The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1933-10-26
HERE
WRITES OPINION
ON $3.50 LIMIT
Maximum Levy Law Ruling
Given at Request of
U. S. Officials.

The Indiana $3.50 law, in itself. is
not an obstacle to federal loans to
Indiana municipalities for public
works projects, but repayment of
the loans may depend on the courts.
That is the substance of an
opinion by Frederick E. Matson,
of Matson, Ross, IcCord g. Clifford,
written in response to a request
from the federal emergency ad-
ministration of public works at
Washington. and joined in by the
law firm of Smith, Remster, Horn
brook & Smith.
Discussing the application of the
$3.50 tax limitation to general OBJ
legation bonds hereafter issued by
municipalities and taxing units, Mr..
MatSon points out that the ques-
ton is not as to the validity of such
bonds, but as to their enforceability.
Ruling Is Lengthy
Mr. Matson also notes that obi
cations of a municipality, commonly
called revenue bonds, issued for the
construction, improvement or ex-
tension of waterworks, sewage dis
posal plants, etc, the interest and
principal of which are payable ex-
cluSively from the revenue thereof,
are not affected by the $3.50 law
The opinion, comprehensive and
lengthy, explains fully the operation
of the $3.50 law and ''its relation to
essential taxes" such as levieS to
protect the solvency of the govern
mental unit-levieS to meet pay
ment Of interest and principal on
bonds issued before the $3.50 law
went into effect-and levies to pro-
vide running expenses OF the NUM-
cipality necessary in the exercise of
its governmental functions.
Opinion Is Quoted
The opinion says IN part;
Ordinarily, two methods are
available to bondholder to enforce
the obligations of municipal bond,
(a) a suit to mandate the taxing
officials to make the necessary levies
(of taxes to provide for payment
of interest and maturities; and (b)
after default, a suit to obtain
judgment for the amount of in
terest and / or principal due.
las all municipal bonds hereafter
issued are subject to this law which
puts limit on total tax levies, and
does not permit levies in excess of
a total of $3.50 on each one hundred
dollars of taxable valuation of
property, in cities and towns, and
total of 81 in outside territory,
except in case of emergency" the
method Of enforcing payment Of
bonds by compelling the levy of
taxes in many cases no longer will
exist.
This is for the reason that be-
fore including such levies for new
bonds other tax necessities having
prior right first must be provided
for.
Subject to Prior Claims
All necessary levies to meet pay
ment of interest and principal on
bonds issued before the $3.50 tax
law went in force must be provided
for first of all. This right of prior
bondholders can be strictly enforced.
And there also must be included the
"levies to provide for running ex-
penses of the municipality neces-
sary in the exercise of its govern
ment functions"
eff, after these essential taxes are
levied, there is not room left within
the $3.50 limit to include levy
for interest and principal on the
new bonds, then, "a writ of mandate
is not available to enforce the levy
Of tax to service bonds hereafter
issued, where such levy would carry
the total tax levy of the municipality
above $3.50, until some court has
declared an emergency to exist"
But, the opinion further states,
"the holder of a valid bond never
theless will be able to obtain iudg-
ment for the principal and / or in
terest thereof in event Of default,
and such judgment will be en-
forceable."