Court Opinion

ID: 4719223
Source: CourtListenerOpinion
Date Created: 2021-08-12 02:35:03.542201+00
Date Added: 2024-06-11T08:07:34.697428
License: Public Domain

Chadwick, C. J., and Mackintosh, J.
(dissenting)— "We agree with the majority opinion in this:
“We have to do only with the question of the power of the city, not with matters of propriety or policy.”
We have no douht of the right of the city of Seattle to take over and operate as a proprietor existing street railways, but its power to acquire and operate public utilities is to be found in the statute. Beyond the statute it cannot and should not be allowed to go. We have more than once held that a statute defining the rights and powers of a municipal corporation have the same force and effect as a constitutional limitation upon the powers of the state legislature.
That it was the intent of the legislature to deny the governing body of a municipality the right to charge either the cost, or the cost of maintenance and operation of a public utility upon the general funds of a city seems too plain for argument. The power to acquire is found in § 8005. Subdivision 1 of § 8006 provides for the acquisition of public utilities for which no general indebtedness is to be incurred. Subdivision 2 provides that public utilities may be acquired under apt provisions of a city charter and for which no general indebtedness is to be incurred.
“If a general indebtedness is to be incurred, the amount of such indebtedness and the terms thereof shall be included in the proposition submitted to the qualified voters as aforesaid and such proposition shall be adopted and assented to by three-fifths of the *56qualified voters of the said city or town voting at said election.”
It is only where no general indebtedness is to be incurred that the council or governing body may proceed without first submitting the proposition to the people. In other words, the legislature has by positive and unmistakable mandate said to the governing bodies of our municipalities, “You may acquire, maintain and operate public utilities where no charge is to be made against funds raised by general taxation, but if you intend to, or the scheme employed may, charge the general revenues you must have the sanction of a popular vote.”
To save the right of the general taxpayer and the one who may find employment in the maintenance and operation of the utility and to protect the general funds the legislature was careful to provide as follows :
“In creating any such special fund or funds the common council or other corporate authorities of such city or town shall have due regard to the cost of operation and maintenance of the plant or system as constructed or added to, and to any proportion or part of the revenue previously pledged as a fund for the payment of bonds, warrants, or other indebtedness, and shall not set aside into such special fund a greater amount or proportion of the revenue and proceeds than in their judgment will be available over and above such cost of maintenance and operation and the amount-or proportion, if any, of the revenue so previously pledged. ’ ’ Eem. Code, § 8008.
The law being in intent, letter and spirit that a public utility acquired without a vote of the people shall be paid for out of the earnings of the utility, “having due regard to the cost of maintenance and operation,” it cannot be held that without a vote of *57the people the city council can pledge the entire gross revenues to the payment of the initial cost. To do so strikes out and nullifies the words “proportion- or part” and the limitation that the council “shall not set aside into such special fund a greater amount or proportion of the revenue and proceeds than in their judgment will be available over and above such cost of maintenance and operation.” In other words, before the power to set aside a fund can be exercised at all the council must have due regard for, which can mean nothing else than that it shall reserve, a sum sufficient in its judgment to defray the cost of maintenance and operation.
In this case the gross revenues are set aside without reservation; they are to be paid into a special fund and the bonds and indebtedness are made a first charge against the entire fund. The traction company may take all under its contract. In the working out of this scheme the council has proceeded not with “due regard” for the “cost of maintenance and operation” but, as said by counsel for one of the appellants, in positive disregard of the statute.
The reasoning of the court that the council has proceeded under a third alternative; that is, that it may set aside “a fixed amount without regard to any fixed proportion,” is illogical. The meaning of that alternative is no more than this: That if the city council does not see'fit to set aside a certain proportion measured in percentages it may set aside a fixed amount, but it does not follow that it can do so in disregard of a sufficient amount reserved to reasonably meet the cost of maintenance and operation. If the legislature had intended that the words “fixed amount” or “greater amount” should have the same meaning as the words “gross revenues” it would have *58so declared, and if it had so intended we may assume that it would have left unwritten the greater part of the act wherein it is provided, not once but many times, that the cost of maintenance and operation are a first charge and that they must be paid out of the revenues unless the people by a vote upon that question decide otherwise. But the statute defines the term “amount.” It gives it a certain meaning when it couples the words “amount” and “proportion.” The law says that the council shall not set aside a greater “amount or proportion” of the revenues and proceeds than will be available over the cost of maintenance and operation. The ordinance wilfully disregards this mandate, for there is not warrant either express or implied for the setting aside of any part of the gross revenues for the payment °of the cost exclusive of the cost of maintenance and operation. It is said that the bond buyers will not buy bonds that are not a first charge upon the gross revenues. We are not concerned with the whims of money changers. They should find their remedy at the bar of the legislature and not at the bar of the court. If the argument had any legal merit it might be answered by saying, “Men will not contribute their labor and services to maintain and operate unless they are guaranteed payment out of the gross revenues of the utility.”
The decisions of this court do not sustain the majority opinion. In Griffin v. Tacoma, 49 Wash. 524, 95 Pac. 1107, the ordinance provided that the officers of the city should set aside as a special fund from the gross revenues “at least fifty per cent thereof.” In Scott v. Tacoma, 81 Wash. 178, 142 Pac. 467, the court tolerated what seemed to be to the writer an evasion of the statute holding that the city might *59make a loan from one fund to another to he paid ont of the gross revenues of the utility; the particular question of maintenance and operation was not discussed. The court did say, however, that the statute
“gives the common council the power to create a special fund for the sole purpose of defraying the cost of the public utility ‘into which special fund’ the common council may obligate the city to pay a fixed proportion of the gross revenues of the utility and to issue and sell interest-bearing bonds or warrants payable only out of such special fund.”
Schooley v. Chehalis, 84 Wash. 667, 147 Pac. 410, is not in point. The ordinance in that case provided for a fund to be used for the purchase and maintenance of a water system. There was no question of the payment of maintenance and operation out of the general fund, the court assuming that the city council would, in the event that it should be found that the rates then established were insufficient to maintain the plant and pay interest and principal upon the bonds, raise its rates until the revenues would be sufficient to maintain the system and also to take care of the maturing principal and interest of the bonds.
In so far as these cases hold and the court now holds that the creation of a debt for the purchase of a public utility is not a general indebtedness, we can agree, but it is only so where the law is observed and provision is made for the maintenance of the plant out of its own revenues. If it is not so provided the charge is a debt. It is no answer to the plain mandate of the statute to say that, although the gross revenues are “irrevocably” pledged to the payment of the bonds and the interest thereon, the city council has provided that:
“The gross revenues to be derived from the operation of the municipal street railway system of the *60City of Seattle ... at the rates of transportation charged and to be charged . . . will be sufficient in the judgment of the council and of the corporate authorities of the city to meet all expenses of operation and maintenance, including operation and maintenance of the proposed additions, betterments and extensions, and to provide all proportions or parts of revenue previously pledged as a fund for the payments of bonds, warrants and other indebtedness, with interest thereon, heretofore made payable out of the revenues of the existing municipal street railway system, and to permit the setting aside in a special fund, out of the gross revenues of the entire system, amounts sufficient to pay the interest on the bonds hereby authorized to be issued, as such interest becomes due and payable, and to pay and redeem all of such bonds at maturity.”
The law requires that the judgment of the council shall be expressed in “amounts” or in “proportions,” and for the city council to so opine and at the same time irrevocably obligate and bind itself to pay into such fund the gross revenues of the municipal street railway system, “even though the balance of such gross receipts thereafter remaining may be insufficient to pay the cost of maintaining and operating said system and said additions and betterments thereto and extensions thereof,” is to deny its faith in its own “judgment.” It is but a subterfuge and a. pretense and should not be sanctioned by the courts.
The legal effect of the majority opinion is that all of the gross revenues are pledged to the payment of the purchase price; that if the one who renders labor or service as a motorman, conductor or about the tracks and barns of the railway system is to be paid he may be paid out of the general revenues; that, instead of taking his pay in a warrant which is a first charge upon the gross revenues as the law contem*61plates, he may not, if the gross revenues are insufficient to meet the maturing bonds and interest, have his pay out of the earnings of the utility at all, but must take his chances with a general fund warrant which may be subject to discount and unless sanctioned by subsequent decree of this court will be of doubtful validity.
The ordinances but clumsily conceal the reserved purpose of the council to ‘‘maintain and operate” the street car system at the expense of the general fund, either by a system of loans from the general fund, or by levying a direct tax for that purpose.
It has been said that “the power to govern is the power to tax” and that “the power to tax is the power to destroy”, but our legislative bodies have wisely put limitations upon that power. They should not be lightly disregarded, for as the power of taxation is essential to government its abuse is likewise destructive of government. Tax measures or measures that may result in a general tax if their purpose be accomplished should be expressed in fair and unmistakable terms. That the power to tax should not be abused or exercised through indirect methods, the legislature wisely provided that no plan for the acquisition of a public utility which directly or indirectly made or contemplated, or in its exercise might be a charge to be met by general taxation, should be adopted without an approving vote of those who might be called upon to pay the tax.
If the council did not intend to charge the general fund it might have said so in words. It might have had “due regard for the costs of maintenance and operation” as the statute directs by reserving an “amount or proportion” of the revenues of the utility, or being mindful of a possible charge, it should *62have submitted the measure to the people. The net result of the ordinances as construed by the court is that the cost of maintenance and operation has not been provided for. By the employment of an indirect method dressed for the occasion in a cloak of words the law is circumvented, and the people whose right of participation and self determination was so carefully safeguarded, have been denied the sovereign right of the franchise.
It was suggested in consultation that the council could raise the rate charged for fares, and thus meet the cost of maintenance and operation out of the revenues of the street car system. Counsel made no such suggestion, as of course they could not, for with the gross revenues of the system pledged irrevocably to the payment of the purchase price, the seller or the bondholder, as the case may be, can insist that the gross revenues belong to him, whether they are accumulated by a charge of five, seven, ten or fifty cents for a single fare.
Whether it is wise for the city of Seattle to purchase the property of the traction company, is not of our concern. That is a matter for those who live in that city. Thát they may be charged for the upkeep and operation of the street car system is not denied. Our insistence is that before we make it possible—and this is the statute as we read it—they should- be heard either in affirmation or negation of the plan.
To hold that the gross revenues of the system may be irrevocably pledged to the payment of the purchase price as a first charge and then to say that, in the judgment of the council, the gross revenues will pay the cost and the costs of maintenance and operation is to nullify the statute and put a premium on eva*63sion, pretext, subterfuge, quibbling and equivocation for the expression of such opinion is not a setting aside or a reservation of an “amount or proportion” to meet these charges. In other words, in case of suit, the- city would be bound by its irrevocable promise and not by its gratuitous opinion.
The law was designed to cover not alone what is, but what may be. The plan, as outlined by the ordinances, is a corruption of the statute providing for the acquisition of public utilities, and a direct assault upon the law which provides in terms that the owner of property shall not be called upon to pay a tax upon his property unless three-fifths, or a majority, of the voters, as the case may be, shall so decree.
Believing that the ordinance was drawn with intent to, or whether with, intent it does, in legal effect, charge the general fund, or leaves the way open to levy a direct tax, thus violating the letter and spirit of the law, we are constrained to dissent.