Opinion ID: 1762334
Heading Depth: 2
Heading Rank: 3

Heading: Authority Of City To Issue Revenue Bonds Under Section 27(b).

Text: This Court's analysis necessarily begins with the words of section 27(b), which Peculiar argues clearly authorize its issuance of the revenue bonds. Section 27(b) states: Any county, city or incorporated town or village in this state, by a majority vote of the governing body thereof, may issue and sell its negotiable interest bearing revenue bonds for the purpose of paying all or part of the cost of purchasing, constructing, extending or improving any facility to be leased or otherwise disposed of pursuant to law to private persons or corporations for manufacturing, commercial, warehousing and industrial development purposes, including the real estate, buildings, fixtures, and machinery. The cost of operation and maintenance and the principal and interest of the bonds shall be payable solely from the revenues derived by the county, city or incorporated town or village from the lease or other disposal of the facility. Mo. Const. art. VI, sec. 27(b) (emphasis added). By its terms, section 27(b) authorizes a municipality: (1) upon a vote of the majority of its governing body (rather than of the general electorate); (2) to issue and sell revenue bonds; (3) for the purpose of paying for facilities to be leased to private persons or corporations; (4) when the facilities are for manufacturing, commercial, warehousing or industrial development purposes; and (5) the cost of operation and maintenance of the facility and the principal and interest of the bonds shall be payable solely from the revenues derived from the lease or other disposal of the facilities. StopAquila does not dispute that Peculiar's approval of the revenue bonds complied with requirements 1, 2, 3 and 5 just listed. Specifically, Peculiar's governing body approved the issuance of revenue bonds (requirement 1); issued and sold the bonds (requirement 2); for the purpose of paying for facilities to be leased to Aquila, a private corporation (requirement 3); and the revenues from the lease provide the sole source of payment for the principal and interest of the bonds, with Aquila solely responsible for the operation and maintenance of the facility (requirement 5). StopAquila argues, however, that the Aquila plant fails to meet requirement (4), that the facilities be used for manufacturing, commercial, warehousing or industrial development purposes. Aquila disagrees, noting that the plant is to be used for the commercial purpose of generating and selling electricity and commercial purposes should include the generation of electricity to be sold by Aquila. The determinative issue, thus, becomes the meaning of the term commercial purposes as used in section 27(b). [11] This Court rejected a parallel attempt to construe the word commercial narrowly in the context of determining the reach of this State's taxing statutes in King v. Laclede Gas Co., 648 S.W.2d 113, 115 (Mo. banc 1983). As King and other cases have noted, when construing statutes or constitutional provisions, the primary rule is to consider words in their plain and ordinary meaning. See, e.g., King, 648 S.W.2d at 115 (statutes); Akin v. Mo. Gaming Comm'n, 956 S.W.2d 261, 263 (Mo. banc 1997) (every word employed in the constitution is to be expounded in its plain, obvious, and common-sense meaning). When a term is undefined, the Court looks to its plain and ordinary meaning as found in the dictionary. Tendai v. Mo. Bd. of Registration for Healing Arts, 161 S.W.3d 358, 369 (Mo. banc 2005). In King , as here, the defendant was a utility company in the business of buying and selling electricity. It alleged, however, that the underground storage facilities in which it stored natural gas for use in generating electricity when needed for its customers were not part of its commercial operation. Stating that [t]he only issue here is the statutory interpretation of the term `commercial,' 648 S.W.2d at 114, King noted that the dictionary definition of the term commercial is quite broad and includes any operation that has financial profit as a primary aim. Id. at 115. Applying that definition to the issue whether Laclede Gas' storage tanks were used in commerce, King held that Laclede's business of buying and selling electricity was clearly commerce and [t]he facts of this case clearly indicate that the use of the electricity was such an integral part of the commercial activities of the taxpayer that to construe the use as unrelated to commerce would result in a rejection of the plain meaning of the statute. . . . The facilities were essential to the utility's successful commercial operation. Id. King expressly overruled cases more narrowly construing the word commercial to the extent that they were inconsistent. Id. King's analysis is directly applicable here. Aquila, like Laclede Gas, is in the business of buying and selling electricity. Here, as in King , the utility unquestionably will seek to sell, i.e., engage in commerce, and profit from the electricity it generates at the Peculiar plant. Reference to other dictionaries confirms the broad meaning of the word commerce as referring to matters relating to commerce or which have profit as a primary motive. [12] Under both King and the plain dictionary definition of the term commercial, then, the Peculiar plant is for commercial purposes.
StopAquila argues that even if the term commercial purposes otherwise could be read to include power plants, it must be more narrowly construed because the words power plant are used in section 27(a) expressly and if the voters had wanted section 27(b) to apply to power plants those same words would be repeated in section 27(b). StopAquila's interpretation of section 27(a) would require the Court to reject the plain meaning of commercial. Equally importantly, it ignores the fact that section 27(a) applies only to a small subset of power plant projects, which does not include the Aquila plant at issue here. More specifically, section 27(a) says that the voters may by majority vote approve issuance and sale of: negotiable interest bearing revenue bonds for the purpose of paying all or part of the cost of purchasing, constructing, extending or improving any of the following: (1) revenue producing water, gas or electric light works, heating or power plants; or (2) airports; to be owned exclusively by the county, city or incorporated town or village the cost of operation and maintenance and the principal and interest of the bonds to be payable solely from the revenues derived by the county, city or incorporated town or village from the operation of the utility or the airport. Mo Const. art. VI, section 27(a). By its terms, section 27(a) only governs Peculiar's issuance of revenue bonds if they are used to build a revenue producing power plant that is to be owned exclusively by the city, and the cost of the operation and maintenance [of the power plant] and the principal and interest of the bonds is to be payable solely from the revenues derived by [Peculiar] . . . from the operation of the utility. [13] Here, however, Peculiar has leased the plant to Aquila, a private party, which may purchase it for $1,000 at the end of the lease. In this case, the cost of operation and maintenance of the power plant and the principal and interest of the bonds will not be payable solely, or indeed at all, from the revenues Peculiar derives from the operation of the plant, for Peculiar is not responsible for the plant's operation, nor will it derive any revenues therefrom. The costs of the plant's operation and any revenues therefrom will be borne and retained by Aquila; Peculiar's revenue derives from the lease to Aquila, not from the operation of the plant. This is exactly the situation to which section 27(b) is intended to apply. As set out at length above, section 27(b) specifically permits the governing body of a municipality to approve by majority vote the issuance of revenue bonds for any commercial, industrial development, manufacturing or warehousing purposes, where, as here, the facility is to be leased or otherwise disposed of pursuant to law to private persons or corporations and so long as the cost of operation and maintenance and the principal and interest of the bonds shall be payable solely from the revenues derived by the county, city or incorporated town or village from the lease or other disposal of the facility. Mo. Const. art. VI, sec. 27(b). Section 27(b) by its terms applies to all commercial, manufacturing, industrial development and warehousing facilities to be leased to private entities, not merely to a subset thereof such as power plants. Because, as set out at length above, Aquila's plant is to be used for commercial purposes, it comes within section 27(b). The Peculiar board acted within its authority in authorizing the bond issue in this case. This distinction between requiring voter approval of revenue bonds issued for plants to be operated by the municipality under section 27(a), but allowing governing body approval of revenue bonds for privately operated plants under section 27(b), is a rational one. The retention of risk by the municipality is different in the two instances. An undertaking on the part of the city to maintain and operate such a utility necessarily entails the hazard of some loss, direct or indirect, of the general revenue, and the uniform legislative policy of this State, evidenced by its Constitution and statutes, is that assent thereto of the inhabitants of the city at an election held for that purpose is essential. State ex rel. City of Blue Springs v. McWilliams, 335 Mo. 816, 74 S.W.2d 363, 367 (banc 1934). Although it is clear that revenue bonds do not result in general obligations upon the city, see City of Maryville v. Cushman, 363 Mo. 87, 249 S.W.2d 347, 351 (banc 1952) (We have many times ruled that bonds payable solely from the revenues of a municipal utility, service or facility, and not from taxation, are not a general municipal indebtedness within the Constitution), where the city is operating and maintaining the utility, it may retain greater contingent risk than if it has contracted the operation and maintenance to a third party. City of Springfield v. Monday, 353 Mo. 981, 185 S.W.2d 788, 791 (banc 1945) (holding that a city retains contingent liability on revenue bonds where it is maintaining and operating the utility). It is sensible, then, that the voters approved retaining the requirement of a public vote for all instances of municipal operation and maintenance of a utility, but did not require such a vote for issuance of bonds for commercial developments whether power plants or otherwisethat were to be leased where the bonds would be retired solely from revenue derived from the lease.
StopAquila also contends that, even if the use of the term power plants in section 27(a) does not prevent section 27(b)'s application to leased power plants operated by a private entity for commercial purposes, such an interpretation of sections 27(a) and (b) puts them into irreconcilable conflict with article VI, section 27 of the Constitution. StopAquila so argues because section 27 permits the building of power plants, airports, and other revenue producing utility plants to be owned and operated by a city or joint board or to be leased to private companies upon a majority vote of the people of the city or joint board or commission of cities authorizing the project. Mo. Const. art. VI, sec. 27. This section, as well as sections 27(a) and (b), were adopted by the voters at the same 1978 election. StopAquila's argument hinges on the assumption that the Missouri Constitution cannot confer alternative methods of exercising power upon Missouri municipalities and that there is an inherent conflict between the provisions of section 27, on the one hand, and sections 27(a), (b) and (c) on the other hand, because they provide varying methods of approving such projects. This is not correct. As Ashcroft noted, [t]he test for determining whether a conflict exists is whether one amendment prohibits what the other permits or vice versa. 642 S.W.2d at 620. Where two provisions are not irreconcilably inconsistent, both must stand even if there is some tension between them. Id. [14] In Ashcroft , relator prosecuted an action in quo warranto seeking a declaration that Fulton's bond issue was invalid because both section 27 and sections 27(a) and (b) failed to become part of the Constitution in 1978 due to the alleged conflict between them. Id. This Court rejected that argument for at least two reasons. First, Missouri statutes provide that in the case of adoption of conflicting amendments, the one receiving the largest affirmative vote will prevail. [15] Id. Second, and more fundamentally, this Court rejected the argument that because the two amendments both dealt with the issuance of revenue bonds for similar purposes they were in conflict and that amendment 7 (current article VI, section 27) prevailed over amendment 6 (current article VI, sections 27(a)-(c)) because it received more votes. Noting that only irreconcilable conflicts (and therefore not mere overlapping provisions) can justify ignoring the voters' will by declaring a constitutional amendment invalid, this Court held that although there is some tension between [section 27 and sections 27(a), (b) and (c) ] . . . [t]here is no irreconcilable conflict between the amendments, and . . . both became part of the constitution. Id. at 620-21. This Court reaffirms its holding in Ashcroft that there is no conflict between the texts of the amendments. Id. at 620. Both section 27 and sections 27(a) and (b) are constitutional grants of authority to cities and other political subdivisions to issue revenue bonds for certain purposes under certain conditions. These sections can be harmonized and present no irreconcilable conflict. While authority is granted under section 27 to issue revenue bonds upon satisfaction of certain requirementsincluding voter approvalnot set out in section 27(b), and vice versa, this does not ipso facto mean that the two amendments are in conflict. Rather, they set out parallel methods of accomplishing the goal of issuing revenue bonds for the building of commercial power plants, among many other projects. While section 27 requires voter approval of such plants, section 27(b) provides an alternative method of authorizing such plants where they are to be leased to a private entity for commercial purposes and that entity will be responsible for the plant's cost, operation and maintenance. Neither section is written in the form of a prohibition or limitation . . . [rather] each . . . is written as an affirmative grant of permission. Cape Motor Lodge, Inc., 706 S.W.2d at 212 (holding that permissive provisions do not prohibit what the other permits). Therefore, neither amendment contains such a prohibition on what the other permits. While it is rather unusual to authorize alternative methods of proceeding in two separate amendments, that is what occurred when both amendments were concurrently submitted to and approved by the voters. Ashcroft makes clear that this joint approval did not itself create an inherent conflict or require one amendment's terms to be given precedence over the other. By virtue of the people's simultaneous adoption of both of these amendments, the people's intention to authorize cities to issue revenue bonds through the alternative methods of either section 27 or sections 27(a) and 27(b) is manifest.