of the Ninth Judicial District, 

In and for the County of Toole, 

The Honorable R. D. J\lcPhillips, Judge presiding. 

COUNSEL OF RECORD: 

For Appellants: 

J. V. Barron, Great Falls, Montana 

For Respondent: 

Aronow, Anderson, Beatty & Lee, Shelby, Flontana 

Submitted on Briefs: September 15, 1983 

Decided: January 26, 1984 

Filed: In-f 

Clerk 
Mr. Justice Daniel J. Shea delivered the Opinion of the 

Court. 

Gloria Sandholm, et all protesting the creation of a 

special improvement district, appeal from an order of the 

Toole County District Court declaring invalid their petition 

to place on the election ballot for all the registered voters 

of Shelby, the question of whether a special improvement 

district created by the city cou.nci1, should be approved by 

all the registered voters in Shelby. We affirm. 

Although the issues are presented in different ways, the 

dispositive issue, and one not raised in the trial court, is 

whether a city council resolution creating a special 

improvement district consisting of less than the entire city 

is subject to repeal by referendum procedure. We hold that 

it is not and therefore affirm the District Court. 

Authority for cities to create special improvement 

districts is provided by sections 7-12-4101. et seq., MCA. 

Three resolutions are involved. On June 7, 1982, the City of 

Shelby validly passed Resolution 907, a resolution of 

intention to create Special Improvement District No. 53 to 

construct and install a storm sewer system that involved most 

of the property within the boundaries of the city. Protest 

of such a resolution is permitted by section 7-12-4110, MCA, 

and although a protest was lodged within the statutory 

fifteen days, it was insufficient. protest to bar the 

proceedings under section 7-12-4113, MCA. The City then 

passed Resolution 908 which created the special improvement 

district and which also contained the procedures for 

assessment of costs against the property owners in the 

improvement district. Finally, on October 18, 1982, the City 

passed the third resolution, Resolution 916, which permitted 
the sale of serial bonds to the highest bidder for cash, the 

bonds to be paid from the funds of the special improvement 

district. 

The protestors challenged the resolution creating the 

special improvement district (Resolution 908) by placing a 

petition before the Toole County election administrator 

seeking a referendum on the action taken by the City. At 

this point, the Shelby city attorney requested an opinj-on 

from the attorney general as to whether a city council 

resolution creating a special improvement district under 

section 7-12-4102, MCA, is subject to repeal by referendum. 

When the attorney general issued his opinion that the 

resolution was not subject to repeal by referendum, the Toole 

County election administrator rejected protestors' petition. 

The protestors then filed action in District Court asking for 

a temporary restraining order, injunction, and writ of 

mandamus to compel the election administrator to rescind her 

decision rejecting the ballot referendum petition. The 

protestors al-ternatively asked that the City file a petition 

for declaratory judgment to determine the validity of the 

protestors' petition. The City compl-ied with this request 

and filed a petition for declaratory judgment in the Toole 

County District Court. The trial court held that the City's 

action in creating a special improvement district was not a 

legislative act subject to referendum. This appeal followed. 

We agree, under the facts of this case, that the City's 

action creating a special- improvement district, was not a 

legislative act subject to referendum. However, we hold also 

that referendum is not a permissible procedure to challenge 

the creation of a special improvement district where the 
district encompasses less than the entire area within the 

city limits. 

The special improvement district involved here 

encompasses approximately two-thirds of the real property 

within the City. If referendum were a permissible procedure 

in this situation, there would be qualified voters within the 

city limits who would be qualified to vote on the proposed 

referendum but who did not own property within the boundaries 

of the special improvement district. Referendum procedures 

were not intended to cover this situation. 

The Montana Constitution places limits on the use of 

referendum. Art. 111, 5 5, provides in part that "[tlhe 

people may approve or reject any act of the Legislature 

except an appropriation of money . . . " And Art. XI, § 8, 

extends the power of referendum to the voters of local 

government by providing that " [tlhe legislature shall extend 

the initiative and referendum powers reserved to the people 

by the constitution of the qualified voters of each local 

government unit." The intent of this provision is to give 

al.1 interested and qualified voters of a municipal-ity a right 

to vote on a referendum. But here the special improvement 

district encompasses less than all of the real property in 

the City, and there are qualified voters in the City who 

could vote on the referendum but who are not physically or 

financially affected by the special improvement district. 

Clearly, the property owners who will be benefited by the 

improvement, as well as assessed for the costs of the 

project, should control whether the project succeeds or 

fails. Section 7-12-4110, MCA, provides the protest 

procedure for those affected by the special improvement 

district, but the protest here was insufficient because it 
did not represent 50 percent or more of the property within 

the district, and the trial court so found. The protestors 

have not appealed from that finding. This being so, the 

protestors cannot now avail themselves of a city-wide 

referendum as a means of challenging the creation of a 

special improvement district affecting less than all of the 

area in the City, and less than all of the property owners in 

the City. 

The California case of Chase v. Kalber (1915), 28 

Cal.App. 561, 153 P. 397, illustrates the application of a 

referendum procedure to the creation of special improvem.ent 

districts. California's Constitution reserved to the 

electors of the cities and counties the initiative and 

referendum powers, just as does our Montana Constitution. 

The City wanted to improve streets in certain areas of the 

City and therefore passed a resolution to create a special 

improvement district. But, the protestors wanted the 

resolution placed on the ballot in a city-wide election and 

they brought an action in mandamus to compel the city clerk 

to accept their petition to have the City's resolution passed 

on by the voters of the City. The Supreme Court, however, 

held that initiative and referendum procedures do not apply 

to resolutions or ordinances establ-ishing street improvements 

because such ordinances or resolutions affect only the people 

within the improvement district rather than the people of the 

municipality as a whole. We think the same rationale applies 

here. Referendum is not the proper tool for repeal of an 

ordinance creating a special improvement district that 

encompasses less than the entire city limits. 

Although the constitutional issue, not raised in the 

trial court, and raised by this Court sua sponte, is 
dispositive, we also agree that the trial court was correct 

in holding that the challenged resolution was not a 

legislative act subject to referendum. Rather, it was part 

of an administrative procedure not subject to initiative or 

referendum procedure. The trial court's holding is in accord 

with our decisions in City of Billings v. Nore (1966), 148 

Mont. 96, 41-7 P.2d 458; Dieruf v. City of Bozeman (1977), 173 

Mont. 447, 568 P.2d 127; and Allen v. City of Butte (1918), 

55 Font. 205, 175 P. 595, where we also held that only state 

or local government acts which are legislative, as opposed to 

administrative in nature, are subject to repeal by referendum 

or initiative. 

The protestors' reliance on City of Billings v. Nore, 

supra, is misplaced. There the voters of Billings passed an 

ordinance providing for the sale of municipal bonds to 

finance a city-wide storm sewer system. The city council 

then passed an ordinance that created the special improvement 

district out of the entire city limits, and provided, among 

other things, for a sliding scale for rate assessment, a 

method for assessments, a method for collection, and a method 

to periodically review the assessment rates. The Billings 

voters petitioned to place the second ordinance on the ballot 

for a cj-ty-wide vote. The issue was whether the ordinance 

creating the special improvement district was subject to 

repeal by referendum. The Court held that the second 

ordinance was not subject to referendum because it was 

"simply executing" the municipal bond ordinance which the 

voters had already passed, and therefore it was 

administrative in nature. It should be emphasized that the 

burdens imposed there were city-wide, and all property owners 

in the Billings city limits were to be assessed the cost. 
Here, however, the improvement district is not city-wide and 

it affects less than all of the qualified voters in the City 

of Shelby. 

In Dieruf v. City of Bozeman, supra, we repeated the 

policy that a city must be free to perform val-id 

administra.tive acts without having to refer them to the 

voters. Otherwise, small groups of dissatisfied voters would 

have it in their power to constantly frustrate the efforts of 

local government. In Dieruf, the city passed an ordinance 

setting a formula for assessing property for a parking 

facility and then adopted a resolution creating the special 

improvement district for the parking facility. We upheld the 

trial court's ruling that the protestors were not entitled to 

a writ of mandamus to refer the ordinance and the resolution 

to the voters. 

We further note that the attorney general issued an 

opinion on this precise question based on a request by the 

City of Shelby. The attorney general's opinion stated that 

"[a] resolution creating a special improvement district under 

section 7-12-4102, MCA, is not subject to repeal by 

referendum. " 38 Att'y. Gen. Op. No. 73 (1982) . The opinion 

correctly stated the law. 

For these reasons, the order of the District Court 

declaring the protestors' petition invalid is affirmed. 
We concur: 

d eQ,~&&Q Chief JusCic?e