Opinion ID: 1844610
Heading Depth: 1
Heading Rank: 3

Heading: debt limit

Text: Taxpayers argued that this step financing transaction constituted a general obligation debt that violated the North Dakota Constitution, particularly sections 15 and 16 of Art. X:  Section 15. The debt of any county, township, city, town, school district or any other political subdivision, shall never exceed five per centum upon the assessed value of the taxable property therein; provided that any incorporated city may, by a two-thirds vote, increase such indebtedness three per centum on such assessed value beyond said five per centum limit, and a school district, by a majority vote may increase such indebtedness five percent on such assessed value beyond said five per centum limit; provided also that any county or city by a majority vote may issue bonds upon any revenue-producing utility owned by such county or city, or for the purchasing or acquiring the same or building or establishment thereof, in amounts not exceeding the physical value of such utility, industry or enterprise. In estimating the indebtedness which a city, county, township, school district or any other political subdivision may incur, the entire amount, exclusive of the bonds upon said revenue-producing utilities, whether contracted prior or subsequent to the adoption of this constitution, shall be included; provided further that any incorporated city may become indebted in any amount not exceeding four per centum of such assessed value without regard to the existing indebtedness of such city for the purpose of constructing or purchasing waterworks for furnishing a supply of water to the inhabitants of such city, or for the purpose of constructing sewers, and for no other purposes whatever. All bonds and obligations in excess of the amount of indebtedness permitted by this constitution, given by any city, county, township, town, school district, or any other political subdivision shall be void.  Section 16. Any city, county, township, town, school district or any other political subdivision incurring indebtedness shall, at or before the time of so doing, provide for the collection of an annual tax sufficient to pay the interest and also the principal thereof when due, and all laws or ordinances providing for the payment of the interest or principal of any debt shall be irrepealable until such debt be paid. Taxpayers argued that the debt is void under these constitutional provisions. The City argued that the nonappropriation mechanism made it clear that the City has not pledged the full faith and credit of the City to make lease payments, that the City has not legally obligated itself to make any appropriation and that if no appropriation is made that the City has no liability.... A discussion of lease-purchase agreements and nonappropriation clauses may be found in Bisk, State and Municipal Lease-Purchase Agreements: A Reassessment, 7 Harvard Journal of Law and Public Policy 521 (1984). That author concluded that [t]he nonappropriation framework provides an effective tool for encouraging lease-purchasing while meeting debt limitation safeguards. Id., at 550. The parties agreed that five per cent of the City's 1987 assessed value of $596,076,177 is $29,803,808. Before this transaction, the total existing general obligation bonded indebtedness subject to the constitutional debt limit for the City was $4,340,000. It is apparent that if the obligation of this transaction is deemed debt for constitutional purposes, the City's total debt is still within constitutional limits. Thus, it is unnecessary for this court to decide, at this time, whether this obligation of the City is debt under Section 15 of Article X of the Constitution. Section 16 of Article X does not apply because there is no general obligation of the taxing power of the City for this financing transaction. See Syllabus ¶ 1, Schieber v. City of Mohall, 66 N.D. 593, 268 N.W. 445 (1936) (debt and indebtedness as used in § 183, N.D. Const. [now Art. X, § 15], refer to pecuniary obligations imposed by contract, except obligations to be satisfied out of current revenue). The lease-purchase agreement specifically says that it does not constitute a general obligation of the City, that its taxing powers are not pledged for payment of the lease payments, that the City may terminate the agreement by not appropriating funds to make lease payments, and that the City is only liable for lease payments for the current fiscal year for which it has appropriated funds. Payment of the obligations having been provided without resort to general taxation, they are not such obligations as are contemplated by [§ 184, N.D. Const. (now Art. X, § 16) ]. Marks v. City of Mandan, supra, 296 N.W. at 47.