162 Iowa 732 | Iowa | 1913
The executive council of the state consists of the Governor, Secretary of -State, Treasurer of State, and the Auditor of State. It employs a secretary. The object of this action is to enjoin the executive council as such and each member thereof from acquiring for the state the property de
There shall be levied annually for a period of ten (10) years, commencing with the first levy made after the passage of this act, a special tax as follows: in each of the years 1913 and 1914, one-half mill on the dollar of the taxable property in the state, and in each of the remaining eight years such fate of levy to be fixed by the executive council as will yield approximately one hundred and fifty thousand dollars ($150,-000) annually. The proceeds of such levies shall be carried into the state treasury to the credit of a fund to be called the capitol grounds extension and improvement fund. The amount so realized by said levies shall be in lieu of all of the appropriations for said purposes during the said period of ten years.
Section 4 authorizes the executive council to acquire any or all of said real estate for the state and in so doing purchase same.
On option, contracts or in any other way which said council may deem expedient, ... at any time within said period of ten years at its discretion and as the amount of money in said fund at.any time may enable them to do. Payment for said real estate may be made by said executive council certifying to the State Auditor the amount due to any person at any time and the auditor then drawing a warrant in his favor on the State Treasurer payable out of the fund herein created.
Were, the lots to be paid only from this fund known as the capitol extension and improvement fund derived from the source mentioned on warrants drawn on the state treasury, the foregoing sections, it will be noted in passing, are complete in themselves and adequate for the objects intended. The sections following relate entirely to the anticipation of part or all of said fund. Section 9 enacts:
That for the purpose of accomplishing* the earliest possible completion of the work contemplated herein and the carrying out of the plans provided for in this act, the executive council may anticipate the collection of the tax herein authorized to be levied for the extension and improvement of the capitol grounds, and for that purpose may issue interest-bearing warrants or certificates carrying a rate of interest not to exceed five per cent, per annum to be denominated ‘capitol grounds extension and improvement warrants or certificates’ and said warrants or certificates and interest thereon shall be secured by said assessment and levy and shall be payable out of the respective funds hereinbefore named, pledged to the payment of the same, and no warrants shall be issued in excess of taxes authorized or to be levied to- secure the payment of the same. It shall be the duty of the State Treasurer to collect said several funds and to hold the same separate and apart in trust for the payment of said warrants or certificates and interest and to apply the proceeds of said funds pledged for that purpose to the payment of said warrants or certificates and interest. Such warrants or certificates shall be issued in sums of not less than one hundred nor more than one thousand dollars each running not more than ten years bear*737 ing interest not exceeding five per cent, per annum, payable annually or semi-annually and shall be substantially in the following form.
Following this is a form of such certificate, not necessary to be set out. Section 10 directs that the certificates be issued only in pursuance of a resolution of the executive council specifying conditions as to amount, rate of interest and the like. Section 11 provides for the registry of said certificates, with the Treasurer of State, and section 12 authorizes the sale thereof at not less than par value. The contention of the plaintiffs is that the entire act is in violation of sections 2 and 5 of article 7 of the Constitution of the state, in that it authorized the creation of an indebtedness in excess of that therein permitted, without submitting the quesion to a vote of the people. These constitutional provisions may as well be set out:
Sec. 2. The state may contract debts to supply casual deficits or failures in revenues; or to meet expenses not otherwise provided for; but the aggregate amount of such debts, direct and contingent whether contracted by virtue of one or more acts of the general assembly or at different periods of time, shall never exceed the sum of two hundred and fifty thousand dollars; and the money arising from the creation of such debts shall be applied to the purpose for which , it was obtained, or to repay the debts so contracted, and to no other purpose whatever.
Sec. 5. Except the debts hereinbefore specified in this article, no debt shall be hereafter contracted by, or on behalf of this state, unless such debt shall be authorized by some law for some single work or object, to be distinctly specified therein ;' and such law shall impose and provide for the collection of a direct annual tax, sufficient to pay the interest on such debt, as it falls due, and also to pay and discharge the principal of such debt, within twenty years from the time of the contracting thereof;. but no such law shall take effect until at a general election it shall have been submitted to the people, and have received a majority of all the votes cast for and against it at such election; and all money raised by authority*738 of such law, shall be applied only to the specific object therein stated, or to the payment of the debt created thereby; and such law shall be published in at least one newspaper in each county, if one is published therein throughout the state, for three months preceding the election at which it is submitted to the people.
In determining whether the act in authorizing the issuance of interest-bearing certificates or warrants is inimical to these provisions of the Constitution, several questions necessarily are involved: (1) Would these certificates, if issued, constitute “expenses not otherwise provided for” within the meaning of section 2 of article 7 of the Constitution? (2) Can the executive council anticipate the revenues collectible within the biennial period by the issuance of certificates in advance payable therefrom as authorized without creating a debt within the meaning of these sections? (3) If these inquiries be answered in the affirmative, should the act be interpreted as empowering the executive council to issue certificates in anticipation of current revenues and in an amount beyond these not exceeding $250,000, or equaling the collectible taxes during the entire ten years within which levies are directed to be made ? (4) If the latter be the true construction, then does the act authorize the creation of a debt in excess of the constitutional limitation ?
The objects for which “expenses” may be incurred are not defined, but left to the discretion of those endowed with the power of incurring them. “Expense” is defined in "Webster’s Dictionary as meaning “that which is expended, laid out or consumed; outlay; and hence the burden of expenditure; charge; cost.” And “price” is said to be a synonym. Expenses when incurred is evidently what is meant, for there could be no expense by the state unless made in pursuance of law and the debt authorized may be created to meet such expenses.
The manifest design in allowing the executive council to issue certificates payable out of funds other than those collected during the biennial period was to assure “the earliest possible completion of the work, ’ ’ and we are of opinion that any deficiency in the revenues collectible within that period and available for this purpose would be an expense to meet which a debt against, the state not exceeding $250,000 may be incurred by the issuance of certificates on warrants in pursuance of the last four sections of the act under consideration.
It is well settled in this state that a municipality may anticipate the collection of taxes, and in defraying ordinary expenses may make appropriations and incur valid obligations to pay “in advance of the receipt of its revenues,” even though the treasury be empty, and no actual levy made, and the city be otherwise indebted to the full limit. Grant v. City of Davenport, 36 Iowa, 396; Dively v. City of Cedar Falls, 27 Iowa, 227; French v. City of Burlington, 42 Iowa, 614; Phillips v. Reed, 107 Iowa, 331; City of Cedar Rapids v. Bechtel, 110 Iowa, 198. In some other states the levy of taxes must actually have been made in order to warrant the anticipation of revenues by issuing warrants in advance.
In the Phillips case it was said, in speaking of certain warrants: “If the city had on hand or in prospect, at the time these warrants were issued, funds with which to meet them without trenching upon the rights of creditors for current expenses of the city, then the warrants were valid, although such funds may have been thereafter wrongfully applied to another purpose.”
Warrants issued in anticipation of taxes are held not to constitute a debt on the theory that moneys, the receipt of which is certain from the collection of taxes, are regarded as for all practical purposes already in the treasury and the contracts made upon the strength thereof are treated as cash transactions. Even though a municipality is indebted to the
The same rule was laid down in State v. Medberry, 7 Ohio St. 529; the court saying:
So long as this financial system is carried out in accordance with the requirements of the constitution (two years’ restriction) , unless there is a failure or defect of revenue, or the General Assembly have failed, for some cause, to provide revenue sufficient to meet the claims against the state, they do not and cannot accumulate into a debt. Under this system of prompt payment of expenses and claims as they accrue, there is, undoubtedly, after the accruing of the claim, and before its actual presentation and payment, a period of time intervening in which the claim exists unpaid; but to hold that for this reason a debt is created would be the misapplication of the term ‘ debt, ’ and substituting for the fiscal period a point- of time between the accruing of a claim and its payment, for the purpose of finding a debt; but, appropriations having been previously made and revenue provided for payment as prescribed by the constitution, such debts, if they may be so called, are, in fact, in respect of the fiscal year, provided for, with a view to immediate adjustment and payment. Such financial transactions are not therefore to be deemed debts.
The Supreme Court of South Dakota was called upon to advise the Governor of that state concerning the anticipation of the revenue by the issuing of warrants, and in response thereto said:
By general law, the Legislature has provided for the levy of an annual tax for meeting the ordinary expenses of the state. By so providing, in a constitutional manner, for the levy of a sufficient tax, it has provided a revenue, to the extent of the tax for the payment of the ordinary or current expenses of the state. It may then make appropriation of such revenue for diverse and specific purposes, included within the ordinary expenses of the state, and may authorize the issue of evidence of such appropriation in the form of warrants, without incurring an indebtedness therefor, within the meaning of said section 2, art. 13, of the constitution. If this were not so, then the appropriations of each Legislature in excess of the cash actually in the hands of the State Treasurer, and in the fund from which such appropriations were made, would, to the extent of such excess, constitute the creation of a debt against the state. It is well understood that the aggregate of the general appropriations of each Legislature in this, as in other states, generally greatly exceeds the amount of actual cash in the hands of the State Treasurer when such appropriations are made. The taxes levied and in process of collection are treated as in the state treasury, though not yet actually paid over to the State Treasurer. It has been ruled in several cases, and by high judicial authority, that state funds, so in sight, but not yet in hand, may be anticipated and appropriated as though actually in possession of the State Treasurer. Critically considered, it may constitute the incurring of an indebtedness; but it is not an indebtedness repugnant to the constitution, because its payment is legally provided for by funds constructively in the treasury. If the drawing of a warrant upon the state treasury is the incurring of indebtedness by the state, then the drawing of such warrant would violate the constitution, even if there was money in the state treasury to pay it, if the constitutional limit of indebtedness had been reached; for there must always be some time inter-*744 veiling between the drawing of the warrant and its payment, and during such time the indebtedness of the state would be increased beyond the constitutional limit. Such an interpretation of the constitutional limitation would obviously be too hypercritical to be practicable or reasonable. It being once established, as we think, it is by the authorities already cited, that the revenues of the state, assessed and in process of-collection, may be considered as constructively in the treasury, they may be appropriated and treated as though actually and physically there; and an appropriation of them by the Legislature does not constitute the incurring of an indebtedness, within the meaning of section 2, art. 13.
See, also, In re Incurring of State Debts, 19 R. I. 610, 37 Atl. 14, where the court said, in answer to the inquiry from the governor as to whether the General Assembly could in time of peace incur state indebtedness or borrow money in excess of the limit in the constitution, that;
' In thus answering (in the negative) we do not mean to be understood that the General Assembly may not make appropriations or authorize the expenditure of money to an amount exceeding the sum named. The power of taxation resides in the' General Assembly, and therefore it has power to raise by taxation such sums as it may deem necessary for the expenses of the state and the public benefit; and it may appropriate or authorize the expenditure of the money so raised for the purposes for which they are raised, and even, as we think, in anticipation of their actual payment into the state treasury.
The principle seems well established in reason and by authority. The power of General Assembly to tax' is unlimited save by the two years’ period. Of course, it may enact laws exacting the levy of a tax annually for any period in the future, but this is always subject to repeal or modification by subsequent General Assemblies. But revenues provided for during the biennial period are available to a legal certainty, for the General Assembly will not convene to repeal or modify within that time. The anticipation then by the issuance of
Were we to give the word 'debt’ the broad significance that some of the authorities would justify, we should destroy the corporate life and efficiency of every municipality which reached the allowed limit of indebtedness. But the construction we give it has strong support in the decisions of the courts of other states, is in strict line with the opinion we have heretofore frequently expressed, and preserves the integrity of the constitution according to its evident meaning and intent, while entailing no disastrous consequences to the city or to its citizens. The right of a city to construct and own works of public utility, if such rights exist, is one of great importance, and should not be embarrassed or rendered nugatory by strained or technical construction of the constitution or of the statutes. Its importance is not so much in the fact that public, ownership is in itself wise or desirable (concerning which there may be much difference of opinion) as in the fact that with such power in reserve municipalities are placed in position to deal with private owners on equal terms, and avoid exactions which their helplessness might otherwise invite.
That case is readily distinguishable from that now before us. After the bonds were issued and the system of waterworks purchased or erected, the municipality would have no escape from the levy and collection of the taxes, stipulated and
Nor do we find the weight of authority otherwise. Section 10 of article 7 of the Constitution of New York, though differing some, is in substance like section 2 of article 7, and is in words following: “The state may, to meet casual deficits or failures in revenues, or for expenses not provided for, contract debts, but such debts, direct and contingent, singly or in the aggregate, shall not at any time, exceed one million of dollars; and the money arising from the loans creating such debts, shall be applied to the purpose for which they were obtained, or to repay the debt so contracted, and to no other purpose whatever.” Section 12, art. 7, Const. 1846 (section 4, art. 7, Const. 1894) is, in all essential particulars, like section 5 of our article 7, and the Court of Appeals, in Newell v. People, 7 N. Y. 11, declared an act authorizing the creation of a fund by the sale of canal revenue certificates for the enlargement and completion of the Erie, Genesee Valley, and Black River Canals and the payment of these from revenue to be derived from taxation during twenty-one years void as creating a debt in excess of the limitation contained in the section quoted.
Article 12 of the Constitution of North Dakota declares that “the state may, to meet casual deficits, or failure in rev
Section 5 of article 9 of the Constitution of Minnesota reads:
For the purpose of defraying ordinary expenditures, the state may contract public debts, but such debts shall never, in the aggregate, exceed $250,000; every such debt shall be authorized by law, for some single object, to be distinctly specified therein; and no such law shall take effect until it shall have been passed by the vote of two-thirds of the members of each branch of the Legislature, to be recorded by yeas and nays on the journals of each house respectively; and every such law shall levy a tax annually sufficient to pay the annual interest of such debt, and also a tax sufficient to pay the principal of such debt within ten years from the final passage of such law, and shall specially appropriate the proceeds of such taxes to the payment of such principal and interest; and such appropriation and taxes shall not be repealed, postponed or diminished until the principal and interest of such debt shall have been wholly paid.
In Brown v. Ringdal, 109 Minn. 6 (122 N. W. 469), the Supreme Court of that state upheld an act authorizing the issuance of interest-bearing certificates of indebtedness, as funds were needed for the construction of a new state prison costing $2,250,000, said certificates to be payable out of a
Counsel for-plaintiff differentiates the Lamberton case by the fact that no certificates of indebtedness were there authorized to be issued, and earnestly insists that this feature of the act under consideration renders it wholly void. We are unable to concur in this claim. The certificates in and of themselves create no indebtedness against the state. On the contrary, they are mere evidence of the holder’s right to demand and receive ‘from the State Treasurer the proceeds of the tax authorized by the act to be levied and collected, and known and classified as the Prison Building Fund. ’ Fairly construed, the act contemplates their payment from this fund exclusively, and they are not general obligations of the state. Whatever indebtedness, if any, was created by this act, is, within the Lamberton ease, found in the provisions thereof appropriating $2,250,000 for the construction of the new prison and the levy of a tax extending over a period of nine years to produce the same, and not by the issuance of certificates indebtedness evidencing the right of the holders thereof to the fund when collected. If the certificates could be construed as creating an indebtedness against the state payable from the general revenue fund, a different question would be presented. But they are not. They are to be issued in anticipation of funds provided for and appropriated, rightfully under the Lamberton case, and are valid only as respects that fund when paid into the state treasury.
The majority intimate that but for the prior decision a different conclusion might be reached, but the act considered in the former case merely appropriated any surplus' thereafter in the state treasury and the proceeds of an annual levy of two-tenths of a mill upon the assessed valuation of the state for not exceeding ten years to the purchase of a site and the erection of a capítol building at a cost of not exceeding $2,000,000. It in no manner contemplated the creation of a debt nor authorized the revenues to be anticipated by'the issuance of evidence of debt. It might have been repealed by any
The majority hold that the Legislature may provide for the present capitalization of such future conditions by issuing certificates of indebtedness to draw interest to be sold to the public upon the assurance that the credit of the state is behind them, and that the money will be forthcoming when the certificates mature. By this arrangement the entire amount of the tax levy is anticipated, and the amount is available for present purposes. Thus the evidence of a present indebtedness is furnished which may be received with confidence in the commercial world.
The opinion in Flecten v. Lamberton, supra, does not disclose that the point now being considered was involved, and as the court in Brown v. Ringdal, supra, gave the question scant, if any, consideration, the latter decision is not persuasive authority. Moreover, in that state a debt in excess of the limit may be authorized by a two-thirds vote of the members of each House of the Genei’al Assembly, and whether the act for the construction of the prison was so passed does noo appear.
California adopted a Constitution in 1849, article 7 of which provided that the “Legislature shall not in any manner create any debt or debts, liability or liabilities, which shall singly, or in the aggregate, with any previous debts or liabilities exceed the sum of three hundred thousand dollars.” Then follows an exception in case of war, invasion, or insurrection, similar to section 4 of article 7 of our Constitution, and provisions for the creation of a debt exceeding that amount like section 5 of that article. In People v. Pacheco, 27 Cal. 175, the Supreme Court of that state, speaking through Sawyer, J., held an act of the Legislature, in substance agreeing to pay the interest on $1,500,000 of bonds issued by the Central Pacific Railway Company for a period of twenty
Here is a provision for raising a fund and setting apart and appropriating it to the payment of the interest on the bonds in question, more specific than those' in the cases of State v. McCauley, 15 Cal. 429, McCauley v. Brooks, 16 Cal. 24, and Koppikus v. State Capital Commissioners, 16 Cal. 249, because in those cases the payment was to be made, generally, out of ‘moneys in the treasury not otherwise appropriated,’ without providing any specific fund and devoting it to that use alone, or knowing whether or not there would in fact be any unappropriated moneys in the treasury at the time payments would fall due. In this case, a specific fund is provided and set apart, to be devoted to the payment of the interest in question alone; and it would seem to be more than ample for the purpose, as -the tax provided for on a sum much less than the present assessed valuation of the taxable property in the state, would produce the required amount, and the appropriation from the general fund will not be required until the specific fund is exhausted, which may, and in all probability never will, occur. For these reasons there would be even less propriety in holding this appropriation to be a debt or liability, within the meaning of the constitutional restriction, than those which were the subjects of discussion in the cases cited. The Legislature has provided a fund, and made the appropriation for the entire amount. No further legislation is required upon the subject. Nothing further remains to be done on the part of the state, but the ministerial duty of col*753 lecting taxes and paying the interest out of the proceeds, as it from year to year accrues. Of course the state cannot, without a breach of good faith, refuse through its officers to perform this ministerial duty.
An examination of the earlier eases relied upon discloses that, while the contracts entered into extended beyond the time for which taxes were available, no liability was created in excess of that which would be in the treasury to meet it. No attention was given the thought that the scheme was like that provided in the article for the creation of an indebtedness in excess of the amount limited. The court appears to have relied largely on State v. Medberry, 7 Ohio St. 526; but there the decision was that the state might anticipate the revenues to be collected within the biennial period for which the General Assembly may authorize the levy and collection of taxes, and, as a clause in the Constitution forbade appropriations for more than two years, the act authorizing a contract extending over a period of five years was denounced as invalid.
For the reasons already stated, we are not inclined to follow the California decisions. To do so would defeat the manifest design of the people in adopting the section of the Constitution in limiting indebtedness the General Assembly may create. The salutary purpose was to prevent mortgaging the revenues of the state in the future, beyond a specified amount, and, if this is to be rendered effective, it is quite as essential to denounce a scheme to incur a debt for the payment of which provision is made by a scheme of taxation as a debt to the payment of which no thought has been given. In either event, the funds to meet the obligation must be raised by taxation, and, in either, it is certain to be paid.
The decision in Swanson v. City of Ottumwa, supra, then is not controlling, and, were the act to be construed as authorizing the issuance of certificates payable from taxes levied beyond the biennial period exceeding $250,000, it would have
It is elementary law that every statute is to be read m the light of the constitution. However broad and general its Imguage, it cannot be interpreted as extending beyond those matters which it was within the constitutional power of the Legislature to reach. It is the same rule which obtains in the interpretation of any private contract between individuals. That, whatever may be its words, it is always to be considered in the light of the statute, of the law then in force, of the circumstances and conditions of the parties. So, although general language was introduced into the statute of 1871, it is not tobe read as reaching to matters in respect to which the Legislature had no constitutional power, but only as to those matters within its control and if there were, as it seems there were, certain special taxes and dues which under the existing provisions of the state constitution could not be affected by legislative action, the statute is to be read as though it in terms excluded them from its operation.
Again, in Chesapeake & Ohio Ry Co. v. Kentucky, 179 U. S. 388, 394 (21 Sup. Ct. 103, 45 L. Ed. 244):
Indeed, we are by no means satisfied that the Court of Appeals did not give the correct construction to this statute in limiting its operations to domestic commerce. It is scarcely courteous to impute to a Legislature the enactment of a law which it knew to be unconstitutional, and if it were settled that a separate coach law was unconstitutional, as applied to interstate commerce, the law applying on its face to all passengers should be limited to such as the Legislature to'ere competent to deal with. The Court of Appeals has found such to be the intention of the General Assembly in this case, or, at least, that if such were not its intention, the law may be supported as applying alone to domestic commerce. In thus holding the act to be severable, it is laying down a principle of construction from which there is no appeal.
Reverting to the terms of the act, it will be noted that, from the eapitol grounds and extension fund, the executive
