Opinion ID: 1426331
Heading Depth: 1
Heading Rank: 3

Heading: Transfers of Funds from Utility and Sanitation Accounts

Text: The appellants also allege that three transfers of funds to the City's general fund were unlawful. The first challenged transfer occurred on September 6, 1994, when the City transferred $500,000 from the unobligated balance of the water and sewer operating fund to the general fund. The ordinance indicated that the money was appropriated as a temporary loan for funding fire equipment purchases. No date was set for repayment of the loan. In 1999, through its adoption of a year 2000 budget, the City relinquished the loan as a debt of the general fund. The ordinance granting relinquishment stated that the cost of the 1994 appropriation would be charged to the surplus waterworks revenues of the Water and Sewer Operating Fund. The trial court ruled that the appellants' challenge to this transfer was barred by the statute of limitations. It found that, because the statute commenced running from the date the funds were transferred in 1994, the applicable three-year limitations period had expired. The appellants, on the other hand, contend that the cause of action did not expire until the loan was canceled on December 7, 1999. Thus, they assert that the cause of action was not time barred. We have previously held that the statute of limitations begins to run on a debt at its maturity. Smith v. Milam, 195 Ark. 157, 110 S.W.2d 1062 (1937). Here, the $500,000 loan stated no date for maturity. Where no time is set for the payment of a debt, the debt is in law payable on demand. Jonesboro Investment Corp. v. Cherry, 239 Ark. 1035, 396 S.W.2d 284 (1965). A debt payable on demand is due immediately, so that an action can be brought at any time, without any other demand than the suit, and the statute of limitations begins to run at once. Sturdivant v. McCorley, 83 Ark. 278, 103 S.W. 732 (1907). We therefore conclude that the temporary loan made to the general fund in 1994 was due on demand, the statute of limitations on that debt began to run immediately, and the collection of the debt was barred by the three-year statute of limitations in September 1997, well before this lawsuit was filed. Accordingly, we affirm the trial court's ruling that the challenge to this transfer was barred by the statute of limitations. The statute of limitations would not, however, bar the appellants' challenge to the two fund transfers made in 1996. Both those transfers were accomplished by an ordinance that reflected the monies were available from each fund's county sales-tax allocation. On April 16, 1996, a $2,000,000 loan was made to the general fund from the water and sewer operating fund to be used in the funding of a police facility. That loan was to be repaid in equal installments of $333,333 over a six-year period. Installment payments were made on the loan in 1997 and 1998, but no further payments were made. The year 2000 budget approved by the Board indicated that the remaining debt was formally rescinded. A $2,000,000 loan was also made to the general fund from the sanitation operating fund to be used in funding the police facility. As with the loan from the water and sewer operating fund, the general fund was to repay the sanitation operating fund in equal installments of $333,333 over a six-year period. Installment payments were made in 1997 and 1998, but no payments were made after that date. The year 2000 budget approved by the Board also indicated that this debt was formally rescinded. As to these transfers of funds in 1996, the appellants make several arguments. First, they allege there were no surplus funds as defined in Ark.Code Ann. § 14-234-214(e)(1) (Repl.1998). Second, they contend that excessive fees constitute unlawful taxes. Third, they argue that, even if a surplus existed, it was not disbursed properly under the statutory scheme set out in Ark.Code Ann. § 14-234-214(e). Next, they assert that the controlling statutes, Ark.Code Ann. §§ 14-234-214, 14-235-221, and 14-235-223 (Repl.1998) are unconstitutional. Finally, they suggest that the transfers were illegal because (a) the water and sewer operating fund and the sanitation fund are special purpose funds that cannot be used for any purpose other than water, sewer and sanitation, respectively; and (b) Resolution R-67-94 restricts the use of those funds. As to the first argument, the record reflects the following evidence regarding whether the transferred funds were unencumbered, or surplus. An affidavit by Kara Bushkuhl, Finance Director of the City of Fort Smith, states that the $500,000 appropriation authorized in 1994 was charged to surplus waterworks revenues of the Water and Sewer Operating Fund as defined and authorized by Ark. Code Ann. § 14-234-214(e)(3)(D). Ms. Bushkuhl also states in the affidavit that the 1996 appropriations of $2,000,000 from the water and sewer operating fund and $2,000,000 from the sanitation operating fund were of unencumbered surplus funds. However, Ms. Bushkuhl does not indicate that she used any statutory provision to determine whether a surplus existed in 1996. The statutory provision cited in her affidavit in connection with the 1994 appropriation, section 14-234-214(e)(3)(D), only indicates that a surplus can be used for other municipal purposes; whereas, the definition of surplus funds is set forth in Ark.Code Ann. § 14-234-214(e)(1): those funds in excess of the operating authority's estimated cost of maintaining and operating the plant during the remainder of the fiscal year then-current and the cost of maintaining and operating the plant during the fiscal year next ensuing. This statutory definition of surplus funds is not referenced anywhere in Ms. Bushkuhl's affidavit. Furthermore, the water and sewer operating fund reported a deficiency of $1,078,459 in fiscal year 1996 and $1,491,915 in fiscal year 1997. The sanitation operating fund also reported deficiencies of $617,188 in fiscal year 1996 and $359,306 in fiscal year 1997. Based upon this record, we conclude that a question of fact remains regarding whether surplus funds, as defined in Ark.Code Ann. § 14-234-214(e)(1), existed in the City's utility and sanitation accounts prior to the 1996 transfers. We therefore reverse the trial court's grant of summary judgment on this point. Next, the appellants point out that section 14-234-214(e) only applies to waterworks systems and does not authorize the transfer from the sanitation operating fund. [5] While we might agree that this particular section does not apply to sanitation funds, such a conclusion does not necessarily mean that the transfer from the sanitation operating fund was unlawful. The appellants have cited no statutory authority or case law indicating that the transfer from the sanitation fund is prohibited. We have stated that summary judgment is inappropriate where, although there may not be facts in dispute, the facts could result in differing conclusions as to whether the moving party is entitled to judgment as a matter of law. Wallace v. Broyles, 332 Ark. 189, 192-193, 961 S.W.2d 712, 722 (1998) (supplemental opinion denying rehearing). Though no facts appear to be disputed as to the transfer of funds from the sanitation operating fund to the general fund, the facts before us do raise a question as to whether the City is entitled to judgment as a matter of law. Ms. Bushkuhl stated, in her affidavit, that it is a generally accepted accounting practice, where permitted by law, for municipalities to supplement utility fund income by sales tax revenues and then utilize surplus revenues of the utility fund for other municipal purposes. Both parties appear to assume that the City's sanitation fund is a utility fund such that it would be governed by the general accounting principles that Ms. Bushkuhl described as being applicable to utilities. Such an assumption, however, may not be warranted under Arkansas law. The City refers us to case law standing for the proposition that surplus utility fund revenues may be used for other municipal purposes. See Adams v. Bryant, 236 Ark. 859, 370 S.W.2d 432 (1963); City of Harrison v. Braswell, 209 Ark. 1094, 194 S.W.2d 12 (1946); Johnson v. Dermott, 189 Ark. 830, 75 S.W.2d 243 (1934). However, none of those cases involve a sanitation fund. Thus, we are unable to conclude that the City is entitled to judgment as a matter of law with respect to the legality of the 1996 transfer of funds from the sanitation operating fund to the City's general fund. Accordingly, we reverse the trial court's grant of summary judgment on this point as well. For their second argument, the appellants contend that excessive fees constitute unlawful taxes. They point to the City Finance Director's statements that water rates had to be increased to meet operational needs, and assert there can be no surplus funds where revenues must be increased to meet the necessary expenses of operation. The argument then shifts to an assertion that, if a surplus existed in the utility funds, the revenue generating the surplus is a tax. The appellants point to cases where we have held that a fee must be fair and reasonable and bear a reasonable relationship to the benefit conferred by the services in order not to be denominated a tax. See Harris v. City of Little Rock, 344 Ark. 95, 40 S.W.3d 214 (2001); Barnhart v. City of Fayetteville, 321 Ark. 197, 900 S.W.2d 539 (1995). After citing these cases, the appellants jump to the conclusion that a fee is unreasonable, and therefore a tax, if it exceeds the costs of providing such services. They cite no authority for such a proposition, and this court has never made such a holding. When an appellant neither cites authority, nor makes a convincing argument, and where it is not apparent without further research that the point is well taken, we will affirm. Mikel v. Hubbard, 317 Ark. 125, 876 S.W.2d 558 (1994). We turn now to the appellants' third argument. They suggest that, if there was a surplus of funds, it was transferred unlawfully because the City did not disburse the surplus funds in accordance with the progressive order set out in Ark. Code Ann. § 14-234-214(e): (1) If any surplus is accumulated in the operation and maintenance fund of the waterworks system which shall be in excess of the operating authority's estimated cost of maintaining and operating the plant during the remainder of the fiscal year then-current and the cost of maintaining and operating the plant during the fiscal year next ensuing, the excess may be by the operating authority transferred to either the depreciation account or to the bond and interest redemption account, as the operating authority may designate. (2) If any surplus is accumulated in the depreciation account over and above that which the operating authority shall find may be necessary for probable replacements needed during the then fiscal year, and the next ensuing fiscal year, the excess may be transferred to the bond and interest redemption account. (3) If a surplus shall exist in the bond and interest redemption account, it may be applied by the operating authority, in its discretion, subject to any limitations in the ordinance authorizing the issuance of the bonds, or in the trust indenture: (A) To the payment of bonds that may later be issued for additional betterments and improvements; (B) To the purchase or retirement, insofar as possible, of outstanding unmatured bonds payable from the bond and interest redemption account, at no more than the fair market value thereof; (C) To the payment of any outstanding, unmatured bonds, payable from the bond and interest redemption account that may be subject to call for redemption before maturity; or (D) To any other municipal purpose. Ark.Code Ann. § 14-234-214(e) (Repl. 1998). (Emphasis added.) According to the appellants, this statute mandates that surplus funds, as defined in section 14-234-214(e)(1), be applied in a particular progressive order. Under section 14-234-214(e)(1), surplus funds may be first applied either to the depreciation account or to the bond and interest redemption account. Next, pursuant to section 14-234-214(e)(2), if any surplus is accumulated in the depreciation account, the excess may be applied to the bond and interest redemption account. A plain reading of the statute supports the appellants' statutory interpretation up to this point. The appellants then proceed to assert that, under section 14-234-214(e)(3), a surplus in the bond and interest redemption account must be applied as follows: first to the payment of bonds that may later issue for improvements; then to the purchase or retirement of outstanding unmatured bonds; then to the payment of any outstanding, unmatured bonds that may be subject to call for redemption before maturity; and then to any other municipal purpose. We disagree. A plain reading of Ark.Code Ann. § 14-234-214(e)(3) indicates that any surplus remaining in the bond and interest redemption account may be applied, in the discretion of the operating authority and subject to ordinance and trust limitations, to any one of the four listed uses in section 14-234-214(e)(3). The statute follows a progressive order from section 14-234-214(e)(1) through section 14-234-214(e)(3), but once a surplus is found to exist in the bond and interest redemption account, the operating authority then has discretion to apply the surplus to any one of the four options listed in that section. The disjunctive or indicates clearly that any of the four options may be chosen in the discretion of the operating authority. Thus, if a surplus exists in the bond and interest redemption account, the operating authority may apply the surplus to any other municipal purpose. Once again, based on the record in this case, we hold that genuine issues of material fact exist as to whether the City complied with the provisions of Ark.Code Ann. § 14-234-214(e) when it transferred the alleged surplus funds to the general fund in 1996. For the reasons already stated, we reverse the grant of summary judgment as to the appellants' claims arising out of the 1996 transfers of funds. In arguing that the statutory scheme was not followed, the appellants further contend that the provisions of Ark. Code Ann. §§ 14-235-221 and 14-235-223 (Repl.1998) were not followed. This argument was not addressed by the trial court. Accordingly, we do not reach the merits of the argument on appeal. It is well-settled that failure to obtain a ruling from the trial court is a procedural bar to our consideration of the issue on appeal. Barker v. Clark, 343 Ark. 8, 33 S.W.3d 476 (2000). It is incumbent upon the appealing party to obtain a ruling on an issue to preserve it for review. Ross Explorations, Inc. v. Freedom Energy, Inc., 340 Ark. 74, 8 S.W.3d 511 (2000). The fourth argument raised by the appellants is that the City's compliance with sections 14-234-214, 14-235-221, and 14-235-223 is irrelevant because those statutes are unconstitutional. They acknowledge, however, that the trial court did not rule on the constitutionality of the statutes. Without a ruling from the trial court on this issue, we cannot reach the merits of the argument on appeal. See Barker v. Clark, 343 Ark. 8, 33 S.W.3d 476. In their final argument, the appellants suggest that the fund transfers were illegal because the water and sewer operating fund and the sanitation operating fund are special purpose funds that cannot be used for any purpose other than water, sewer and sanitation, respectively. They contend that forgiveness of the ... loans [made by those funds] to the general fund is a diversion of the revenue collected for one purpose to another resulting in a violation of Ark. Const. art. XVI, § 11. However, the appellants cite no legal authority in support of this argument. We have stated on occasions too numerous to count that we will not consider the merits of an argument if the appellant fails to cite any convincing legal authority in support of that argument, and it is otherwise not apparent without further research that the argument is well taken. Ouachita Trek Development Company v. Rowe, 341 Ark. 456, 17 S.W.3d 491 (2000); Matthews v. Jefferson Hospital Ass'n, 341 Ark. 5, 14 S.W.3d 482 (2000). To the extent that the appellants rely upon Resolution R-67-94, the argument merely restates the first point on appeal. As explained under Part II of this opinion, Resolution R-67-94 is not the law imposing the tax. Thus, the use of funds in contravention of the purposes set out in that resolution is not an illegal exaction. Affirmed in part; reversed and remanded in part.