Court Opinion

ID: 5170245
Source: CourtListenerOpinion
Date Created: 2022-01-02 04:53:48.170886+00
Date Added: 2024-06-11T08:26:03.185573
License: Public Domain

STEWART, C. J.,
Dissenting. — I cannot agree to the conclusion of the majority opinion, that ordinance No. 380 creates any indebtedness upon Coeur d’Alene City, within the meaning of sec. 3, art. 8 of the constitution. Neither do I agree with the conclusion announced in the majority opinion that the reasoning of the supreme court of Washington in Winston v. City of Spokane, 12 Wash. 524, 41 Pac. 888, the supreme court of Iowa, in Swanson v. Ottumwa, 118 Iowa, 161, 91 N. W. 1048, 59 L. R. A. 620, the supreme court of North Carolina In Brockenbrough v. Board of Water Commissioners, 134 N. C. 1, 46 S. E. 28, and the supreme court of Washington in Connor v. City of Marshfield, 128 Wis. 280, 107 N. W. 639, is not in accord with the language of the constitutions of the respective states. These cases, in my judgment, were dealing with constitutional provisions identical in meaning with the constitution of this state, and correctly state the intent of the makers of the constitution in each state where such questions have been decided. They are the only cases where courts have been called upon to pass upon the constitutionality of a transaction entered into by a municipality through its ordinances similar to that involved in this action, except the ease of Ottumwa v. City Water Supply Co., 59 L. R. A. 607, 119 Fed. 315, 56 C. C. A. 219. This decision was by the circuit court cf appeals of the eighth circuit, and, in my judgment, should not be accepted as authority in this state rather than the decision of the highest court of each of said states where such questions have been directly passed upon. The federal court imagines conditions which in its opinion would create a possible indebtedness, but in my opinion they have no application to the probabilities arising under such conditions.
*60There is nothing in ordinance No. 380 which in any way provides for a municipal indebtedness or liability in excess of' the constitutional inhibition. No tax is assessed against the-property within the municipality, and the city has in no way promised to pay from the general fund of the city, or out of any tax levied by the city in any one year, or any number of years, but, on the contrary, it is clearly provided that payment is to be made only and wholly from the income of the water system arising from the fund accruing for the use of water,, and that such fund shall be applied to the maintenance of the system and the payment of the purchase price, and with permission for the city to regulate the water rates at such sum as to raise such fund. This method of paying for the waterworks is neither a debt nor a liability; the obligation that the city undertakes is that it will collect and turn over to the bondholders, out of the income from a charge for water, the amount/ due under the contract.
In the Washington case, the court of that state construed sec. 6, art. 8 of the state constitution, in which this language is used: “No county, city, town, school district or other municipal corporation shall for any purpose become indebted in any manner to an amount exceeding one and one-half per cent of the taxable property in such county .... without the assent of three-fifths of the voters therein.” It will be seen by this provision of the constitution that the court was considering the question .of incurring an indebtedness.
In the Iowa case of Swanson v. Ottumwa, the supreme court of Iowa was construing the following language: “No city, county or other political or municipal corporation,- shall be allowed to become indebted, in any manner, or for any purpose, to an amount, in the aggregate, exceeding five per cent-of the value of taxable property,” etc., and from this language it clearly appears that the court in that state in the above cited case was dealing solely with the question of incurring an indebtedness.
In the North Carolina ease, the supreme court of that state was construing the following language: “No county, city, town or other municipal corporation shall contract any debt, *61pledge its faith or loan its credit, nor shall any tax be levied nor collected by any officer of the same except for the necessary expenses thereof, unless by a vote of the majority of the •qualified electors therein.” It clearly appears that the court was dealing with the question of indebtedness.
The same may be said of the case of Connor v. City of Marshfield, 128 Wis. 280, 107 N. W. 639, and the cases cited therein. The question the court was passing upon in these cases was whether a municipal indebtedness was created by the action of the municipality, and whether the city became bound by any promise to pay a debt by reason of the transaction made. So in the opinions disapproved in the majority opinion, the courts were dealing solely with the question of indebtedness, .and with the question as to whether or not by such transactions the municipalities were assuming liabilities in the performance of acts and obligations of the municipality which in no way amounted to a municipal indebtedness. Comparing the constitutions of the states referred to in the foregoing opinions, it will be observed that none of such constitutions contained the exact language found in the constitution of this state. This section of the constitution in its prohibition not only is against the incurring of any indebtedness, but it is .also an inhibition against the creation of any liability in any manner or for any purpose, without a vote of the electors.
The constitution provides that “No ... . city .... shall incur any indebtedness, or liability, in any manner, or for .any purpose, exceeding in that year, the income and revenue provided for it for such year, without the assent of two-thirds <o£ the qualified electors thereof, voting at an election to be held for that purpose; nor unless, before or at the time of incurring such indebtedness, provision shall be made for the collection of an annual tax sufficient to pay the interest on such indebtedness as it falls due, and also to constitute a sinking fund for the payment of the principal thereof, within twenty years from the time of contracting the same. Any indebtedness or liability incurred contrary to this provision shall be void.....”
*62While the majority opinion seems to hold that the incurring of an indebtedness and the creation of a liability in any manner have a different meaning, as used in this provision of the constitution, yet when the entire section is taken together, it will be seen that the inhibition of an indebtedness as provided in the section is in the incurring of an indebtedness or liability without a vote of two-thirds of the qualified electors, and that “before or at the time of incurring such indebtedness, provision shall be made for the collection of an annual tax sufficient to pay the interest on such indebtedness as it falls due, and also to constitute a sinking fund.” Thus the inhibition applies both to the incurring of an indebtedness and the creation of a liability, in the sense that both the indebtedness and liability is the making of an obligation which requires the raising of revenue by taxation by the municipality upon the property of the múnicipality for the payment of the same. The section, taken as a whole, shows clearly that the words “indebtedness” and “liability” are used in the same sense, in so far as the prohibition applies, and there is, in my opinion, no justification for the contention that a liability is any different from an indebtedness, or any more comprehensive, or has any different meaning as used in the section in the application of the inhibition contained in the section.
Sec. 2315 of the Rev. Codes, which provides that every city or town incorporated under the laws of the state shall have power and authority to issue municipal bonds not to exceed ' at any time in the aggregate fifteen per cent of the real estate value of said city, “to provide for the construction and maintenance of necessary waterworks and supplying the same with water,” has relation only to municipal bonds that are a charge against the city, and has no application whatever to bonds issued for the purpose of and in accordance with the provisions of ordinance No. 380; neither does it apply to bonds issued by a city for special improvements or to any bonds that are payable out of a special fund created by special payments, or payable out of a special fund created out of the receipts of waterworks purchased under a contract that the same shall be paid for from the receipts received by the city from the use *63of the water from such system. This section of the statute has reference to a general indebtedness of the city, and was intended to carry into effect sec. 3, art. 8 of the constitution. (McGilvery v. City of Lewiston, 13 Ida. 338, 90 Pac. 338; Blackwell v. Village of Coeur d’Alene, 13 Ida. 357, 90 Pac. 353.) The fact that the ordinance provides that the city may have the power “if at any time the gross revenues of said waterworks system shall not be sufficient to pay said cost of operating and maintenance, and the amounts required for the payment of such charges including the charge hereinabove created in favor of the bonds authorized, it will increase its. rate to consumers to such figure as will be sufficient -to provide the payment of all such costs and charges,” can in no way affect or annul the laws of the state granting to a city the power to regulate the water rates within a municipality at a reasonable rate, and the purchaser of such bonds is advised of that fact when said bonds are purchased, and in accepting the bonds, accepts them with the knowledge that under the laws under which such bonds have been issued, such bonds are to be paid only from the revenue derived from the system, and that the rates fixed by the city are required to be reasonable.
Just what is a reasonable rate depends primarily upon the cost of production, and a fair rate thereon being recognized as the operating expenses, maintenance and depreciation, all of which are legitimate expenses, and which the system must bear whether the ownership be in the municipality or a private corporation or individual, and the bond purchaser accepts such bonds at his peril, and has full knowledge that the law requires that the rates to be charged for water are to be reasonable, and if the bonds are issued to an excessive amount, and the revenue derived from the water rentals fixed at a reasonable rate is insufficient to meet the payments, the bondholder assumes such liability and not the city. So there is no indebtedness or other liability which the city will incur which in any way would require the raising of any funds for the purpose of making any payments by reason of the transaction entered into, by the authority of said ordi*64nance. The fact that the city of Coeur d’Alene is to become the owner of said water system, and agrees to fix the rates to be charged for the use of water' from the system and to pay the same upon the bonded indebtedness out of a fund arising from the revenue received for the service of water, is not an indebtedness or obligation which adds to or requires the raising of revenue from assessment upon the property of the municipality during each year or for any number of years, or at all, and the general credit of the city is in no way pledged, except the duty to create the fund, and does not bring the transaction involved in this case within the inhibition provided by sec. 3, art. 8 of the constitution.
For these reasons I dissent from the majority opinion, both in the theory and reasoning of the opinion, and in the conclusion.