Court Opinion

ID: 3383497
Source: CourtListenerOpinion
Date Created: 2016-07-05 18:35:02.411072+00
Date Added: 2024-06-11T12:48:28.228396
License: Public Domain

Nothing in the opinion of the Court in this case should be construed as a holding that the covenant of the City of Vero Beach to fix and maintain rates and collect charges for the facilities and services afforded by the utility adequate to provide revenues sufficient at all times to pay the cost of operation, maintenance and repairs of the system and to maintain
the pledged fund set up as security for the payment of the revenue certificates, with interest thereon, as provided in the city's ordinance involved in the revenue certificate proceedings, is not a valid and binding covenant. On the contrary the holding of the court is that such covenant is a binding and valid covenant, and one that may be enforced by the holder or holders of certificates in appropriate judicial proceedings, when it is shown, as it has been in this case, that the municipality has been receiving revenues from an existing utility which if maintained by an adequate rate structure for the future life of the revenue certificates, will be sufficient to provide funds for the operation, maintenance and repair of the utility as extended, and will in addition provide the necessary additional funds that may have been anticipated and pledged for the payment of the revenue obligations payable out of future earnings to be derived from the utility against which same are issued.
But a municipality, in attempting to issue special fund *Page 136 
utility revenue certificates on the basis of an anticipation of future utility earnings, absent the approving vote of a majority of the freeholder electors as required by amended Section 6 of Article IX of the Constitution, can not make a valid and binding covenant, nor enter into any other effectual or enforceable contractual obligation, for the borrowing of moneys by an anticipation of revenues to be realized in the future, in excess of revenues that have been received, and which may reasonably be expected to be received, from the revenue producing capacity of the utility as repaired, improved, enlarged or extended, through a maintenance of its existing rate structure, or one commensurate therewith, as of the date of the issuance of such revenue certificates.
In other words, a municipality obligor undertaking to issue special fund utility revenue certificates payable solely out of future utility earnings and nothing else, as a special fundpledged specifically for that sole purpose, and without a vote of freeholders under amended Section 6 of Article IX, supra, may not make a valid and enforceable pledge of its rate making powers as a means of raising a fund to repay the special fund revenue certificates out of future earnings of the utility, except upon the basis of its present earnings calculated on the basis of its existing rate structure, or its equivalent in reasonable rates as provided in Section 11 of Chapter 17176, Acts 1935, as applied to the utility for the anticipated earning period during which the funds are to be realized to retire the certificates including the reasonable anticipating of the earning power of the utility as repaired, extended, enlarged or improved. This is not to say that the rate structure may not be changed in accordance with legislative powers lawfully conferred on the municipal obligor. The prohibition is against the pledging *Page 137 
of a rate making power to be exercised in the future in excess of the general revenue producing power being exercised at the time revenue certificates are issued, and upon the basis of an anticipation of which for the life of the certificates, the certificates themselves are presumptively to be issued.
The opinion in this and companion cases involving the proposition hereinbefore discussed is to be deemed supplemented and explained by the foregoing and upon that basis the petition for rehearing denied.
Rehearing denied.
WHITFIELD, C.J., and TERRELL, BROWN, BUFORD, and DAVIS, J.J., concur.