Opinion ID: 1900198
Heading Depth: 1
Heading Rank: 1

Heading: Impermissible dual purposes? Plaintiffs' first issue raises two subsidiary questions.

Text: A. The first question is whether revenue bond proceedings may legally include more than one purpose. By virtue of section 384.28, we have held that general obligation bond proceedings may include multiple purposes. Green v. City of Cascade, 231 N.W.2d at 885. We were not required to decide this question in our revenue bond case, McGrory v. Board of Trustees of Municipal Electric Utility, 232 N.W.2d at 263. We must now resolve it. In the absence of statute, the rule of most jurisdictions is that a proposal to issue bonds must be limited to a single purpose; two or more separate purposes must be voted on separately. 64 Am.Jur.2d Public Securities & Obligations § 154 (1972); 64 C.J.S. Municipal Corporations § 1925 (1950). The leading case on this principle is Gray v. Mount, 45 Iowa 591 (1877). See also Stern v. City of Fargo, 18 N.D. 289, 122 N.W. 403 (1909). The Iowa home rule act was not hastily drafted; much effort went into it. Scheidler, Implementation of Constitutional Home Rule in Iowa, 22 Drake L.Rev. 294, 309-10 (1973). The legislature expressly changed the common law rule with reference to general obligation bonds and authorized multiple purposes. § 384.28. Section 384.25(2) accordingly uses the word purposes. Revenue bonds, paid out of projects' income rather than through the general taxing power, were not removed from the common law rule; section 384.83(2) uses the word purpose. The council argues that most decisions based on the common law rule involve public referenda rather than voting by a council acting as a legislative body. But the objective of the single purpose rule is avoidance of logrollingtying a strong proposition to a weak one to get the weak one through. This objective applies to both public and council voting. See 64 Am. Jur.2d Public Securities & Obligations, § 154, at 197 (1972). Thus the Ohio Supreme Court made no distinction between public and council voting with reference to the single purpose rule in Elyria Gas & Water Co. v. City of Elyria, 57 Ohio St. 374, 381, 49 N.E. 335, 337 (1898): The reason is, that the requisite majority of the council and of the electors may be in favor of one measure, and against the other, or against each; while by uniting them as one, and submitting them to be acted upon in that form, the members of council, and the electors, are required to vote for or against both propositions combined, or abstain from voting at all, and thus denied the right to express their will with respect to each. (Emphasis added.) Indeed some states including Iowa have imposed a general constitutional single purpose rule on state legislative bodies. Iowa Const. art. III, § 29. The council also argues that use of the singular purpose in section 384.83(2) includes the plural, citing section 4.1(3) of the Code. Normally the singular does include the plural, but this principle is incorporated in the interpretative section of the Code to avoid the necessity of using both singular and plural words throughout the Code. The rule does not apply where, for example, other sections or the framework of the statute demonstrates that the singular was intended, as in the case before us. See State ex rel. Mitchell v. McChesney, 190 Iowa 731, 733-34, 180 N.W. 857, 858 (1921). We hold that the common-law single purpose rule applies to city revenue bonds. B. Many of the cases in this area deal with the second question, which is whether the particular proposition involved one purpose or two or more purposes. The issue before us at this point is whether the proposition to issue revenue bonds to construct a new parking facility and to refund existing bonds on other parking facilities involves one purpose or two for the bonds. From the standpoint of both the statute and the facts, we conclude that the bonds would be for two purposes. As to the statute, sections 384.24 and 384.82 evidence legislative awareness of refunding as a purpose in itself. Regarding general obligation bonds, section 384.24(3)(f) includes refunding as a separate corporate purpose. (Section 384.28 permits this purpose, of course, to be joined with others in general obligation bond proceedings.) Similarly, regarding revenue bonds, the subsections of section 384.82 provide separate procedures for projects and for refunding. Hence the statute points toward legislative regard of refunding as a separate purpose. We note that nothing in chapter 384 indicates the two purposes cannot by proper proceedings be separately brought before and decided by the council. See Kendrick v. City of Birmingham, 242 Ala. 112, 118, 5 So.2d 82, 87 (1941) (There is no plausible reason advanced why the city by a proper election cannot vote on the two proposals separately.); McBryde v. City of Montesano, 7 Wash. 69, 34 P. 559 (1893). As to the facts, we do not have the case of two purposes in form which are in fact a single purpose such as construction or acquisition of an electricity plant or building a high school and gymnasium or erecting and equipping a city hall. Cases of that nature are collated in annotations in 4 A.L.R.2d 617 (1949) and 5 A.L.R. 538 (1920). An interesting example is provided by McGrory v. Board of Trustees of Municipal Electric Utility . There the notice stated the bonds would be issued for the purpose of providing funds to pay a part of the cost of extending and improving the municipal electric utility of said City by constructing distribution lines or to refund temporary pledge orders delivered in payment of goods and services furnished to said project. 4760 Abstracts and Arguments 160 (Iowa 1975). Under the statute, a city may issue pledge orders toward the cost of the project to be paid from the bond proceeds when later obtained. §§ 384.80(11), 384.82(1). Objector McGrory admitted on appeal that a bond issue for constructing distribution lines or to refund pledge orders for goods and services furnished to said project did not present separate purposes. McGrory v. Board of Trustees of Municipal Electric Utility, 232 N.W.2d at 263. The situation before us is factually different from McGrory. The council does not propose to issue these bonds to build this new parking facility and refund pledge orders for goods and services furnished to said project. The city presently has bonds outstanding from four prior projects. One of the acts the council actually proposes to do is to build a fifth parking facility; another act it actually proposes to do is to refund the remaining bonds of the issues for the other parking facilities by creating a fund to pay those bonds at maturity. A somewhat similar situation existed in McBryde v. City of Montesano, 7 Wash. at 73, 34 P. at 560-61. There the council desired to buy fire apparatus and to purchase land and erect a city hall and jail on it. The city had legal problems however with existing indebtedness of $20,000 for roadways, an electric plant, and general warrants. The council therefore submitted a proposition for bonds of $25,000 which would simultaneously fund the existing indebtedness and permit acquisition of the apparatus, land, city hall, and jail. A problem did not exist as to simultaneous submission of the acquisitions for future improvements; the problem related to adding the funding of the old debt. The Washington Supreme Court regarded the proposition as involving two basic purposes: one prospective, to acquire future improvements; and the other retrospective, to fund the prior debt. The court stated: Yet it was proper enough to submit a proposition to fund at the election which was held, but it could not be united with the proposition to borrow money for future purposes, so as to have one expression of the voter answer both propositions. They might be decided by the same ballot, but the voter must have an opportunity to express himself separately as to each one. For these reasons, the whole election under ordinance 178 was void. Respondents claim that under our decision in Seymour v. Tacoma, 6 Wash. 427 (33 Pac.Rep. 1059), part of the result of the election may be saved; but the ruling in the former case does not apply here. People voted very largely on the proposition to issue bonds for $25,000; but it might be that a feeling may have existed in favor of putting the old debts in good shape, which induced many to vote for the whole loan who would not have voted to borrow to buy fire apparatus and build a city hall. In this case the council argues that all it actually desires to do is to erect the new parking facility, and it proposes to refund the outstanding bonds because of the anti-dilution clauses in them preventing erection of the new facility; hence only one purpose is involvederecting the new facility. The council is confusing its reason for refunding the outstanding bonds with what it actually proposes to do. The council's reason for refunding, whatever it may be, does not negate the fact that the refunding of the four prior issues for four other facilities is itself an act it intends to perform; the existing bonds could be refunded under section 384.82(2) without ever building another parking facility. The council could be right that garnering four affirmative council-member votes for the new facility and also four for refunding existing bonds may be more difficult than obtaining four votes on one proposition by presenting the two issues to the council as a package. Such a contention by the council is, essentially, an attack on the single purpose rule against logrolling. The very purpose of that rule is to prevent adoption of a measure, which would not stand on its own merits, by packaging it with a more attractive measure. If the council's contention is accepted, an unpopular project could be obtained by the simple expedient of incorporating it into a proceeding with a popular refunding proposal. Thus a proposed project A, which would not carry itself financially and therefore would not receive majority approval, could be logrolled in by tying it to a favored proposal to refund bonds for existing projects B and C. We thus hold that the council's joinder of constructing the facility and of refunding existing bonds was invalid. The trial court should have overruled the council's motion for summary judgment and sustained plaintiffs' corresponding motion. This holding disposes of the appeal, but we will touch upon other issues which will likely arise before the council if that body undertakes dual proceedings. We have no knowledge, of course, as to whether the council will be advised to go forward with two bond proceedings or whether it will wish to do so.