Court Opinion

ID: 3485193
Source: CourtListenerOpinion
Date Created: 2016-07-05 21:10:59.865869+00
Date Added: 2024-06-11T13:37:44.190838
License: Public Domain

The ordinance invalidated by the decision in this case declares "it is to the manifest interest of the Mayor and City Council of Baltimore and the citizens thereof, that the unsold portion amounting to thirteen million one hundred and ten thousand dollars ($13,110,000) of the General Improvement 1922-46 City stock shall bear interest at the rate of four and one-half per centum (4 1/2%) per annum instead of five per centum (5%) per annum, provided said stock bearing interest at four and one-half per centum (4 1/2%) per annum is sold at not less than its par value." The commissioners of finance were, therefore, directed by the ordinance to issue the remaining stock at four and one-half per cent. interest provided it was sold at not less than par. It is undisputed that the treasury and taxpayers of the city would be materially benefited by the sale of the stock at the lower rate of interest. The formal and responsible declaration of the municipal authorities to that effect is supported in the record by the unanimous opinions of experienced and prominent financiers, that the sale of city stock bearing four and one-half per cent. interest would be greatly to the advantage of the city, as enabling it to obtain the loans which the stock was to secure at a cost lower than its sale at a five per cent. interest rate would involve. The basis of this view is the belief that four and a half per cent. stock of the city would produce more than its par value at this time, and that the higher premium to be realized from the sale of five per cent. stock would not be sufficient to compensate for the additional interest charge, which would amount to more than $65,000 annually on the stock yet to be issued. In my opinion there is no adequate ground for denying to the city government the right to adopt the proposed method of duly conserving the financial interests committed to its care.
I think the provision for a five per cent. interest rate in the referendum ordinance should be regarded as having placed a maximum limitation upon the interest cost of the loan, and not as preventing the city from issuing the stock at a lower rate and for a price relatively more advantageous. *Page 305 
The authorization of the loan by the voters of the city included, in my judgment, an implied warrant to procure the specified sum of money as cheaply as possible within the limits of the terms which the ratified ordinance defined. I consider the effort of the city administration to protect the taxpayers by lowering the interest rate as not simply the exercise of a right but also as the performance of a duty.
Authority to make the loan at a lower interest rate than five per cent. is distinctly conferred by section 6, sub-section (25) of the City Charter, according to my understanding of its provisions. The section is entitled "General Powers," and the sub-section, "Stocks, Loans and Finance." By its first sentence the sub-section empowers the Mayor and City Council to "levy upon the assessable property within the city, and collect by tax any sum which may be necessary to pay and discharge the principal and interest of any loan which may heretofore have been obtained, or which may hereafter be obtained by said city according to law," and by its concluding clause it provides that "nothing herein contained shall prevent said city from negotiating said loans, or any part thereof, already authorized by law, but not yet actually issued, or which may be hereafter created and authorized by law, at a lower rate of interest than five per cent. per annum, whenever it may appear to the said city practicable and advisable to do so." Except for the clause last quoted, the first sentence of sub-section (25) might have been construed as requiring the city to provide by taxes for the payment of interest on subsequently issued loan stock at the rate originally prescribed, and as thus preventing a reduction of the rate. But the final sentence precludes such an interpretation, and in effect approves the policy of sound finance and practical economy which the ordinance in question was designed to apply. As sub-section (25) relates to the payment of the principal and interest of the stock involved in this case, I can see no valid reason why its proviso as to the lowering of the interest rate should not be held to have a similar relation. In declaring that nothing therein *Page 306 
contained shall prevent the city from reducing the rate of interest, if feasible, on stock thereafter issued, the Legislature appears to have assumed that, apart from the preceding clauses which the proviso qualified, there could be no doubt as to the right of the city to thus avoid unnecessary expense.
The sub-section was enacted as an integral and important part of the New City Charter. Its provisions are significant and definite expressions of legislative purpose. They were in force when the ordinance was submitted to the voters, and their approval was presumably given with due regard to the policy which the charter indicated as to the lowering of the interest rate on future stock issues, if practicable in the city's judgment.
The requirement of the ordinance that the four and one-half per cent. stock be sold for at least its par value should not present any difficulty. It prescribed a condition upon which the exercise of the authority vested by the ordinance in the finance commissioners was made dependent. If they were unable to sell the stock at par, the advisability of offering a higher interest rate, not exceeding five per cent., would be demonstrated. In that event the stock could be reoffered under a new ordinance or under the one by which the interest rate was first determined. The just presumption is that the municipal government would not permit the loan to fail merely because the stock could not be sold at par on the lower interest basis, but would properly discharge its obligations to the people, in reference to the loan, within the limitations of the authority which they have granted.
On motion for reargument: In overruling the motion of the appellee for reargument, the majority of the members of the Court concurring in the opinion desire it to be noted that the effect of the Court's opinion is to be confined to the facts of the instant record; and that no opinion is expressed by the majority of the Court as to the effect of submitting to the voters, under a similar enabling act, the question of the issuance of portions of the total authorized issue of stock by one or more ordinances.
Motion for reargument overruled. *Page 307