Opinion ID: 1254414
Heading Depth: 1
Heading Rank: 5

Heading: debt limitations

Text: The Participants' Agreements obligate each participant to make its contractual payments to WPPSS whether or not the projects are completed and whether or not they produce electric power. These payments, however, are to be made only from the participant's revenues derived from the operation of its electric utility properties. [7] The parties dispute whether the obligations are debts or indebtedness, as those terms are used in the various laws applicable to such debts, or escape these laws because they are payable only from electric power revenues. The arguments concerning the cities differ from those concerning the PUDs, and we deal with each separately. The issue whether the cities' unconditional commitments to WPPSS constitute debts arises under the individual city charters. When cities were incorporated by individual legislative acts, Article XI, section 5 of the Oregon Constitution required such acts incorporating cities to restrict their powers of taxation, borrowing money, contracting debts, and loaning their credit. One city, Springfield, still has a statutory charter; the others adopted their own charters after Article XI, section 2, shifted that function from the legislature to the cities themselves. [8] Each has a debt limitation in its charter, but they are not identical. [9] It should be understood that the meaning of a charter debt limitation, as the meaning of any other charter provision, is an individual matter for each city. The adoption of a debt limitation, by charter or otherwise, is local legislation, to be interpreted by the same means as other legislation, including attention to the meaning intended by those who adopted it if that can be ascertained. It is not a matter of common law, to be resolved by consulting caselaw or encyclopedic summaries of caselaw. Cf. Anderson v. Peden, 284 Or. 313, 315-316, 587 P.2d 59 (1978) (concerning the meaning of conditional use in zoning ordinances). A city can write its charter or ordinance to define for itself the amount, character, or purposes of indebtedness that it means to limit. Not only can cities choose different words; legislative history may show that cities, like state legislatures, meant different things by the same words. It therefore is not conclusive that cases have held indebtedness under various charter provisions to include long-term contracts or to exclude obligations payable from special funds. In the absence of statute, a city can design its debt limitation to exclude payments due for goods and services as distinct from borrowed money, or to include debts payable from non-tax revenues. [10] Under the home rule powers of Article XI, section 2 of the Oregon Constitution, these are political choices for the cities; they will not be imposed by courts in the name of judicial doctrines. This does not mean that past judicial opinions are irrelevant in interpreting a particular provision. Given the ingrained tendency to copy conventional texts, though obscure, rather than seek clarity by new ones, charter debt limitations may well have been adopted and later repeated in the belief that they meant whatever courts or McQuillin had said of such provisions generally. [11] As early as 1873, for instance, this court held that a 17-year contract to purchase water at a fixed rate created an immediate indebtedness for the total, aggregate purchase price. Salem Water Co. v. City of Salem, 5 Or. 29 (1873), see also Brewster v. Deschutes County, 137 Or. 100, 1 P.2d 607 (1931). The assumption that present charter provisions accept that interpretation of indebtedness might be overcome by showing a different intention, but no such showing has been attempted in this case. WPPSS invites us to reconsider this aggregation rule, citing a reference to that possibility in Terry v. Multnomah County, 279 Or. 127, 136, 138, 566 P.2d 878 (1977). But, as already stated, that view of long-term contracts is not properly a judicial rule but judicial interpretation of state or local laws, and it can be modified at will by amending the laws. For present purposes we accept the opponents' assertion that the cities' financial commitments to WPPSS would qualify as indebtedness within these cities' respective charters if they were payable from general funds. The question is whether the charter limitations exclude debts payable only from electric utility revenues under the interpretation of debt limitations generally known as the special fund doctrine. We note that this doctrine, too, is not a judicial rule of law but judicial interpretation of provisions found in various statutes, charters, and the constitution. Again, however, it is an interpretation that early was recognized in Oregon, see, e.g., Brockway v. Roseburg, 46 Or. 77, 79 P. 335 (1905); Eaton v. Mimnaugh, 43 Or. 465, 73 P. 754 (1903); Avery v. Job, 25 Or. 512, 36 P. 293 (1894), and we are offered no evidence that any of the provisions relied upon in this case were differently intended or in practice have been thought to include debts payable from non-tax revenues. The proponents rely on this court's statement of the doctrine in Butler v. City of Ashland, 113 Or. 174, 232 P. 655 (1925), which involved a city's contract to buy water from an irrigation district. The city expected to pay for the water by issuing notes exceeding the amount of debt allowed by its charter, and the contract originally was made contingent on approval of a charter amendment by the voters. When the city found that it could meet the cost from accumulated and expected revenues from the sale of water, the contract was changed to substitute certificates of indebtedness payable exclusively from those revenues, and no authorizing election was held. The court declined to enjoin issuance of the certificates of indebtedness as a violation of the charter. It wrote: The authorities are well-nigh unanimous, that where a contract creating an indebtedness provides for a special fund with which to meet the indebtedness as the same accrues, and no general liability is thereby created against the municipality, such an indebtedness is not within the constitutional inhibition against creating a debt in excess of a fixed amount.... [12] The language of the special obligation note limits the liability of the city to the water revenues. The special obligation notes, therefore, do not constitute an indebtedness against the city within the meaning of Article XI, Section 5, of the Constitution of Oregon. 113 Or. at 182-183, 232 P. 655. Subsequent decisions have repeated this view of debt limitations, making their application turn on the potential exposure of general tax revenues. Compare, e.g., Walsh Const. Co. v. Smith, 272 Or. 398, 404, 537 P.2d 542 (1975) (housing bonds payable from rents held to be outside debt limitation despite a moral make-up clause); Morris v. City of Salem, 179 Or. 666, 174 P.2d 192 (1946) (same for contract to purchase parking meters payable only from meter revenues), McClain v. Regents of the University, supra (same for dormitory bonds payable only from rental income), with Public Market Co. v. City of Portland, 171 Or. 522, 130 P.2d 624, 171 Or. 523, 138 P.2d 916 (1943) (lack of revenue source to repay utility certificates would violate debt limitation), Rorick v. Dalles City, 140 Or. 342, 12 P.2d 762 (1932) (held to be within debt limitation because of partial exposure of general funds beyond tolls collected from toll bridge). We repeat that the exposure of tax revenue is not an inescapable definition of indebtedness. A public entity's financial obligations payable from its operating assets, like those in Butler or in the other cases cited above, may have all the ordinary characteristics of debt of a private entity engaged in a similar operation, and charters or other laws may choose how such debt should be incurred or restricted. The uniform interpretation given existing laws, however, is of long standing. The cities and their ratepayers do not claim that the special fund doctrine, as previously understood in Oregon, does not apply to their respective cities, but they claim that it does not apply to the obligations imposed by the Participants' Agreements. They seek to distinguish the decisions applying the doctrine by arguing that none of those decisions involved obligations with all the features of the present agreements. They observe that the cities' financial obligations towards WPPSS are not for projects owned or controlled by the cities, do not depend on actual receipt of any benefit (in this case electricity), are not self-liquidating, are not finite in amount or in the rates committed to paying them, and obligate revenues that are paid by substantially all residents for an essential service. They maintain that these characteristics should take the contracts beyond the limits of the special fund exception. The proponents respond that characteristics which individually do not create a debt under the charters also cannot cumulate so as to create a debt. None of the listed characteristics places a transaction outside the special fund rule. This court's older decisions did not confine that concept to self-liquidating projects but used the term also to refer to assessments levied for specific projects that generated no revenue, such as a courthouse, Dougan Co. v. Klamath County, 99 Or. 436, 193 P. 645 (1920), a jail, Wingate v. Clatsop County, 71 Or. 94, 142 P. 561 (1914), and roads and streets, Morris v. City of Sheridan, 86 Or. 224, 167 P. 593 (1917); Bowers v. Neil, 64 Or. 104, 128 P. 433 (1912); Kadderly v. Portland, 44 Or. 118, 74 P. 710, 75 P. 222 (1903); Little v. City of Portland, 26 Or. 235, 246, 37 P. 911 (1894). Also, the persons who provide the special fund need not be direct beneficiaries of the expenditure; indeed, there need not be any quid pro quo. In Moses v. Meier, 148 Or. 185, 35 P.2d 981 (1934), the court applied the doctrine to an unemployment relief fund payable from liquor control revenues. The opponents observe that Moses v. Meier was litigated as a friendly proceeding and perhaps turned on the court's desire to uphold the laudable purpose for which the liquor control funds were exacted in the first place. Nonetheless, the source of the funds, not the purpose to which they were put, explains the decision that they escaped the constitutional restriction on state debt. Against the position emerging from these cases, opponents argue forcefully that a debt limitation confined to commitments of tax revenues cannot prevent state or local officials from entering speculative or ill-considered undertakings without the prior consent of their constituents. That is true; in hindsight, the present contracts are an example. The law of debt limitations in general and the special fund doctrine in particular have had their share of criticism; upon a fresh start in the light of experience one might draw the lines differently. But the argument presents a task for lawmakers; it comes too late for judges. As recently as 1976, Justice Holman's opinion in Martin v. Oregon Building Authority, supra , reiterated that the predominant purpose of debt limitations was to forestall irresponsibly imposed tax burdens, to protect against burdensome and excessive taxation, McClain v. Regents of the University, 124 Or. at 634, 265 P. 412, to prevent exposing the sources of public revenue to potential hazard, Carruthers v. Port of Astoria, 249 Or. 329, 337, 438 P.2d 725 (1968), [13] and to preserve the ability of future legislatures to avoid a tax increase. 276 Or. at 135, 554 P.2d 126. Too many commitments have been made on that understanding to overturn it now, in the absence of a showing that a particular law or charter provision meant something else. And the interpretation of debt limitations as referring to commitments of tax revenues is defensible. It is not unreasonable to suppose that a community might wish to impose quantitative or procedural restraints on the perennial political urge to spend the next generation's taxes, yet not wish to extend the same restraints to the management of its public service enterprises as long as tax revenues are not obligated. We do not accept the opponents' argument that utility rates in fact are equivalent to taxes because they have a comparable economic impact on ratepayers. Any charge for a public service reduces the user's disposable funds much as taxes do; that was true of the water charges in Butler, the dormitory rents in McClain, the bridge tolls in Rorick, and the parking meters in Morris, each of which was a necessity for some class of users. Charges for these necessities are not inescapable in the same sense as taxes are. This is what makes general obligation debt preferable to creditors, and correspondingly cheaper. At some point it may become too expensive to drive or park a car, to attend a college, to water a lawn; and it also is possible to reduce one's consumption of electricity, to substitute another fuel, or in the case of a plant or institution, perhaps even to generate one's own electricity. If an unforeseen event prices too many users out of the market for the service, the creditor also loses the only source of repayment. In equating a commitment of future rates, expensive as it may prove to be, to a pledge of future taxes, the opponents simply attack the special fund premise of this long-established line of decisions in another way. Nor, finally, do we agree with the contention that the Participants' Agreements in fact expose the cities to general liability. The agreements plainly were intended to exclude any obligation that would bring them within the various debt limitations. That was understood to be essential to their validity, and they must be interpreted accordingly. Public Market Co. v. Portland, 171 Or. at 565, 130 P.2d 624, 171 Or. 523, 138 P.2d 916. The agreements expressly negate any obligation to pay except from the revenues derived from the ownership and operation of a participant's electric utility properties. The exclusion of any broader liability deserves to be taken at face value. See Carruthers v. Port of Astoria, supra, 249 Or. at 339-340, 438 P.2d 725.